Much like today’s automobile manufacturers are focused on taking individuals out of the driver’s seat and giving them a lesser role in turn-by-turn vehicle operations, Jabil Circuit has spent the last four years honing a highly automated, digital supply chain that requires much less hands-on attention.
“We want to reduce the amount of time that we, as supply chain managers, spend in the driver’s seat by automating a lot of the activities we handled in the past,” says Fred Hartung, vice president of supply chain and global logistics for Jabil.
As an electronic product solutions company that provides comprehensive electronics design, production, and product management services to global electronics and technology companies, Jabil Circuit works with customers in a wide range of industries. To do this, the company relies on a massive global supply chain that includes 17,000 suppliers, 700,000 part numbers and 101 manufacturing plants in 24 countries.
“Our supply chain is more complex than most because we manufacturer other companies’ products,” says Hartung. “As a result, we have to operate very individualized supply chains across 250 premier customers.” That means Jabil Circuit can’t just approach one customer and ask it to consolidate parts with a competitor or with a company in a completely different industry—even if that company is using the same parts as the first customer.
Adding to the complexity is the sheer volume of parts that Jabil Circuit manages on a daily basis for its customers. “It’s an environment that was really crying out for optimization, automation and the ability to capture all of the information from the supply chain environment,” Hartung explains. “Then, we needed to be able to orchestrate and use that information across all of our partners and customers.”
Over the next few pages we’ll learn how Jabil Circuit was able to achieve this goal, find out what technology platforms are driving this initiative, and learn the key benefits the global company is already seeing from these mobile efforts.
Creating a fluid supply chain
Four-and-a-half years ago, the logistics and supply team at Jabil Circuit started thinking about how it could make its global supply chain more efficient while also simplifying operations and ensuring that products and information flowed as seamlessly as possible as they moved from supplier to manufacturer to distributor to end user.
The team also wanted to better leverage the company’s structured and unstructured data (e.g., blogs and social media posts) and that of its customers and business partners. Finally, it wanted to be able to turn those insights into actionable data that would be useful for decision-making.
“We didn’t just want visibility, we wanted actionable visibility,” says Hartung. “We wanted to know what actions to drive, what to move forward with, and what actions could be automated.”
Realizing that Excel spreadsheets weren’t going to cut it—and that its existing technology platforms probably weren’t up to the task either—the contract manufacturer set out to build a new platform that would be known as “Jabil InControl” (Intelligent Control) from the ground up. Hartung says that the timing was right because data storage was becoming less expensive and more available Big Data was having a large impact on supply chains. And at the same time, analytics applications were growing in popularity.
“There was a confluence of technology, so everything just kind of came together at once,” says Hartung. “It was less of an epiphany on our part, and more of a ‘holy cow, we believe we can really do this.’” And like many projects, this one started out small and slowly became a major initiative. “Once we started working on it, the process just fed itself,” he says.
Harnessing the globe
To develop its new supply chain visibility platform, Jabil Circuit tapped the collective knowledge of its managers and employees, talked to them about their jobs, asked them about potential productivity improvements, and explored the various functional areas that contribute to the contract manufacturer’s overall supply chain.
Early on, Hartung says that the company was less interested in the typical 3% to 5% improvements and more focused on attaining 20% to 30% jumps by introducing new technologies, examining cost points and leveraging its internal knowledge bases—versus just turning the project over to its IT department.
“We used the ‘incubation method’ to come up with ideas and test them out,” Hartung recalls. “If the idea didn’t work out, we threw it away and moved on to the next thing.”
Within three months, the company had a functioning product that was already proving its worth across five key areas: growing revenue, helping profitability, increasing free cash flow, decreasing working capital, and increasing service levels. Because four of the five measures can be directly attributed to financial statements, Hartung and his team were able to begin building support for the initiative.
Initially known as a demand driven supply chain (DDSC), the platform enabled advanced planning and helped Jabil Circuit identify changes in demand and then adjust accordingly. “That’s the first piece that we automated,” says Hartung.
