ViaSat leverages technology in manufacturing shift

David Hannon -- Purchasing, 6/2/2005

As the telecommunications industry continues to emerge from its darkest days, manufacturers in this space are looking for ways to manage continued growth at a steady pace while controlling costs as much as possible. ViaSat of San Diego is a good example, as it has been seeing 20-30% annual growth coming out of the downturn, but wants to minimize its asset-based cost structure and develop a more scaleable supply chain.

The $300 million company manufactures a diverse lineup of telecommunications and satellite equipment including antennae and broadband networking hardware. Its R&D heavy business is split fairly evenly between government contracts and commercial business, which creates two separate supply chains—the former a low-volume, high-mix and the second a high-volume low-mix set of offerings. Ray Barger, ViaSat's director of procurement, describes that after the downturn in 2001-2002, the company decided to continue to invest in its R&D operations and outsource more of its manufacturing, putting a greater emphasis on supplier management and communication.

The company's previous model had ViaSat buying components, receiving, stocking and kitting those components, then sending them out for assembly and receiving a semifinished product, for final testing and assembly. Today, in its government work, ViaSat outsources the manufacture of subassemblies and does final assembly and testing in-house. On the commercial side, the company completely outsources manufacturing and relies on its Agile PLM system to trade data with contractors.

"Agile serves as our supplier portal for design specs and data," Barger says. "But we needed a web portal for business data that could support both our government and commercial contracts. We basically wanted to end up with two portals—one for design information, the other for business information."

As a first step in that direction, ViaSat moved to a unified instance of its Oracle ERP system across all business units and one Agile PLM system across business units.

With the Agile tool in place for design data, the challenge was to find another portal tool flexible and scalable enough to deal with the variety of products and volumes ViaSat handles, that could also be global in nature and support multiple tiers in the supply chain. "At the same time, we wanted to go forward with as little inventory without having to hire people to make the system work—increase the automation capabilities as we grew and outsourced more. We needed technology to be a productivity multiplier," Barger says.

ViaSat tested a variety of systems and finally decided on a suite of tools from RiverOne about a year ago. The implementation started logically with the demand forecasting module, setting up key suppliers on the commercial side first. Most of ViaSat's volume products are built under manufacturing service agreements that include a rolling forecast and a final assembly schedule given to the supplier so they can pipeline material based on the schedule. ViaSat rolled its RiverOne systems into the 12-month forecast in its Oracle MRP system to create line items on the Oracle blanket purchase orders and convey that to suppliers through the RiverOne portal.

Other modules were rolled out by business unit and functionalities. But Barger points out that when rolling modules out, occasionally a business issue can change the original plan and a little flexibility can go a long way.

"In the beginning of our rollout, our operation in the Atlanta area, which does a lot of our commercial work, was moving to a new building and didn't want to have any stock room. We had planned for the third-party-logistics management module of RiverOne to be at the tail end of our implementation, but in light of the Atlanta facility's move to a building which had only 40% of the space and no stock room, we decided to move the logistics functionality up in the implementation to reduce our inventory and move the remaining inventory to a third-party warehouse near our Atlanta facility."

With this system in place, ViaSat's suppliers drop ship into the third-party inventory facility and RiverOne lets the third-party receive against ViaSat's order tool. ViaSat can then release pick lists to the third-party and custom-pick to order products. The logistics module of RiverOne is also used to coordinate export documents with the third-party logistics provider when shipping to overseas customers or partners.

"This will expedite the process to both reduce order fulfillment time and improve our cash-to-cash cycle time," says Barger, adding that the shift delayed the rollout to some contract manufacturers (there are three of about 13 contract manufacturers on the system now).

ViaSat will likely limit the roll-out of RiverOne to about 50 of its 650 active suppliers because about 80% of its total spend is with the top 25 suppliers, including a number of EMS and component providers. If the top 50 suppliers are on the system, close to 90% of its direct spend will be covered along with its entire commercial business, which is the higher volume business.

There is a returns management module that ViaSat plans to roll out, but that is a future project, as a very small percent of its product shipped comes back. Barger is using this system to help create a supply chain that not only adds to the bottom line, but can serve as a competitive advantage for his company and bring more customers in.

"If we pick up 3-5% sales in a year because of the improved supply chain, you can compound that over a few years and that can be tremendous. The supply chain can contribute a huge margin enhancement for us."