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"Do you need a robust operational supply chain today? With Extron's modular approach we can have your supply chain solution up and operational in a fraction of the time required for you to develop or expand it yourself."
The Evolution of the Last-mile Supply Chain
Last-mile Supply Chain
is also known as :
Extron SCM Programs
Extron Supply System
Last Mile Current Supply Chain Strategy Extron
Extron Supply Chain Logistics Solutions
Extron Supply Chain Distribution Software
Outsourced Supply Chain Model,
Last Mile Supply Chain Process,
Last Mile Supply Chain Technology,
Extron Supply Process,
Extron Supply Logistics,
Extron Supply Technology,
Supply Chain Management,
Supply Chain Software,
Supply Chain Industry,
Supply Chain Strategy,
Global Supply Chain Integration,
Supply Chain Services,
Supply Chain System,
Integrated Supply Chain,
Supply Chain Model.
A Brief History
Beginning in the 1980s, the United States led a massive
globalization effort. Free Trade was the mantra of choice and ideas like
Michael Porter's classic, "The Competitive Advantage of Nations" flourished.
Global wages grew, poverty fell dramatically, and hunger was surely being
eliminated. Mankind certainly had entered the golden age! Correct? Wrong!
Wrong - because globalization has had several unintended side effects and also
because it has not resolved some of the most pressing supply chain issues. This
is not to say that globalization is the wrong answer, on the contrary,
globalized supply chains HAVE benefited the world and certain economies
dramatically. The only problem is, as is often the case, one size does not
fit all and a globalized supply chain is not the solution to all our
Why Are The Current Supply Chain Models Flawed?
that the globalization playing field is becoming more level, some of the true
pitfalls of the model are becoming evident. Here are some problems:
- Current globalized supply chain models do not take freight costs into account.
- Globalized supply chains lead to increased inventory levels.
supply chain models assume cheap energy. However, the days of cheap,
plentiful energy ended in the 1990s. Moreover, current energy supplies are
causing significant environmental problems and are fueling "Petrodictators"
(to borrow a word from Tom Friedman's latest book "Hot, Flat and Crowded")
- Globalized solutions where "All Roads Lead to China" have eroded US preeminence
in the world. In fact, we have actually fueled the rise of our biggest
adversaries - Al Qaeda and China. Now, we have to spend more money defending
ourselves from threats, real or perceived, from both sources.
supply chains have led to an unacceptable level of risk in the supply chains
of most western countries. The flow of goods can simply be stopped due to a
problem in one country - mostly China. Have this discussion with Supply Chain
managers trying to plan around the annual February shutdowns in Asia during
the Chinese New Year - I am sure you will get an earful.
What is astounding
to me is that we are not simply discussing geopolitical issues here.
Fundamentally, there are real economic issues with today's supply chains:
freight costs, inventory costs, lack of IP protection for US-invented goods
and much more. Why did we then outsource our entire supply chain to Asia? I
think the answer can be summarized by "herd mentality" or, more kindly,
Let me be clear, the solution is not to do a complete U turn to
the days where we assembled every PCB or made every forging within our own
borders. The globalized model has tremendous benefits, both to the US as well
as to our trading partners. Both American and International companies benefit
from globalization. The solution is to enter a paradigm that recognizes total
cost and also manages risk to the overall supply chain.
I believe this is
where the "Last Mile" architecture shines through. This is the architecture
that balances supply chain risk, globalized sourcing and economics. This
architecture allows for continuous refinement of the supply chain to balance
A Brief History Of Globalization
In order to understand why we got
into the position we are in, it would be useful to take a short history
lesson on globalization. Fundamentally, civilizations have been trading in
goods and services for centuries. Trading in rare spices, silks, animals and
other goods is as old as man. However, when cheap transportation came into
being (with steam ships, the internal combustion engine and air transport),
and when communications revolutionized the ability of people to project their
needs instantly, the real age of globalization was born.
could be transferred, prices calculated and decisions made in days, not
months. Goods could be cheaply transported in weeks, not years. If you were not
globalizing, you were being left behind… You HAD TO globalize. You had to have
an Asian strategy, because that was a cost reduction strategy.
In the rush
to outsource and adopt less expensive globalized sources of materials, most
companies did not address several key aspects of their supply chains. They then
rushed into "point solutions" that solved each problem, but did not address
efficiency of materials, labor or even address economies of scale (since each
solution was a point solution).
Where We Are Today
Some key Supply
Chain factors that were not effectively addressed in the massive outsourcing
to Asia of the 80s and 90s included:
- Inventory concerns caused by remote
factories (high levels of configured inventory, inventory obsolescence, etc)
- Management of Supply Chains that were naturally domestic
- Demo and Loaner
- High freight costs from overseas destination and
heavy expedite fees for "mistakes"
However, the riches borne by cost
reduction made possible by Asian outsourcing hid many of these problems.