Using a process called actionable proactive analytics (AMP), the company was able to more efficiently utilize and allocate inventory and improve its customer service levels by 20%. “We occupy a low-margin, extremely capital-intensive segment of the market,” says Hartung, “where the traditional approach was just to load up on inventory.”
Customers were also enamored by the initiative, Hartung says, and started providing the kind of positive feedback needed to move the project out of the testing stages and into Jabil Circuit’s supply chain. From there, he says the company’s supply chain department partnered with its IT department to lay out the road map for getting that done. As part of that initiative, the platform would incorporate mobile capabilities and be made available to customers and business partners.
“After about two years of getting nothing but positive feedback from the business community—and helping to grow both revenue and profitability,” says Hartung, “we decided to invest millions to build the second version on a commercial platform that had multi-tenancy capabilities.”
Measuring the benefits
Currently, version 1.0 of Jabil InControl is a Web application, while development for version 2.0 is being created as a hybrid app. Using the multifaceted supply chain platform, the company has been able to reduce its inventory costs by more than $300 million, or 13%, since the platform was rolled out. The company has also elevated its customer service levels by 20%.
Jabil Circuit’s customers, which include some of the world’s largest brands and high-tech manufacturers, have gained from the platform’s collaborative decision-making capabilities and the way in which it proactively protects against supply chain disruption. According to Hartung, the platform also lets customers optimize Jabil’s significant manufacturing and distribution footprint to minimize their own total landed product costs.
Hartung says the contract manufacturer has also lowered its supply chain risk over the last few years. “When you have access to Big Data and analytics, everything becomes that much more manageable,” he notes. “Things that couldn’t be done before—such as assessing supply chain risk—can be done now thanks to the technology.”
Following the 2015 explosions at the container storage station at the Port of Tianjin in China, for example, Jabil quickly identified which of its 17,000 suppliers were situated within a 150-mile radius of the plants. With that data in hand, Jabil’s logistics and supply chain organization knew the parts that each was producing or supplying, how much inventory each supplier had on hand, as well as the alternative sources for those parts. Using its supply chain visibility platform, the company could also view in-transit inventory and the potential impact of any supply disruption.
“We had all of this information within minutes and immediately started working on alternative sourcing strategies,” says Hartung, “whereas with most companies, it takes about three to four weeks to fully understand that picture.”
Focus on process improvement
Having a centralized database for the 700,000 components that it carries not only provides Jabil with inventory visibility, but it also allows the company to build analytics around and understand the risk profile for “every single component and across eight or nine risk-related attributes,” says Hartung. “We can look at everything from defects per million to supplier performance to the lifecycle age of every product. Using this data, our supply chain managers can go out and proactively mitigate problems.”
Jabil InControl isn’t only winning over the company’s internal and external customers, it’s also getting attention in the supply chain space. In fact, it recently caught the attention of research giant Gartner, which named the company a “supply chainnovator” as part of its annual supply chain innovation awards for 2016.
According to Gartner, Jabil Circuit earned the award in the high-tech manufacturing category for driving the transformation of its global digital supply chain through the use of unconventional, innovative and high-impact approaches.
“Jabil’s InControl provides the supply chain ecosystem and its customers worldwide with unique and holistic views of the complex material flow from raw material manufacturers to the delivery of end products,” said Virginia Howard, research director of Gartner supply chain research. “As an early adopter of innovative supply chain visibility tools and intelligent analytics, Jabil is making major strides in optimizing its working capital while automating supply chain decision-making.”
Going forward, Hartung says Jabil Circuit plans to expand its InControl platform to leverage even more functionalities, including machine learning, cognitive analysis, and complex event processing in support of the driverless, piloted supply chain of the future.
“We want to take as much of the analysis as possible out of the individual’s hands,” says Hartung, “and free up our managers and employees in a way that allows them to spend 85% to 90% of their time driving improvements.”