By John Hall
Several years ago, a relatively small company called Redbox (a division of Outerwall) was working hard to convince McDonald’s restaurants that its novel, on-site DVD rental machines were a good idea. But the bright red kiosks just couldn’t satisfy customers’ appetites enough because their small inventories of 100 discs often sold out quickly.
McDonald’s gave the company an extremely tight timeframe to increase kiosk capacity to match an upcoming advertising campaign. Redbox turned to Flextronics, which flexed its massive contract manufacturing muscle, and in just a few short months – a fraction of the time conventional methods would take – the company and a supply chain partner produced a prototype with completely re-engineered software and hardware and a 400% increased capacity of 500 discs – all with a similar footprint. Today Flextronics produces 120 units per week for Redbox, whose 43,000 kiosks are as ubiquitous as the stores that host them – more than 34,000 locations serving over 40 million customers a day.
Welcome to the new world order, what Flextronics’s Chief Procurement Officer Tom Linton calls “the virtual supply chain,” a giant Rubik’s Cube® of 1,400 customers, 220,000 employees, 700,000 active part numbers, 33,000 suppliers and 121 factories across 30 countries on four continents. Flextronics is behind some of the most successful electronic product launches and re-launches in history, and today has built a reputation for the velocity and expertise it brings to the supply chain table when companies need to devote precious financial and human capital to things like research and development.
For the uninitiated, Flextronics is a $30 billion Fortune Global 500 electronics behemoth that delivers complete design, engineering and manufacturing services to automotive, computing, consumer, industrial, infrastructure, medical, clean tech and mobile OEMs. Flextronics notes on its website that it helps customers design, build, ship and service electronics products through its global network, whose vastness is dwarfed only by its flexibility. The company claims that its core manufacturing and logistics services, vertically integrated with components technologies, optimizes customer operations by lowering costs and reducing time to market. By increasing speed to market and driving competitive positioning for customers, Flextronics boasts that it “solves customers’ most challenging problems better, faster and more cost effectively than any other company.”
Considering the man behind procurement at Flextronics, there’s good reason to boast. Linton is credited, in fact, with helping to speedily transition the company from contract manufacturer to global supply chain company in just under two years.
Linton carved out his career early on during a 20-year stint at IBM, where he was part of a team that sourced parts for the world’s first personal computer. After leaving IBM, he helped found E2Open, Inc., a supply chain software company, and later served as Chief Procurement Officer of Agere Systems, Freescale Semiconductor and most recently, Executive Vice President and Chief Procurement Officer at LG Electronics. He also serves as a guest lecturer at over a dozen major universities.
It’s not surprising that the thing he finds most interesting in his role at Flextronics is the sheer “complexity” of what his global supply chain group of 9,500 employees pull off on a daily basis. The global supply chain group is responsible for materials, inventory, procurement, distribution, logistics and sourcing.
“What fascinated me about this opportunity is I’d done the OEM thing and the semiconductor thing,” Linton tells My Purchasing Center. “If you look at the electronic supply chain, it starts with the bits, the semiconductors, assembly to OEM and I‘d done supply chain software as well. So it was fascinating to come into this space.”
Indeed, the “space” that Linton oversees is almost as mind numbingly huge as it is complex.
In fact, one of Linton’s proudest achievements was orchestrating a centralized procurement and supply chain structure at the company after joining Flextronics in late 2011.
“The CEO created a new objective in 2012 called ‘One Flex,’ meaning one team, one flex and one plan,” Linton says. Before Linton came on board, procurement functions were handled separately for all of the myriad industry segments Flextronics served, each headed by a Vice President of Procurement. Today, those division heads all report up to Linton. “There was a leveraging effect from that, which saved a lot of money and increased efficiency,” he say.
Linton’s second biggest achievement so far is a work in progress: A corporate-wide effort to not follow customers, but lead them. “We’re transitioning to a leadership role in the supply chain,” he says. “We want to empower talented people to create powerful supply chain solutions that transform industries and companies. So, really what we are doing is helping our customers create powerful supply chains that transform their companies and transform their industry. That goal is stated on big banners hanging on the walls in every location we have.” How does this tie into what Linton does? “We’re building a powerful supply chain organization,” he says. “Anybody that’s doing business with us we want to have at a competitive advantage over people who aren’t.”
One notable effort that distinguishes a company the size of Flextronics is its Global Services division, a self-described global provider of post manufacturing supply chain services. The division provides a comprehensive suite of aftermarket services “designed to meet the specific requirements of customers operating within the computing, consumer digital, infrastructure, industrial, mobile and medical markets.” Another is SimFlex optimization and simulation software, which “enables companies to design, test and rapidly implement robust and efficient value chain solutions.” SimFlex allows Flextronics to design and optimize end-to-end value chain and logistics networks, develop operations plans that balance and optimize asset utilization and inventories and helps customers manage the sales and operations process.
