Won't you be my neighbor? --
Campus concept supports JIT supply strategy
By Jennifer L. Baljko
March 30, 1998, TechWeb News
In a global market, it's not uncommon to have parts shipped
to a given production site from every corner of the world.
The practice, though, may not be the perfect solution for
procurement managers. Often, it means factoring in
potential delivery delays due to the lack of infrastructure in
a particular region, working with people in various time
zones, and increased worry about the all-important
time-to-market schedule.
All of which has some buyers asking, "What ever
happened to the supplier next door?"
Taking those concerns to heart, Flextronics International
Ltd. has found a way to steer clear of some of the logistical
problems plaguing the supply chain: They have adopted the
campus concept.
The core philosophy is to have plastics, sheetmetal,
cable-wiring harness, and electronic component suppliers,
and distributors and other key vendors located within a
stone's throw of the contract manufacturer's worldwide
facilities.
Though not a completely new idea, it's a way of getting a
better handle on the supply chain and strengthening its
links. By having suppliers practically across the street, a
company can eliminate geographic boundaries, avoid
import/export restrictions on raw materials, and reduce
logistical barriers for distribution and manufacturing
channels.
"This is a way of optimizing the supply chain," said
Michael E. Marks, chairman and chief executive of the San
Jose-based contract manufacturer. "Historically, we buy
materials around the world and bring them to the factory
and then ship them out. We're moving to large campuses in
various parts of the world and putting our materials
suppliers near us."
For example, Flextronics has a 100,000-sq.-ft.
manufacturing site in Guadalajara, Mexico, with plans to
complete an additional 120,000 sq. ft. this year.
Rather than be concerned with how products would make
their way from other regions, the company has put the
infrastructure in place and is leasing space to suppliers
who are based locally or want to be in a particular region,
said Dave Otterness, director of supplier management. So
far, Insight Electronics Inc., an IC distributor, and Siemens
have opened up shops there.
Similar sites are under construction in China, and are
likely to be developed in Europe and other strategic
regions.
Such arrangements offer numerous benefits. The suppliers
not only have a chance to serve one of the top-tier contract
manufacturers, they can work with other regional
customers while skipping all the overhead associated with
brick-and-mortar construction and related expenses.
As for Flextronics, having suppliers locally situated,
means better procurement practices and a quicker
turnaround time on just-in-time delivery.
"The suppliers do their own thing and we do our thing,"
Otterness said. "It's sort of like an industrial park-type of
setting."
For Insight, the opportunity was perfect, said Jaime
Morales, regional sales manager for Mexico.
The company had been serving its Mexican customers from
its San Diego operations, but wanted to move further south
to reach clients in Latin America.
"One of our company's goals was to expand into markets in
Latin America, Brazil, and Argentina," he said. "This was
a powerful way of doing that. Before, our customers in
Mexico would have to wait for shipments from our U.S.
offices. The parts would either come through the
Guadalajara airport or on trucks from Laredo. By having
an order-fulfillment center and a warehouse here, we are
able to offer an immediate response for our customers."
The idea could also be appealing on the customer level,
said Michael Aghajanian, director of Pittiglio Rabin Todd
& McGrath, a Weston, Mass.-based
management-consulting firm.
"If a customer wants to visit some of their sites and they
visit Mexico and China, they'll see that their key suppliers
are right there," Aghajanian said. "They may also like the
fact that a U.S. company moved into these areas and has
very sophisticated buildings."
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