For example, Juniper Networks leverages state-of-the-art tools, many of which are available only from small startups, with a vision to solve complex manufacturing and management challenges. These tools are of no use without a sense of acceptance and ownership from the company’s people, and alignment with the company’s culture and priorities. It is therefore essential that supply chain investments be accepted, rationalized, utilized and loved, before they drive a company to increased profitability.

Juniper brought in, deployed and ultimately helped grow and expand companies and software tools, such as Agile, Valdero, Webmethods, Tradec, Manugistics and others, before many in the industry. For example, we adopted Agile to drive our virtual manufacturing model three years ago when Agile was a small company. Agile now has over 800 customers, and many of them use Agile to enable 100-percent outsourced manufacturing models.

The idea was to nurture relationships with not only our supply base and contract manufacturers, but also with the chosen vendors and infrastructure tools that enable them. As a result, with a small team in operations, Juniper is able to run a nearly $1-billion business.

Our fundamental model has encompassed stages commonly referred to inside the company as “form, storm, norm, perform.” This four-step path encompasses the stages of change needed to adopt, deploy and ultimately bring forth positive change in organizational and operations management. Most of our components are custom-made and extremely high-tech. They require long cycles with component manufacturers during the design phases, in which Juniper engineers must work hand in hand on designs with key suppliers.

For this reason, long-term and prescheduled pricing schemes to manage relationships with internal and external trading partners are of extreme importance. In the upstream part of the supply chain, relationships with contract manufacturers and key suppliers must be constantly strengthened in order to remain competitive, especially with limited budgets.

Management
There are many strategies one can adopt to manage the supply chain. Executive management focus is critical, and ignorance can cost a manufacturer millions of dollars in inventory and risk exposure — and can even lead to the destruction of a company. Automation and analysis tools are often ineffective because they are not aligned to the business users, who must feel comfortable with new processes, and open to learning and thinking in order for a vision to become a reality.

Getting to the “perform” stage builds on the three other stages. The first is to include key users, thinkers and visionaries from all levels of the company, in the decision-making and visioning process early on in the project scope process (form). Various ideas are then brainstormed and differences in approaches and requirements are worked out (storm). Next, a company has to architect its supply chain by seeking solutions to optimize inefficient business processes, rather than imposing information tools and hoping to get a business use later (norm). A relentless focus on maintaining, recruiting, refining and attracting talent is a key driver that enables efficient and precise supply chain management (perform).

Creation, Production, and Distribution
Juniper’s supply chain is drastically different from that of companies such as Apple Computer and Dell. Our products are high-end core routers, the cost of which can run into the hundreds of thousands, and our volumes are low. Our cutting-edge technology and time-to-market is of ultimate importance.

Companies such as Apple and Dell have much larger distribution bases and volume rates. Basing production in regions of Asia and other countries helps these companies manage costs, and maintain assurance of supply at key retail outlets and points of engagement. Leveraged and vendor-managed inventories are prevalent, as suppliers are often in plurality and fierce cost-cutting competitions. However, the supply chain challenges remain the same, the primary ones revolving around creation, production and distribution.

Creation
Apple Computer differentiates itself by its industrial design, elegance and ergonomics. These facets allow the company to draw customers from broad areas, enabling it to constantly innovate, retain customers, protect margins and distance itself from Microsoft. Creation is the lifeblood of companies such as Apple and Juniper. Without creative innovation and engineering vision, these companies could not succeed and would quickly fall victim to competitive and parasitic market pressures.

Only with creation can production and distribution be enabled. However, without an equal focus on the other two, a business will not succeed and will have an inefficient supply chain.

Production
Apple began manufacturing operations with an internal direct labor force, primarily in the Bay area and northern California. The early 1990s saw an emerging practice among leading manufacturers toward “contract manufacturing” and leveraged supply chains. This meant that manufacturing operations were handled by another company that manages direct labor, capital equipment, inventory and manufacturing processes for a wide plurality of product design companies (such as Juniper and Apple).

