Manufacturing Leadership Council
Decision Compass: Operational Excellence Group
Call date:
November 1, 2012
Participants included:
Tony Delia, Panduit Corp.
Brad Martin, Enterasys Networks
Mike Hintze, International Thermal Systems
Eric Fidoten, Campbell Soup
Brad Heath, VirTex Assembly Services
Bill Cousineau, Kohler Co.
Members not president included:
Bruce Hagenau, Metcam
Patrick Goughin, International Society of Automation
Jill O’Sullivan, Farmingdale University
Paul Baldasssri, Flextronics
Tracy Baker, DIRTT Environmental Solutions
Duke Golden, International Game Technology
Jill O’Sullivan, Farmingdale University
Jack Ryan, Covidien
Val Zanchuk, Graphicast
Dan Miller, AT&T
Brian Radmer, AT&T
Thomas Seibert, Nestle
Call Topic:
Ensuring Productivity and Quality in an Outsourced Environment
Call Discussion:
Brad Martin, Vice President of Engineering Operations and Quality at Enterasys Networks served as
Topic Leader for this call. With $400 million revenues, 20,000 customers, and customers in 90 countries,
Enterasys competes with Cisco, Juniper, and HP in the market for enterprise networking and security
products. Enterasys’ products are complex, building on 20-layer printed circuit board and including up to
15,000 discrete components in a single product.
The company has enjoyed three consecutive years of growth and high customer satisfaction. It’s Net
Promoter Score is 81.
Enterasys ran its own plants in New Hampshire and Ohio before fully outsourcing production and repairs
in 1999. Today the company works with outsourced production providers around the world, including in
Ireland, Thailand, Taiwan, and Romania.
The company’s strategy for managing contractor quality and productivity revolves around three core
principles: The use of a wide variety of cloud-based tools, standardization of manufacturing equipment
and processes, and visibility through data management.
Cloud-Based Tools
While Enterasys uses traditional on-premise software systems such as ERP for materials management
and Agile for design, PDM, and engineering change orders, the company has increasingly turned to
cloud-based tools that give it a high level of real time visibility into the processes of its outsourced
providers. Besides allowing Enterasys to reallocate IT resources from maintenance activities to valueadded activities, the cloud-based systems have increased customer satisfaction, improved forecast
accuracy, improved quality, reduced returns, and enhanced collaboration with outsourced providers,
among other benefits.
The cloud-based tools include Steelwedge for demand planning, SigmaSure for quality management and
SmartSheet for cloud-based collaboration. The most recent cloud-based tool put into place, SmartSheet
was described by Brad as Microsoft Project in the Cloud. It allows Enterasys to easily share with
contractors information related to processes such as demand planning, failure analysis, factory
transition planning, and critical path resource management. Enterasys also uses a tool that gives users
single sign-on to all of its cloud-based tools.
Use of the cloud-based tools has allowed Enterasys’ IT group to improve the percentage of its time
focused on delivering value-added work from 35% historically to 50%, with more improvement expected
in 2013.
Manufacturing Standardization
Enterasys leverages its access to a variety of contract manufacturing providers to define the best
practices around which all plants producing its products are required to adhere. These standard
practices are compiled in a document called Standard 65, which Brad calls the company’s
“manufacturing bible.” It defines such factors as surface mount technologies to be used, standard
inspection and test procedures, material handling and factory flow, and manufacturing cell layouts.
When Enterasys looks at a potential new plant of contract provider, it does a gap analysis using Standard
65.
Besides instantiating best practices, the use of this comprehensive set of manufacturing standards
provides Enterasys with flexibility. The company can quickly move production, when necessary, between
plants that use the same equipment and processes. When the company’s operations in Thailand were
affected by the tsunami there, the company was able to relocate production to the US without missing a
single revenue shipment or dollar of revenue.
Enterasys uses internal engineering resources to develop the Standard 65 specifications and perform
gap analysis and improvement plans. Although the company outsourced production, it retained
manufacturing and test engineering teams.
Data Management
Brad said data management and analytics is crucial for managing outsourced providers. The company
wants to compete on quality, and it emphasizes customer satisfaction, with lifetime warranty on its
products. At the same time, Enterasys must cope with rapid product development cycles and extended
product lifecycles. As a result, Enterasys must be able to recognize quality trends and events in real time
and even to model and predict potential problems. To accomplish this, the company relies on cloudbased quality management tools, specifically the SigmaSure tools and analytics tools and dashboards
that are part of the product. SigmaSure analyzes real time data from ERP, CRM, RMA repair, and
contract manufacturer production and test systems. SigmaSure delivers early visibility and real-time
manufacturing process intelligence, driving supplier and contract manufacturer quality and preventing
costly rework and scrap downstream. You can effectively monitor your product across the value-chain from suppliers to manufacturing, from finished goods to end users, from design to field service.
SigmaSure gives Enterasys visibility into every test and inspection operation, and lets the company know
when a test has been skipped or repeated. Enterasys can follow results by serial number. This enables
them to make proactive decisions, for example, to scrap production of a board if there is too much
rework.
Enterasys also has introduced processes to support the data management effort. The company holds
weekly quality improvement meetings where action plans are developed based on the data and analysis.
As a result of the data management and analysis, Enterasys saw a 41% reduction in first-year return
rates in its largest volume products and was able to reduce unit reserves by 50%. Overall, the company
has seen a 25% reduction in return rates. As a result of these improvement, Enterasys was able to
negotiate a 300% increase in the warranty coverage period from its major ODM (original design
manufacturer) contractor.
Brad said the increased data and transparency enables Enterasys to understand where friction points
may exist with contractors. In some cases it’s led to new contract terms.
Brad Heathnoted that involves a proliferation of cloud-based systems. (Brad Martin said the company
now has 10 different cloud-based applications.) Brad Heath noted this runs contrary to the efforts of
many manufacturers to consolidate on fewer systems.
Action Items:
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Use cloud-based tools to gain visibility into and improve collaboration with remote outsource
providers. Besides improving collaboration, the use of cloud-based tools can enable IT
organizations to devote more of their resources to value-added activities.
Define and enforce manufacturing standards across outsourcing providers. Start by gathering
information on best practices used by providers. Then specific standard best practice processes
and equipment. Besides enhancing productivity, this enables flexibility and production can be
more easily moved between or within outsource providers.
Retain manufacturing engineering and test engineering personnel and expertise. This is an
important resource for defining standard manufacturing processes and equipment and
performing gap analysis with potential new outsource providers.
Invest in data management and analytics that can provide real time insight into outsource
providers’ operational results. This can enable quick response to quality problems or even
enable preventative steps.
Topic for the Next OpEx Group Call:
TBD
Potential Topics for Subsequent Calls:
•
Identifying and Implementing Global Standards of Operational Excellence. What operational
practices can and should be standardized, and how can these standards be implemented on a global
basis?
•
Introducing continuous improvement standards and structure in decentralized organizations.
(Possible Topic Leader: Eric Fidoten?)
•
ISO 14000 Certification (Possible Topic Leader: Bruce Hagenau?)
•
Fixing quality problems early and throughout the process. Including R&D and engineering up
front. Possible topic leader Jack Ryan?