When it comes to finding a truly global company with a truly global supply chain, it's hard to out-globalize Lenovo. When the Chinese computer maker bought the PC business of IBM two years ago, the resulting company's supply chain was spread out all over the globe, with clusters in Raleigh, N.C., Beijing, China and Singapore. The combination also created what many consider to be an unprecedented array of different business cultures in a single company.
But through strong supply chain strategies and leadership, Lenovo has focused on the best aspects and processes within the company and created a shining example of what a global supply chain really means.
The right people first
It's clear Lenovo has made supply chain experience a priority in selecting its top executives. In late 2005 following the IBM deal, Lenovo named IBM's Steve Ward as its new president and CEO. Soon after, however, William Amelio, the former supply chain boss of Dell, was tapped as Lenovo's president in December 2005. (Ward told BusinessWeek at the time that bringing Amelio in was "an opportunity for Lenovo to add some really great supply chain skills" to the C-suite.)
Then, a little over a year ago, another Dell supply chain executive, Gerry Smith, took over as senior vice president of global supply chain at Lenovo, reporting directly to Amelio in that role. Smith describes Lenovo as a "fully integrated supply chain organization" because he has logistics, procurement, manufacturing, planning and fulfillment all reporting up to him.
"From an organizational perspective we have backed up the statements of how important supply chain is by structuring an end-to-end organization where there is full ownership," Smith told Purchasing in a recent interview. "We've worked to avoid the silos that are common in manufacturing."
To illustrate the point, Smith points out that he is based in Singapore and has direct reports based in Hong Kong, mainland China, Raleigh, Europe and various other geographies. Lenovo's CPO, Qiao Song, is based in Beijing.
"If you're really going to be a global company and source globally, you have to have people in overseas markets," Smith says. "Our structure is very different from a traditional centralized organization. I've lived here in Singapore nearly three years and you learn a lot in this kind of assignment that you might not if you were based in the U.S."
Recruiting supply chain staff to work in a global organization requires consideration of some "softer" skills in addition to the usual requirements. "As companies become more global they will need someone that has international experience and understands the cultural differences because there are differences. So you have to have people who are sensitive to that," says Smith. "Companies have to invest the necessary resources to locate supply chain professionals closer to global suppliers, as well." There is a cost associated with that, but it's worth it. You have to find the balance between the existing company culture and developing an international presence. That's been the fun part of Lenovo building a global model and staff."
Smith admits that the global model means he spends a lot of time traveling and there are time-zone challenges, but he says Lenovo's business management system has taken it all into consideration. "And as more companies become more global, this is the future model they'll be using," Smith says. "The integration of two companies in completely different worlds forced us to become a truly global company."
The creation of the global supply chain organization has gone much more smoothly at Lenovo because of CEO Amelio's understanding of supply chain strategies and priorities. "There's not the usual learning curve or definition of supply chain metrics that sometimes goes on," Smith says. "[Amelio] knows this stuff so we're speaking the same language and if necessary he can get involved in resolving problems in the supply chain."
Building the chain
Lenovo's manufacturing footprint is global (see sidebar), located in various geographies around the world to serve the end-markets most effectively. But Lenovo's is not an outsourced manufacturing model like some PC makers¡ªabout three-quarters of Lenovo's manufacturing is done at its 10 plants around the world. In the cases where Lenovo does use contract manufacturers or EMS providers, it's typically only until the production can be transferred to a Lenovo plant under construction or in areas that it doesn't make sense from a tax standpoint or tariff perspective.
"We feel that it's important from a cost perspective as well as a control perspective that we get more of a manufacturing footprint in place in various geographies," Smith explains.
Smith says there are no secrets about who Lenovo's core suppliers are ("We use the same suppliers that most of the other PC makers use"), but the company is working to expand its supply base in areas where it has historically sole-sourced. To review suppliers and look for ways to design cost out, Lenovo uses commodity teams made up of procurement, finance, engineering and supplier quality as well as the global commodity managers.
"Our procurement staffers are clearly a strategic element of our supply chain and when it comes to designing out cost, procurement has to be involved up front," Smith emphasizes. "So we've built a very strategic procurement organization, not a tactical procurement organization."
To further strengthen its supplier management strategy, Lenovo recently instituted an annual supplier event where the company's CEO, CPO, CFO and Smith all outline the company's goals for suppliers in the coming year. In addition to the annual event, Lenovo also holds quarterly business reviews with suppliers to review supplier scorecards. "With consistent scorecarding you get consistent metrics that send a clear message of what we expect from our suppliers," Smith says.
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