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Sun Microsystems recently honored several of its top suppliers for their outstanding contributions as providers of external manufacturing services. Amongst the winners was U.S.-based ModusLink, which topped the software and supply chain management category.
ModusLink, the merged entity between supply chain management companies Modus and SalesLink, garnered revenues of US$1 billion in its latest financial year and currently operates in 13 countries, including Singapore, China, Malaysia, Taiwan, Japan and Korea. It counts many Taiwanese notebook manufacturers as its customers, as well as tech giants like Sun Microsystems, Hewlett-Packard, IBM, Microsoft and more recently, Advanced Micro Devices.
Ken Southerland, president of ModusLink's Asia-Pacific operations, revealed in a recent interview with CNETAsia, the opportunities and challenges of servicing these high-tech companies. Supported by an IT infrastructure, which includes IFS' enterprise resource planning software and customized applications by its in-house team, ModusLink's global network is tightly coordinated around the clock, ensuring it has the capability to plan, source, manufacture, distribute and serve customers more efficiently.
Q: What are the latest supply chain trends?
A: What we're continuing to see is a consolidation of manufacturing in China. This is not a new trend, it's something that's been going on for quite some time, and it's now driving other trends in the supply chain.
There are two terms we use increasingly: the brand and the manufacturer. It's difficult these days to call Hewlett-Packard an OEM (original equipment manufacturer), because they don't make a lot anymore, they're mostly a brand. As the brands move production to Asia, and the markets have become more robust around the world, the challenge is connecting a more centralized manufacturing base with the global consumers. So the trends we're seeing more and more are towards late customization, because for quite some time now, end users have been (demanding) personalized products, from selecting the color of your cell phone to preloading the device with certain software. So the trend in our space is to more effectively connect the manufacturing base of Asia to the global consumer base, and that takes many shapes and forms based on the product lifecycle, product profile and the various cost elements of the supply chain.
Who's your most exciting new customer?
Our most exciting customer is AMD. We're offering them a very extensive global supply chain solution in getting their retail chips to market. We also expect to be assisting them in reverse logistics as well as in many other areas.
Who're your biggest customers and how do you support them? The notebook manufacturers in Asia are our biggest customers. We're the key player that defines the product for a user. So, we help customize the product to the language, we help the product become customized to what software that's going to be carried on in the product and many other specialties like peripherals, for example, whether it's a left-handed or right-handed mouse. These are the last-minute changes. While many people open their box, obviously the computer is the most impressive part, but the things that change most are all the other stuff. The motherboard or the processor doesn't change that frequently, but the language version, software, drivers, all of those things that go with the computer are the ones that are most dynamic.
How do you respond to the time pressures of the business?
We locate program offices near our customers' knowledge hubs, such as their design centers and laboratories. And for some customers, we manage the technical writing of the documents that go in with the equipment, and we manage those files throughout the supply chain.
For example, an office in the U.S. provides the documents to manufacturing locations like Singapore, Taiwan, Shanghai and Korea, or, perhaps, even Malaysia. The computers don't come to us. Quanta, for example, which manufactures computers, has typically five days from the time they get an order from, say, Europe until they have to get the product into the hands of the end users. That means we have typically four hours when Quanta calls us or sends us a demand file, and says they need all these custom-made components, they can be any of the 42 different languages that we have to custom assemble and get to their assembly line. So we ship the kit to their assembly line for manufacturing.
This window has compressed over the years?
Three or four years ago, the computers were made in market and the lead time was five to 10 days to market. And it wasn't so difficult to get the computers from Amsterdam to Scotland. Delivery time was like less than a day. So the total cycle time was much longer and delivery time was shorter. Today, if Quanta has five days, everything else is compressed. Three years ago, we had 24 to 48 hours to turnaround to customers; today, we have four hours because the lead time for the customer has compressed.
What are your plans for 2005?
We'll continuously expand in China. We currently have a small program office in Beijing and we are expanding it. Thailand is also on our radar for expansion.
China, because more customers are expanding. China, which has been driven by export activity, is increasingly being driven by domestic activity. So we're positioning now to leverage our money and support in domestic solutions.
Thailand has a strong domestic market as well, outside of China. But also increasingly, manufacturing activities are being moved into Thailand. Today, we serve Thailand from our Penang office. We plan to open a complete solutions center in Thailand, which is like the operations that you see here in Singapore.
Another area we're investing in is our after-market services. Increasingly our customers are asking us to fill the huge gap in the market where no one is providing good after-market services for reverse logistics solutions in Asia. And we plan to invest heavily next year. In China, it's a US$1.5 billion opportunity over the next three years.
In Thailand, there is also the opportunity to get into the mobile phone area, which represents a new area for us. And ultimately, we acknowledge the opportunity to serve the manufacturing export market. Hard-drive manufacturing, for example, is large in Thailand.
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