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ModusLink, Strengthening the links

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Manufacturing in Action, Source : The Manufacturer
Published : April 2006

As a global leader in supply chain management, ModusLink commits to getting the right goods in the right place at the right time and at the right price. Richard Lucey and Sean Murray talked to Bernie Sheehan

For more than 20 years ModusLink has been rising to the challenge of getting products into the hands of customers quickly and cost-effectively. As a global provider of supply chain management solutions it supplies clients in the software, hardware, consumer electronics, telecommunications and wireless markets with customised supply chain solutions that reduce risk and time to market while improving efficiency and productivity. ModusLink’s services include demand planning, sourcing and procurement, manufacturing support, kitting and assembly, fulfilment, full-cycle logistics, systems integration and development, customer support and optimisation consulting.

In Ireland, ModusLink is located in Dublin and Kildare. Richard Lucey is the general manager of the Kildare Solution Centre. “We’ve evolved our client base over time. From a company which was once an offshoot of an Irish printing company, we became a turnkey operation and now we’ve evolved into a leading provider of supply chain management services. With one of the supply chain industry’s largest worldwide footprints, ModusLink’s extensive global and local operating knowledge continues to set us apart from our competitors and enables us to offer our clients low-risk, high-return solutions.”

Time to market is critical for clients, with 48 hours increasingly the standard. Faced with increasing competition from overseas, ModusLink has focused on continuous improvement and IT.

“Everything we’ve done for the last five years has been underpinned by continuous improvement,” said Sean Murray, operations director. “We’ve adopted world class manufacturing, lean philosophies such as 5S principles in shopfloor design and layout, and so on. Everything is measured and reviewed daily or weekly, from product cycles to engineering maintenance and downtime to lead times. The metrics are interrogated regularly and we continuously aim to improve targets.”

Suppliers of the different commodities ModusLink uses to package its clients’ finished products are allocated a dedicated delivery slot so that the company can ascertain levels of activity throughout the day and flex labour in and out as required. Three years ago, the timeframe for receiving goods inwards was eight to 10 hours, now it’s two hours, with many goods delivered lineside just-in-time (JIT). ModusLink has also increased the efficiency of its assembly operation through the use of lean manufacturing techniques and other process improvements. “Our minimum target is a 2.5 per cent increase quarter on quarter and we regularly exceed this by 50 to 100 per cent,” continued Murray. “Meanwhile DPPM (defective parts per million) rates have dropped from 4000 four years ago to 125 today. Staff training is high on the agenda, reinforced by hour-long continuous improvement reviews each week.”

A major project is underway to manage the logistics ‘back end’ for three of ModusLink’s major clients. “We’re offering a womb-to-tomb solution that will give clients better lead times and lower costs,” said Murray. “We’re coming under a lot of price pressure from eastern Europe, Asia-Pacific and even internally within ModusLink and so we’ve got to be progressive in the way we think and the way we go about our business. We’re looking to adopt more automation to reduce the price differential in labour costs and have several projects due to start in the next six months. Last year our headline project was an automated fulfilment line where standard cycle times and costs were reduced tenfold by installing a one-unit, one-order automated solution for certain products. We’ve gone from 90 per cent high-volume lines to combining these with a significant number of cellular activities, with the balance in automated solutions.”

Another innovation to drive continuous improvement is ModusLink’s supplier development programme. A suite of quality standards are measured by the Goods Inwards Group, including order complete on time of delivery, quality of delivery, pantone colour comparisons and so on, and these are fed back to the supplier management group. Findings are acted on and suppliers undergo an improvement programme if necessary.

Sophisticated IT systems provide full back-up to ModusLink’s operation. A common project management methodology is used globally throughout the group and ModusLink also makes extensive use of secure portal technology as a customer service tool. This allows customers secure and customised access to specific data and reports, directly from ModusLink’s ERP application (IFS). Custom integrations to various clients’ systems have been completed, and a global platform provides a centralised EDI hub with monitoring and audit trail capabilities for trading partners globally.

Recently there has been heavy investment in the ‘on-demand’ side of the business, which has increased ModusLink’s flexibility. “With demand printing, we can produce just one CD and one manual for a software kit in Hebrew, for example, and ship it out, instead of having to manufacture a minimum quantity,” explained Richard Lucey. “Clients’ mindsets have changed over time. Buyers and planners used to be concerned with the unit cost, but now we look at the total cost. We can reduce overall costs by developing only the inventory levels necessary to meet actual demand – this minimises cycle turnaround times and reduces capital expenditures.”

ModusLink continually focuses on driving greater operational efficiency to optimise its footprint and increase value. Globally there has been double-digit growth in non-traditional sales markets. “We’re trying to make sure we’re not pigeonholed. A range of markets are open to us outside the software space,” said Lucey. “We have the supply chain management expertise and models which are as useful to a consumer electronics company as they are to a hardware or software company. There are huge opportunities available to us and we are always rising to the challenge.”