Abrahim Abbasi, senior vice president of operations, information technology and customer service at Redback Networks Inc., has a simple philosophy: "If an activity changes or modifies the buying behavior of a customer, it should be handled in-house. If not, it should be outsourced," says Abbasi. "I'm a firm believer in a total leveraged model, where partners share rewards and risks and, more importantly, share information."
This philosophy has transformed the company's operations, particularly logistics and supply chain functions. By deploying Web-based software and outsourcing shipping, receiving and outbound logistics, Redback (San Jose, CA) has cut overall logistics costs by 25%.
Founded in 1996, Redback Networks is a $115 million provider of broadband networking equipment, which enables carriers and service providers to build smart broadband networks that can deliver simplified, personalized, portable subscriber services to consumers and businesses. Redback Networks products already run the majority of the broadband DSL lines in the United States, and its next-generation of equipment provides even higher bandwidth for integrated video, voice and data networks. With operations on three continents and dozens of countries, the company has a complex supply chain.
OUTDATED METHODS
As recently as a couple of years ago, Redback Networks handled logistics and supply chain activities -- including those related to its service operation -- with a lot of manual systems, an early version of customer relationship management software from Siebel Systems Inc. (San Mateo, CA) and a legacy system that generated alerts and e-mails to account managers advising that a repair ticket had been opened or a return authorization had been requested. "It was not truly visible or real time," recalls Abbasi.
The service operation consisted of approximately 50 warehouse "depot" locations worldwide, which maintained inventories of replacement parts to ensure the company could meet stringent service level agreement requirements it had with some customers, which call for the replacement of failed components in as little as four hours.
Without real-time visibility into service parts inventory, however, Redback Networks was forced to maintain significant levels of "safety" stock to ensure it could deliver parts to customers in a timely fashion. When a service order was placed, Redback Networks staff would make phone calls to depots to locate parts and arrange shipments. The siloed system also made it virtually impossible for Redback Networks to easily determine the cost of goods deployed, verify service-level agreement eligibility or analyze shipment activity. It also was difficult to track parts returned for repair. That meant Redback Networks often ended up shipping the customer a new part instead of a repaired part because the returned item couldn't be located quickly enough.
Clearly, something had to change. "We wanted to minimize cash burn for the company and cut costs," says Abbasi.
CAUTION! CHANGE AHEAD
But Redback was wary of deploying a new enterprise application to solve its service parts logistics problems, particularly considering the expensive and complex servers and other technologies that would have to be deployed. "At the same time, we wanted an efficient, visible, flexible system, and we were looking for a collaborative effort. We didn't want to simply transfer costs to someone else. We made a conscious decision to select a few partners and integrate the overall system into a network-to-network model," says Abbasi.
To transform its service supply chain, Redback Networks considered several technology options and, ultimately, partnered with D.W. Morgan Co. (Pleasanton, CA), using its ChainLinq supply chain software. Founded in 1990, D.W. Morgan serves high-tech, medical, defense and industrial customers such as HP (Palo Alto, CA), BFGoodrich (Greenville, SC) and Royal Philips Electronics N.V. (Eindhoven, Netherlands).
Redback also signed on D.W. Morgan to handle its shipping and receiving, as well as outbound logistics including preparation of the tariff documentation needed for overseas shipments. ChainLinq also supports these functions. This transition to outsourced services means that almost everyone from Redback Networks' logistics organization now works for D.W Morgan. In fact, the company's in-house logistics staff now consists of just two people, one based in the Midwest and one in Los Angeles, and both work for D.W. Morgan. To do their jobs, "all they need is a personal computer and access to the Internet," notes Abbasi.
ChainLinq is a hosted solution that can pull supply chain and logistics data on demand from a variety of databases within and outside the company and present it in a coherent fashion on a single Web site. "We wanted state-of-the-art technology and a best-in-class vision and strategy, which would provide visibility from the time a customer picks up the phone to start the return process until the repaired or replacement part is back in the customer's hands," recalls Abbasi. Redback Networks also wanted to be able to track return logistics three ways -- by product flow, information flow and financial flow.
Redback Networks, in fact, had much of the information it needed in-house. Unfortunately, the data was difficult to retrieve because virtually none of the warehouse depots were on the same systems. Worse still, "None of the [depot] databases talked to each other," recalls David W. Morgan, president and chief executive officer of D.W. Morgan. As a result, three people were needed to prepare daily inventory spreadsheets, which were then aggregated into a weekly report. Not only was the information days or even weeks out of date, but Redback Networks was consuming considerable resources "manually recreating a readable form [of the] data that already existed," says Morgan.
Today, Redback Networks uses ChainLinq to pull information from its databases, its updated customer relationship management software -- Siebel 7.5 from Siebel Systems Inc. -- and a heavily-customized returns management application, as well as from selected partners such as small parcel shippers, and presents it on a single Web site in real time. To eliminate the need for custom code, database connections are made via the RosettaNet set of XML semantic standards for high-tech manufacturers. For security purposes, one D.W. Morgan server collects the data from the various databases and another presents it to Redback Networks on standardized screens.
"All the information a manufacturer needs already exists in the supply chain, perhaps in someone else's database," says Morgan. "For the last 10 or 20 years, the focus has been on bringing info in and replicating it. Why replicate it if it already exists?" he asks. Replicating data raises costs. However, on-demand network-to-network computing, which draws data from wherever it resides, necessitates collaboration. "It requires a partnering mindset. You have to overcome old adversarial stances of 'what's mine is mine,'" advises Morgan. "It's a paradigm change."
In use now for over a year at Redback for service, supply chain, shipping, receiving, logistics and distribution, the ChainLinq solution has helped the company cut service supply chain costs 30% versus the previous system, and generated numerous additional benefits. Real-time inventory visibility has eliminated overstocking and reduced the total cost of goods in the field. The number of service parts depots has been cut from 50 to 21, significantly shrinking overhead costs. Fulfillment time has been condensed because the system enables immediate online ordering of replacements.
GETTING BETTER ALL THE TIME
In addition, customer service has improved because real-time information can be shared between depots. Service level agreement eligibility can be easily established, eliminating warranty replacements for non-covered customers and creating new sales opportunities. Failed parts can be refurbished and returned to the customer. If the part is not repairable, it can be processed through appropriate disposal channels. The finance department can compute a real-time cost of goods analysis on demand to manage the value of deployed goods. Finally, spreadsheets and graphical charts can be created dynamically and downloaded at any time for on-the-fly analysis. ChainLinq also can help with compliance with regulations like Sarbanes-Oxley or country-of-origin record keeping.
Since ChainLinq is a hosted solution, implementation was virtually immediate and free of infrastructure costs from Redback's point of view. Redback simply pays a monthly service fee, which includes freight charges and depot management expenses. Training employees on the ChainLinq system was simple and quick and involved review of a 30-minute tutorial.
Down the road, Redback Networks plans to expand on its philosophy of a visible supply chain by hosting a customer portal that customers can use to check information such as shipment status. It too will be supported by the ChainLinq solution.
"We've become a company that's much easier to do business with," says Abbasi. "Not only do we have a more visible process, but we've significantly reduced costs."