The hardware and software seller undertakes an ambitious program of consolidating vendors and implementing Lean techniques throughout its supply chain. Fred Tiso, group director of worldwide hardware operations, talks about how it was done.
Founded in 1989, Citrix Systems posted revenues of $1.6bn in 2009. It supplies hardware and software to 99 percent of Fortune 500 companies, according to Tiso.
All was not rosy, however, back in 2008. The company was facing issues of excessive lead times, inadequate material availability and missed delivery dates. "It became pretty clear that we had to transform our supply-chain model to be competitive, and more satisfying for our customers," Tiso says.
Citrix started out as a software provider, adding hardware to its product mix some five years ago due to a series of acquisitions. Each supply chain had been run differently, however, and the company needed to streamline and standardize its processes. While 50 percent of its business is U.S.-based, Citrix was also dealing with more distant suppliers in Europe and Asia. Supporting that operation was a multitude of contract manufacturers and third-party logistics providers. Getting timely and accurate data from all of the partners was anything but easy.
Citrix started with a frank assessment of what it was doing right and wrong. The company's wish list included the application of Lean principles to the supply chain, creation of a "pull" system for fulfilling customer demand, a vendor-managed inventory program and "an information technology wrapper around this whole thing," Tiso says.
As if that weren't enough, Citrix sought to simplify its supply chain by reducing the number of partners, suppliers and nodes in the system. The company cut its electronics manufacturing services providers from four to one, with an identical reduction in third-party logistics partners. "We're not a Cisco or a Juniper," explains Tiso. "We have to focus or leverage our spend. If we're spending a little with everybody, we're never able to capture mindshare." In other words, spreading the business around isn't conducive to forming strategic partnerships with vendors.
Tiso also discusses the company's "should cost" analysis, and how it built a predictive cost model based on total spend instead of unit purchase price. Combined with the rationalization of partners, the strategy "allowed us to dictate what we going to pay."
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