The Chameleon and the Supply Chain

How one company proposes to lower supply chain costs with embedded software and a colorful lizard

Sunnyvale, CA  February 7, 2003  Does a color-shifting lizard hold the key to reduced costs in your supply chain? Alan Lattanner thinks so.

Lattanner is chairman and CEO of two-year-old technology startup Blue Iguana Networks, and as he explains it, "The blue iguana is a member of the chameleon family, and when it comes out in the sunshine, it changes color from a dull grey to a bright, iridescent blue. So it reconfigures itself, and this is all about reconfigurable technology."

The "this" to which Lattanner is referring is Blue Iguana's solution for helping companies communicate with, track and reprogram components and equipment via the Internet. Blue Iguana provides small bits of programming code that can be embedded in "smart" electronic devices or components, as well as enterprise-class software that companies can use to access those devices or components over the Web.

For example, a company could embed the code in test equipment used to ensure quality in electronic components. As each new generation of the components rolls off the assembly line, the test equipment may require updating. Blue Iguana's solution holds the promise of letting the company update the test equipment "on the fly" to handle the new components.

Sounds great for manufacturing, but what does that have to do with the supply chain? To understand that, we have to look at a major trend in manufacturing over the past several decades: outsourcing. Let's examine the electronics manufacturing sector, as an example.

Recent decades have witnessed a global evolution in the electronics manufacturing arena. In the past, all manufacturers owned their own production facilities, but by the late 1980s the proliferation of overseas competition significantly changed the landscape of the industry.

Today competitive pressures are driving electronic original equipment manufacturers (OEMs) to reformulate their strategies, transforming their companies into lean, highly efficient global operations with streamlined supply chains. As part of their efforts to lower plant ownership costs associated with production, labor and procurement, global manufacturers continue to accelerate the trend toward outsourced electronics manufacturing services (EMS) providers and, increasingly, service functions as well.

This manufacturing shift to offshore facilities in the Far East, Eastern Europe and the Pacific Rim provides highly skilled, inexpensive labor, and the move drives product costs down for customers and decreases an OEM's ownership expenses since offshore manufacturing facilities are closer to component suppliers and shipping costs are lower. However, the very solution that enables OEMs to focus on optimal product development and delivery also presents some major challenges as well.

For instance, managing EMS resources on a global basis requires a timely flow of critical technical information to facilities that are often not easily accessible. Insuring that all participating EMS providers use up-to-date standardized configurations can result in logistical nightmares that involve significant cost and human resource implications. Optimizing procedures throughout the chain and establishing common benchmarks for service and support while maintaining costs is essential.

Adding to these problems, recent innovations in technology have produced electronic products that are more complex to design, test and service. The accelerated pace of technical advancements and marketplace changes can overshadow an OEM's ability to manage worldwide quality control or significantly improve post-sales service. As a result, the industry faces unprecedented challenges to customer satisfaction.

"New technology is always going to be the driving force in developing smart electronic devices, but generating high satisfaction among your customers is the key to ensuring a product's ongoing success," says Lattanner. "Ultimately, global product manufacturers need a sound technical infrastructure that enables them to react 'on the fly' to changing dynamics and that offers superior operational control over their product regardless of where it may be manufactured or serviced."

Complicating matters, in addition to addressing quality assurance and operational control in their offshore facilities, OEMs must consider that these resources may trigger a slower response time in addressing problems. Inefficiencies in the supply chain could prevent companies from quickly responding to glitches in the programming, bugs in the firmware or, worse, serious security flaws found only after a product hits the market.

Lattanner argues that global manufacturers can no longer afford to ignore these issues. "This industry is a prime example of Darwin's 'survival of the fittest' philosophy," he says. "Those manufacturers incapable of successfully overcoming the challenges associated with maintaining high quality and lowering cost simply won't survive."

Developing intelligent products that connect to the Internet is simple enough, but actually implementing the necessary features for remote updating, testing and reconfiguration would demand that companies take responsibility for creating and maintaining a secure, reliable link. In most cases however, performing the silicon-level manipulations that are needed is economically unfeasible and beyond the normal capability of conventional Internet connections.

Blue Iguana believes that its solution fills this gap by allowing for remote hardware configuration management, letting a company remotely customize, personalize or service these intelligent devices. The potential benefits include assured delivery and implementation of product firmware/software updates at manufacturing test and service depots; more consistent product quality, since manufacturing can query, inspect, test and effect immediate changes in offshore facilities and service depots; improved operational control, with support for, and real-time visibility into, manufacturing operations; and more rapid time-to-market, since products can be updated, repaired or reconfigured without requiring downtime on the customer's part.

In addition to offering the promise of making smart devices such as test equipment more intelligent, Blue Iguana says its solution is designed to integrate with such third-party applications as customer relationship management (CRM), enterprise resource planning (ERP) and Web services. These capabilities could enable manufacturers to perform data mining and control product-specific functions such as processor speed or configuration; control of license terms, if embedded within the product; or cross-marketing features, customization and sole-distributor branding, if embedded within the product.

Blue Iguana is currently beta-testing its solutions with two companies, which Lattanner declined to name because of non-disclosure agreements.