Supply Chain Brain - March/April 2012

The Challenge of Lean
Collaboration for OEMs,
Contract Manufacturers

Managing Editor
Robert J. Bowman
A conversation with Jay Hollenbeck, director of business solutions with
Flextronics.

The push to outsource high-tech manufacturing has given rise to a number of electronics manufacturing service (EMS) providers, which make everything from cell phones to video games to key components for networking and critical business systems. Among the major players in that space is Milpitas, Calif.-based Flextronics. Like most of its biggest competitors, the company has long since evolved from a pure manufacturer of components to a provider of such value-added services as product design, fabrication, assembly, testing and contract logistics. Operating on a global scale, Flextronics is constantly challenged by the need to rein in costs while adhering to high standards of product quality and customer service. It has pushed hard to implement quality-control efforts such as Lean and Six Sigma throughout its operation. At the same time, with so much production taking place in low-cost regions such as China, Flextronics has sought to offset the drawbacks that come from being so far from the customer. In this interview, conducted in San Francisco at the “Best Practices” Conference of the Institute of Business Forecasting and Planning, Jay Hollenbeck, Flextronics’ director of business solutions, offers his opinion as to what’s missing in the relationship between many original equipment manufacturers and their contract manufacturers. He also discusses how the two parties can enable the real-time exchange of data in order to drive day-to-day supply-chain flexibility.

Q: What is the biggest challenge facing supply-chain collaboration today?

Hollenbeck: I’d say it’s the following of
decision-making and information across supply
chains. Unfortunately, the outsourcing trend has
negatively impacted some of the great efforts that
have been made in developing lean supply chains.
Companies need to be able to view information
outside their four walls; the information that was
once part of their infrastructure is now viewed at a
distance. The delay in understanding the impact of
decisions is caused by that fragmentation of the
supply chain.

Q: Outsourcing is not a new phenomenon by any means—it’s been going on for decades. But is it getting harder and harder to enact true collaboration among these multi-partner supply chains? And if so, why?

Hollenbeck: It’s not [necessarily] getting harder. Some of our best customers still do an excellent job of it. They’re able to understand what the impact of their decisions are on the supply chain. Rather than view supply-chain collaboration as micro-managing the execution of purchase orders and production schedules, they understand the need to measure what’s going on at a macro level. They have to know how their decision-making is influencing the supply chain, and make strategic decisions that impact it—rather than rely on their contract manufacturing partners to make those strategic decisions for them.

Q: Is that the key to how companies differentiate themselves in supply-chain collaboration—getting this macro view of things?

Hollenbeck: Yes. Specifically, some of the companies that truly differentiate themselves will take ownership for inventory turns at their manufacturing services provider. They’ll also try to measure the volatility in the operational plan that they send out. And they’ll aggressively drive down component lead times, rather than just making sourcing decisions based on cost. They truly have a strategic view of the supply chain, and they take ownership for making those decisions.

Q: How do they achieve that level of visibility? I take it that means you have to be collaborating with customers from your end in a very strong, continuous way.