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“Supplier development becomes a huge factor because people bring us so many suppliers. We have significantly more suppliers than we would have if we were just making our own product” 66 Businessexcellence October 07 provide a service offering from the concept all the way through the whole product lifecycle, the entire suite of services. Ideally, we would work with a customer from design all the way through support of the product, to the end consumer.” But each customer has its own different inhouse capabilities, explains Brown, so they have to determine how much of Plexus’ value added service offerings to utilize. “It is a huge advantage for us in getting to a lean and a pull environment if we can design in components with a supplier that we have a relationship with, and that meets our processes,” he continues. “The process works best when we have early involvement and are integrated into the design process.” To add to the complexity, a product could have several thousand parts, with sometimes hundreds of suppliers, some of whom Plexus may be dealing with for the first time. “We have to understand what capabilities the supplier has to work with us, on various supply chain models, like vendor managed inventory, for instance,” says Brown. Furthermore, with 13 manufacturing facilities around the world, it’s a global supply base, too. “We’ve had supply chain related trips all over the world,” says Theune. The Plexus approach to its complex supply chain was to create a capability that allowed it to do the supply chain design work up front, before accepting a contract. “We wanted to get ourselves into a position where we could look at the business before we took it on and understand the supply chain requirements,” says Theune, “so we could predict more accurately what it would take to run that business, how much inventory it would take, what the overall lead time profile looked like, and what kind of variability and flexibility we needed to provide. That would allow us to cost it accurately for our customers.” This has been achieved, he says, so now both Plexus and the customer can make the right choices and have the right expectations about margin and return on investment. “What we have learned about what I call supply chain physics has given us the ability to design a supply chain that delivers the results that everybody involved is looking for,” says Theune. “When we talk to a new customer we bring an analysis that tells them what we’re going to do in very specific detail down to the part level; what the supply chain is going to look like and what are the costs. That’s a big win for us to be able to do that.” Another benefit from this analysis capability has been the automation of much of the p u r c h a s i n g process. This has saved millions of dollars in inventory reduction and avoidance without c o m p r o m i s i n g service level or on-time delivery, which are all important for customers. “Our velocity on the shop floor through our lean initiative has made us much more responsive,” says Theune. “Even though we don’t do any consumer products, our customers are feeling the pressure to behave as if they were. There’s an expectation to be just as responsive as if we were making consumer products, to be able to deliver on very short lead times, which is driving this need for fulfillment activity.” Plexus has developed its own replenishment system in-house, to respond to actual demand for every part that goes into every product. “Our analysis system is pretty robust,” says Brown, “and it watches continuously the demand activity for every item. It automatically maintains and updates the replenishment parameters for parts so that they stay in sync with demand characteristics. “One of the big wins we’ve had is to eliminate MRP messages in the last couple of years,” he

October 07 Businessexcellence 67 continues. “A lot of messages happen in MRP between the time you fi rst recognize demand and you ultimately receive whatever it is you’re buying. In a pull based environment those messages don’t exist anymore, because there’s no activity until you hit the replenishment point, so there has been a tremendous reduction in the amount of message traffi c.” Theune also points out that Plexus has made a strong commitment to standardize processes and that all its locations will be on the same ERP system by the end of this year. “This gives us a considerable advantage in being able to see available supply and putting in common metrics and tool sets.” But the supply chain is not all about suppliers. Customers come in all shapes and sizes, too, and dealing effi ciently with them is as important as it is with suppliers. The capabilities of the customer have a huge effect on the solution, says Theune. “If they’re not thinking from a lean perspective it can add inventory, cost and uncertainty into the supply chain.” So part of the skill in managing the supply chain, he says, is getting the customer to understand the importance of connecting to the real source of demand, rather than sending a purchase order once a month. “When you’re really synchronized with true demand it makes a huge difference. Unfortunately, that’s not very common when we first initiate with a new customer. It’s partly because of the way the industry has worked in the past, but we’re trying to change that. We’re trying to get people to share that demand with us in as raw and relevant a state and as early as possible, so we can design the supply chain appropriate to that. Plexus