Motorola commits US$60M to bolster supply chain

Motorola commits US$60M to bolster supply chain

Summary: The cellphone maker will manage its global manufacturing and distribution activities from one location.

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SINGAPORE--Motorola is investing US$60 million over two years to manage its global supply chain from the city-state.

Speaking today at the launch of what he coins Motorola's global supply chain "control tower", the company's chairman and CEO Ed Zander said the new investment will allow Motorola to manage supply chain management activities across its businesses including mobile devices, networks and connected home products.

Motorola currently manages more than US$10 billion worth of activities each year in supply chain operations, such as manufacturing and distribution.

Stu Reed, Motorola's executive vice president of integrated supply chain, said prior to the new Singapore investment, the company ran disparate supply chain operations around the world.

"This is the first time that we are driving centralization. There was no 'control tower' of supply chain activities before [this]," he said.

Reed said the US$60 million-investment will be spent on manpower as well as research and development in manufacturing technology. Motorola will work with local academia to enhance manufacturing processes, he added. It also intends to hire some 200 professionals in Singapore by the end of next year to support its supply chain operations.

Zander said the company realized several years ago that it needed world-class supply chain capabilities to stay competitive. "Your cost structure, quality of manufacturing and the way you compete in the next decade is through your supply chain," he noted.

Asked how much cost savings Motorola is expecting to reap from centralized supply chain management, Zander said: "It's not about saving money…it's about faster time to market and improving [product] quality. The best-run companies usually have the best supply chain."

According to a study conducted by AMR Research, Dell Computer, Proctor & Gamble and IBM and are the top three companies with the best-performing supply chains globally. Motorola was ranked 15th in the study, released last November.

Reed noted that enhancing supply chain operations can typically rein in "double-digit" productivity growth. It can also allow a company to respond faster to changing product cycles by 30 to 40 percent, he said.

Zander said Motorola's cellphone product cycles usually range from six to nine months. The company also operates in multiple geographies, with some products shipped exclusively for certain markets such as China and India. Operating in such a complex and fast-changing environment means Motorola needs to bolster its supply chain operations for future success, he said.

Indian plans
The CEO was, however, tight-lipped on Motorola's plans to manufacture phones in India.

Government sources told India's Economic Times that an official announcement about the company's plans to begin manufacturing phones in the country, is expected this week when Ron Garriques, Motorola's executive vice president, arrives in India. Rivals Nokia and LG are already churning out millions of phones from the sub-continent.

Zander said: "We have close to 3,000 engineers in India. We also have relationships with third-party [contract manufacturers] for some of the low-cost handsets that have taken the Indian market by storm. We'll continue to evaluate a number of options for this market."

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