“What makes us unique is we have a whole organization called strategic supply chain managers,” Linton says. “Say you’re an OEM and you’ve got a product you want to make. I actually quote that business to you and have supply chain managers who work with you daily to manage your supply chain. So that person is your supply chain guy who, depending on the size of your business or account, runs that. And that same individual interfaces with my procurement and materials organization, materials being at the site and sourcing being centralized. This is the model we follow.
“Say you’re sitting in Boston and have an electronic medical product you want to make and you designed it,” Linton adds. “We can put a prototype together at our innovation center using 3D printing. The customer provides the specs, we price it, agree on it, and then we build it.” Linton says the dedicated supply managers works with the customer from beginning to end, assisting with engineering questions and changes, demand fluctuations, and other issues. Another part of Linton’s group manages parts inventories and materials. “I think other companies may follow a variation of this model, but not all are the same,” he says. “When you have a virtual supply chain, which is what we have, you can see how complex this can be.”
The company also has developed its Flextronics Supplier Portal Program (FSP), a “next-generation supply chain collaboration solution used to manage supplier communications, transactions, and processes.” An e-sourcing tool uses the SAP E-Auction software “to provide an online collaborative environment between Flextronics and its suppliers.
Change Under Nose
Linton says he feels humbled and honored to bear witness to the remarkable changes going on in global manufacturing and commerce. It all began with outsourcing, which transformed the supply chain into a vertical beast.
“If you look at the powerful companies today with huge market caps – Amazon, Google, Apple, Cisco, Microsoft – what’s unique about them when the history of this time is written, is they have no factories,” he says. “Everyone focuses on the products but what’s really happening is the way those products are made now and brought to market. IBM used to make its own software. Now there are hundreds of software companies and tons of outsourced manufacturing going on. There’s this huge virtual vertical integration happening now. This structure is really fascinating because what it requires is transparency, a tremendous amount of trust, and a tremendous amount of accountability in the various parts of the supply chain. So that is quite astounding. When the history of this decade is written, will we be reading about the Internet of things, or the ways those things were produced and marketed?”
At a presentation earlier this year at MIT in Cambridge Mass., Linton spoke about the 3D supply chain, which is more like a ball than a series of chain links. “The velocity of a supply chain is like the equator of the ball,” he tells My Purchasing Center. “When you shorten the equator, the ball gets smaller. And then the axis of the ball is risk. You can de-risk your supply chain by improving visibility and you have a clarity or opaqueness as a measure of your supply chain. On the other hand, if your ball doesn’t get shrunk uniformly, you can have an oblong situation – a fast supply chain but one with high risk. If you have too slow a supply chain and it’s de-risked, you’re not optimizing costs. There’s this whole dynamic around cost, risk and speed. If you can optimize those three variables, you have a super-competitive situation.
“You can use software and build your own solutions, but the point is, the overall model has to recognize the fact that the winners do it faster, improve their network and capital more rapidly and have a lower risk set of suppliers in their supply chain.”
When he’s able to step outside his job and attend job fairs, Linton says he enjoys evangelizing college graduates on the value of being a part of the dynamics shaping the supply chain at an accelerating pace.
“When I recruit students at universities who say, ‘I want to get a job at Amazon or Apple or Google, I try to un-layer things for them,” he says. “It wasn’t that way when I worked at a company that did and made everything itself. So I politely ask these kids, ‘Do you want to watch other people do supply chain or do you want to do supply chain? Would you rather drive the race car or watch someone else drive it?’ I see graduates from major schools seduced by brand names, but many don’t realize that a company like Flextronics is actually doing it. It’s amazing how the lights go over their heads when I say that.”
Linton says he believes the biggest challenge over the coming decade will be mapping the electronics supply chain genome.
“I like to challenge my guys when I tell them I won’t be completely satisfied until I have the entire map of every part number for every product at every supplier at every customer we serve mapped,” he says. “Electronic products all have part numbers. Everything you buy has a part number, a manufacturing date, and all kinds of identifiers that indicate its origins.
“If we want to make things better, the answer will be in these massive models that optimize the number of parts used,” he adds. “Telephones today have maybe 30% fewer parts than they did a few years ago. TVs are thinner and lighter. But there are serious challenges ahead over the next 10 years. We’re going to be faced with issues like raw material scarcity, increases in local sourcing, and the ‘cloud.’ All these things are working in harmony toward creating a much faster, more complete process.
“Remember when we used to defrag computers? Think about defragging your supply chain. If you know everything about anything in your supply chain from materials and costs and you could hit a button and defrag it all, imagine the possibilities,” Linton adds. “We’re really still in the horse and buggy stage. Someone joining this business right now is in for one heck of a ride.”
John Hall is a freelance writer who reports on commodities markets and procurement and supply management topics for My Purchasing Center. His website is jhallmedia.com.
George E. Krauter
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