For technology company Calix, communication is key to getting the most out of its business process outsourcing relationships
[From Supply & Demand Chain Executive, August/September 2006] When broadband access equipment maker Calix was founded in 1999, the Petaluma, Calif.-based start-up elected to pursue an outsourced manufacturing model from the get-go rather than take on the huge costs of setting up its own production facilities. That decision was made easier by the growth of a whole contract manufacturing industry, with companies like Singapore-based Flextronics Corp. providing end-to-end production and, increasingly, supply chain services for its customers. Calix, in fact, has a longstanding relationship with Flextronics, among other outsourced service providers.
Roger Weingarth, senior vice president of product and manufacturing operations, Calix
To gain insights into how Calix has turned its business process outsourcing relationship with Flextronics into a highly integrated partnership, Supply & Demand Chain Executive recently spoke with Roger Weingarth, senior vice president of product and manufacturing operations at Calix. Formerly the president and CEO at Arista Networks and the president and chief operating officer at Optical Solutions, Weingarth handles all aspects of product introduction, supply chain management and product manufacturing for Calix. We began by asking how Calix' relationship with Flextronics has evolved over time.
Roger Weingarth: When we first engaged, we looked at Flextronics as being a full turnkey provider, which meant the traditional manufacturing functions like procurement, assembly and logistics. The relationship has evolved over time to where we now view Flextronics as more of a global full-service partner, which means that instead of just doing operations, they do end-to-end services, including the traditional manufacturing services but also engineering, design validation testing and all sorts of higher-level functions that weren't available when we first established the relationship.
S&DCE: What are the metrics that you use to judge the effectiveness of the relationship with Flextronics?
Weingarth: When we started and were just trying to get the product to market, the first metrics that we had were focused on delivery: setting up the supply chain and delivering the product to market at a target cost. That has evolved into a whole set of measurements including not only time-to-market, but also cost, operating cost of goods sold (OCOGS) expense, warranty expense — a whole bundle of new measurements that we have in place today with Flextronics.
S&DCE: How do you see the impact that the relationship with Flextronics has on Calix?
Weingarth: From an operations perspective, we can start with quality. Flextronics has plants and technology centers all over the world, and we have access to those facilities on a daily basis. When we're looking at a new design, the fact that we have access to that engineering talent pool within Flextronics is critical.
The other piece of it is time-to-market. When you have a known partner and you have processes in place [with that partner], even though you're continuously improving, you don't have to constantly recreate the processes. It becomes more of a repetitive exercise, and as it becomes more repetitive, you can launch products to market faster.
Then another way that we are evolving with Flextronics is that we are having them do the lower-level design work, which means that Flextronics is managing all the value engineering and some of the sustaining engineering efforts being done today on our current platform. That enables us, Calix, to focus on higher-level engineering and on getting new products to market.
And then, of course, let's not forget cost. Cost is huge. I'm not going to tell you the number of margin points we gain through our ability to leverage the buying power that Flextronics has, but it's been significant. Not only that, but they are able to help us get into the low-cost regions of the world relatively seamlessly with little to no cost to make that transition, thereby allowing us to be much more competitive in the marketplace.