Virtually all high-tech companies that were formed and vitally engaged prior to 1995 had internal manufacturing at one point. There are tremendous organizational dynamics that play a part in switching from internal manufacturing to outsourcing. Apple moved toward outsourced manufacturing in the mid-‘90s, and sold off the vast majority of its internal manufacturing plants to companies such as Solectron. (In fact, Solectron manufactures products for Juniper in a building formerly owned and managed by Apple).

A move from internal to external manufacturing is often painful. At one point in my career, I was part of a team that helped orchestrate such an outsourcing decision for Hewlett Packard’s LaserJet motherboard manufacturing facility in Boise, Idaho. Some internal employees who were asked to transfer to the contract manufacturer felt abandoned, and key pieces of the core manufacturing processes were either left redundant or not fully optimized.

Ultimately, it is extremely important to maintain sensitivity to human feelings, perceptions and paradigms in transitions such as this. Without that, a decision to move from internal to contract manufacturing can devastate a business.

Juniper is a young company; our first product shipments were in 1998, when contract manufacturing was already prevalent. We would have had extreme difficulty scaling to our current size were it not for the close partnership we have maintained with two key contract manufacturers: Solectron and Celestica. By leveraging the manufacturing, production and supply chain expertise of these partners, Juniper was able to quickly deliver its first product in record time. Furthermore, we were able to scale our company with blazing speed because of this leveraged manufacturing model.

Maintaining control of supply chain and contract manufacturers is a separate but equally important subject. That however, would warrant a separate article in itself. Juniper did not face the trials, tribulations and management-change resistance that many other companies such as Apple and Hewlett Packard did. It never had internal manufacturing, and grew amongst a new breed of product design manufacturers that leveraged and depended upon contract manufacturing from inception.

DistributionFrom the mid ’70s until about 1993, Apple created a legend by leveraging an expansive network of dealers, distributors and partners to aid it in its growth, and to reach markets it could not otherwise reach in its forward supply chain. Having a product that appealed to the masses, Apple was built around a leading-edge product that dominated and inspired consumers toward creativity.

Conversely, the mass market does not directly purchase Juniper’s Internet routers. Juniper products are sold to a specialized few: large service providers and carriers worldwide, including Worldcom, Qwest, Verio, France Telecom, Ericcson and Scientific Atlanta, which provide IP (Internet protocol) driven services to business and industries.

Juniper’s customers are large, and the sales cycle is technical and long, which greatly differs from manufacturers such as Apple. Our products don’t require distribution mechanisms, such as the new — and quite elegant, I might add — Apple Stores. Juniper’s average selling price is in the hundreds of thousands; and for this reason, the company doesn’t need to have money tied up in the distribution inventory, as does Apple. In fact, Juniper closes its books every quarter with zero inventories on its books. This is a unique supply chain achievement for a company of its size.

More recently, Apple has chosen to move toward a more direct model, similar to Juniper and Dell, in order to minimize risk of inventory exposure and excess in their supply chain. However, channel conflict and accustomed customer bases have prevented a whole and completely fluid transition. It remains to be seen if such a move will be sustainable.

People Rule
Ultimately, what is of highest importance is people. If there is one lesson that manufacturers, suppliers and enablers of supply chain tools must learn it is that people drive business forward, not tools. In order to succeed in industry, whether a company is producing iMac personal computers or high-end Internet routers, technology should enable people to do their jobs more efficiently, productively and swiftly. Technology cannot drive change — but people can. Close attention must be paid to qualitative factors when deciding upon any supply chain strategy or vision. Only then will your organization grow in efficiency and leadership.

Raj is the Director of Supply Chain at Juniper Networks. He has served on the board of directors or as a strategic advisor for numerous companies including Manugistics, PowerMarket, nthOrbit, Valdero and others. In addition, he actively works with venture capital firms. He holds a BSEE and an MBA degree from Arizona State University. He has worked toward completing his Juris Doctorate in Law, and was to complete his JD at Stanford Law School, before leaving for other pursuits. Write to him at: abhyanker@corp.siliconidnia.com
si