There were also significant first-mover advantages, since first movers stood
to grab market share based on price reduction to end-customers.
result, companies rapidly outsourced, shut down local supply and did not analyze
costs fully. And it was so easy! When your costs are a fraction of what they
were, you can hide all kinds of mistakes, stock all kinds of inventory and
not do all the rigorous analysis you should because your costs are dropping
80% and besides, waiting is just not our way, is it?
operations groups were gutted, and contract manufacturers (CMs) emerged as
global powerhouses, there were fewer people to manage operations. In effect
there was no one to watch over the supply chain except the CM. Little wonder,
then, that the CMs encouraged their customers to outsource everything. The
message was simplicity, a globalized hub and freight costs were just part of
doing business. No one discussed inventory because the CM would hold
inventory and charge a small markup for holding it.
This model has worked
fine until today. However, two major disruptive factors have come into play
as well, with the gradual erosion of the "Asian Supply Advantage".
In the early 21st century two major disruptions, vis-à-vis supply
- "Oil shock II" or the first major oil price disruption since the
- Sept 11, 2001
With these two disruptions, freight lead times and
freight costs began to enter the equation in a significant way. Recently, an
executive charged with a turnaround at a Silicon Valley icon was surprised to
discover that in his retail business, which was being run out of a global
logistics hub in Singapore, near his CMs factories in Malaysia, freight costs
actually totaled 13% of revenue! Additionally, lead times had increased by a day
due to security requirements.
He was paying more and waiting longer to
fulfill products from a logistics hub far away from his local markets.
We Have A China Strategy, Now What?
As discussed earlier, an Asia/China
strategy was a requirement after the ‘90s. If you did not manufacture in
China, then your competition was going to eat your lunch because they could,
and would, lower their costs.
As part of the natural evolution of capitalist
markets, however, competitive advantage rewards early movers, but only for a
time. That time is now up. Everyone is manufacturing in Asia or China and now
organizations are looking for new sources of advantage.
immediate opportunities stand out:
- Inventory: Although global inventories
have continued to shrink, it is clear that inventory pipelines have
lengthened as product life cycles have shortened. This is not a desirable
- Freight: As mentioned in an earlier example, freight costs are
now becoming a factor on the income statement and it is clear that freight
does not add any value to the product being shipped. Freight is simply an
addition to cost - it adds no value.
The Logical Next Step - Postponement
As a result, supply chains reconfigured to minimize inventory and freight. The
way this is being handled is by implementing Postponement.
topic for another white paper, is, simply put, the act of committing
inventory to a configuration at the last possible point (typically after receipt
of the customer order) and doing so (from my perspective) in a location that
minimizes non value- add freight costs - which means that postponement is
typically implemented in the market where the product is going to be used.
Let me be clear, postponement only applies to products that merit it. These are
typically high value products, generally costing more that $1 per cubic inch.
Also, the more configurable a product is, the more "postponeable" it is.
The Last Mile
The "Last Mile" Supply Chain architecture implements
Postponement in a logical and cost effective manner by putting all aspects of
the "Last Mile" under one roof. Extron's business model addresses these
issues. Extron handles all Last Mile (or some might say domestic) supply
chain activities for its customers.
Extron is a "Last Mile Supply Chain
Services" company. This is an evolving segment of the supply chain industry,
but a cutting edge segment that has evolved as supply chain managers
nationwide struggle to cope with the inadequacies of the current globalized
supply chain model. Our clients include Dell, Sun, Motorola and a significant
number of technology companies.
We address the following major problems:
- Increased inventory turns using postponement and final configuration as
- Custom supply chain programs for unique needs
- Freight cost
reduction using appropriate transportation chains for different component
- Eliminating rework
- Reassert control of your Supply Chain
- Control your IP when using offshore sources
Extron's "Last Mile" business
model addresses the above issues through the following comprehensive service
Forward Supply Chain Programs
- Inventory Management and
- Forward Distribution and Fulfillment
Configuration (retail, PoP, country kits, disposable kits, etc)
Integration (box and rack build) Reverse Supply
Reverse Supply Chains
- Demo/Loaner program management
- Reverse logistics and RMA
management (including remanufacturing)
- Custom SC programs
engagements are tailored to each customer's needs and include services ranging
from simple inventory management to accommodate temporary spikes in inventory,
to complex engagements that involve transfer of product knowledge,
reconfiguration of products, and so on.
Why West Coast?
perspective, it would be good to keep some supply chain activity in the Silicon
Valley - help the local economy among other things.
It is also a solid
customer advantage to be located on the west coast, since goods (many of
which come from Asia) can be processed quickly and without expending further (non-value-
add) freight costs to move them elsewhere in the country. This improves the
cash-to-cash cycle and inventory position for most of our customers, besides
keeping costs low and totally variable.