What capabilities Cisco suppliers need
Staff -- Purchasing, 3/16/2006 2:00:00 AM
While Cisco Systems has reduced its number of suppliers by 50% over the last five years, the company, in fact, adds a small number of suppliers each year, often for new technology reasons.
"We look at new suppliers because we are always looking at new technologies," says Steve Darendinger, vice president of worldwide supply chain management for Cisco. "New upcoming suppliers may have the capability or the differentiating technology that we need."
"To play with Cisco you have to invest in technology," says Angel Mendez, senior vice president of worldwide manufacturing. And the investment can be steep. With some components such as ASICs, it can involve millions of dollars. "These are the brains of our boards and our cards," says Mendez. "With the investment required, we develop a close partnership with suppliers. We need suppliers to come to the table with that willingness to invest in our future and to be our long-term partner."
Cisco, which makes networking equipment, adds a supplier if the supplier can give Cisco an advantage in technology or cost.
"There is an on-boarding process. They have to meet stringent criteria that allow them to get past the gate," says Darendinger.
The criteria include:
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Technology capability. The supplier has to have an interesting technology, but also the engineering capacity to support that technology and the ability to execute its technology to Cisco's needs.
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Financial performance. What is the long-term financial viability of the supplier?
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Global alignment. Does the supplier have global capability or is it central to a certain geography? Can the supplier support multiple geographic production and supply chain requirements?
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Cost competitiveness. What is the cost of the supplier's technology and how would cost come down from a productivity point of view over time?
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Willingness to cooperate. Is the supplier willing to sign up with Cisco's master purchase agreements and meet Cisco's legal, quality and reliability requirements?
Often new suppliers have a great technology, but have weaknesses. Cisco will work with the supplier in those weaker areas.
"For instance if a new supplier didn't have global capability, we would work with the supplier to improve its global capacity," says Darendinger.
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