Juniper Networks cuts costs by sourcing refinished components
By William Atkinson -- Purchasing, 11/15/2007 2:00:00 AM
While most companies automatically assume that the only products or parts worth purchasing are brand-new ones, at least one high-tech firm has found success, both in terms of cost savings and continued quality assurance, with a strategic procurement program that involves purchasing a combination of new products and refinished products.
Juniper Networks in Sunnyvale, Calif. provides Internet protocol (IP) networking and security products. According to Steve Blaz, vice president of global service operations responsible for supply chain and logistics at Juniper, the company purchases both new and refinished components and spare parts from contract manufacturers and contract repair vendors.
"We base our purchasing decisions on whether we are buying new or repaired items," says Blaz. "In many cases, we have found that it is less expensive to repair damaged goods than it is to buy new ones."
In his previous job, Blaz dealt with repair vendors on a third-party basis, so when he arrived at Juniper 18 months ago, he offered the idea to management and then located the best repair vendors to do the work. The program has been expanding. A year ago, Juniper was buying 80% of its inventory new. It now purchases 30% new items and 70% repaired items.
"We often get repaired items from the same contract manufacturer that built them the first time," he explains. In other cases, if the product requires a lot of testing, Juniper has found that it is often less expensive to go to a third source to get them repaired, which is a contract repair operation.
Juniper arranges to do repairs "in theatre" as often as possible to reduce costs and time. "If we need to repair products for customers in Europe, we can send them to a repair vendor in Europe, instead of sending the product back to the original contract manufacturer, which may be in China," he says. "This reduces transportation costs and improves turnaround time for customers."
In order to make sure new and repaired items work properly, Juniper is vigilant in terms of product performance. "With our contract manufacturing process, we track everything by serial number, which includes a factory code and date, so we know where and when each item was manufactured," states Blaz. If there are failures in the field in the future, Juniper conducts a repair analysis and failure analysis, which will capture repetitive failures. It may find that the problems are limited to a specific contract manufacturer's plant during a certain timeframe. It might be the result of a design process, a manufacturing process, or it might be a specific component in the product. "This allows us to contact other customers with the same products to let them know that they might be having problems in the future, and we swap out the components in advance of failure," he states.
Regardless of whether it purchases new or refinished parts, Juniper has the same quality standards. "Our procurement team that conducts supplier audits on a regular basis and they all meet the same quality standards," explains Blaz. The company qualifies and certifies all contract repair vendors the same way as it does vendors from which it purchases new products.
There is proof for Blaz's claims. Juniper is a TL 9000-certified company, a standard that defines the telecommunications industry quality system requirements for the design, development, production, delivery, installation, and maintenance of products and services. Juniper was first awarded TL 9000 in 2004 (at the time, being the first IP routing vendor to achieve certification). It was recertified TL 9000-compliant in June.
Not only does Juniper maintain quality levels with its strategic program, but it saves money. As noted, last year, it was buying 80% of its inventory new, and now purchases 30% new and 70% repaired. "We can repair damaged goods for less than 20ยข on the dollar," he points out. "This gives us five times the purchasing power than we once had."
Now Playing:
