James D. Molzon was named vice president of customer fulfillment and logistics at Solectron in 2004. As such, he is responsible for establishing, integrating and optimizing Solectron's worldwide logistics and supply chain design competency. Molzon joined Solectron in 1999, where, in his initial position, he established its global logistics team, responsible for transportation management, customs compliance, and warehouse management. Subsequently, he served as vice president of sourcing and logistics, where he was responsible for the global procurement of the company's component materials.

Prior to joining Solectron, Molzon was vice president of transportation & logistics at AlliedSignal (Honeywell), where he was responsible for creating, developing and deploying corporate logistics strategies for over 100 global manufacturing locations. Molzon holds an undergraduate degree in economics from Bucknell University and an MBA with a concentration in finance and international business from the Stern School, New York University.

WT: Supply chains face multiple tasks; from the standpoint of Solectron, what's the major challenge?

Molzon: The major challenge is the movement toward offshore manufacturing. We manufacture for OEMs, and in the past several years we've seen the push from our customers to do more manufacturing offshore. Now, 75 percent of our production is offshore. But that raises the challenge to the supply chain. You need to be able to move materials and products into some rather remote locations and maintain your pipeline of inventory, while being very responsive to changes in customers' needs. Say all of a sudden a particular model comes into vogue and your supply chain is dependent on moving component materials into Asia and then manufactured materials back into the United States-to make quick turns when your pipeline is five-, eight-, ten-thousand miles long is clearly a challenge.

WT: Other problems?

Molzon: In some areas, demand has grown significantly more rapidly than supply. We are not adding new air capacity between Asia and the United States nearly as quickly as we are adding new manufacturing capacity in Asia. It's supply/demand: prices go up and reliability goes down. That's a big issue. There are some lesser challenges, like time zone differences. Being effective in a global economy means dealing with people in all different time zones. There is simply no reasonable time to have a conference call with everyone on the phone together. That puts a strain on the organization.

WT: What's your current focus of energy at Solectron?

Molzon: In the past six or nine months, we've been focusing energy and people on what we call our supply chain design capability. We don't look only for the cheapest labor or manufacturing capability. We look more broadly at the total landed cost-manufacturing, logistics, tax implications, inventory and others-and then design a supply chain that meets customer needs based on that.

WT: Across the industry, what's the resistance to supply chain improvement?

Molzon: I don't sense active resistance so much as a lack of knowledge. I think the lack of knowledge about supply chain parallels a lack of knowledge about globalization. I think they go hand in hand. The reality is-until they've been there and done it, and until they have, frankly, some scars from doing the work-people are just not aware of globalization. We think we are a country with global awareness; in many cases we're not.

WT: Can you give an example of 'lack of global awareness?'

Molzon: Let me put it in perspective. I was teaching a class at Penn State a couple of months ago, an international group of students. My point to them was that there are many leading companies-we'd recognize their names-that lack a real awareness of what it takes to move things from Point A to Point B. The encouraging thing is that students coming out of school today are much more global, much more international, and much more aware of the implications of supply chain.

WT: So much for customers, how has dealing with your suppliers changed?

Molzon: There's a global supplier base. The very good suppliers are optimizing their supply chain, others are trying to force fit a new solution into an old operating model. The reality is that a lot of manufacturing will be moving to Asia. Our suppliers need to be responsive to that. One big catchword we're pushing with our suppliers is responsiveness, the ability to change on demand-on a dime, as opposed to next week, next month, next quarter. To do this, they need to be local. They need to understand how to get things done locally, around the world. You need, frankly, to have people from the local area running things. You can't be a U.S.-centric company with U.S. managers in foreign outposts.

WT: What sort of metrics do you use? How do you know if you're succeeding?

Molzon: Turnaround time is clearly one. We use some fairly traditional procurement measurements-month over month, quarter over quarter. We track costs as a percent of materials and as a percent of revenues. At the end of the day, though, the key question is: are you winning business with your customers? Are you bringing innovative solutions to your customers? That's what drives business. Traditional measures are typically single-dimensional; now, we're talking about multi-dimensional indications. Metrics, though, there's no easy answer on that one at all.

WT: Compared to a decade ago, what are the IT requirements you now have?

Molzon: IT is always used as the excuse and the savior. It's either the savior-if I only put this system in place I'll have all that I need, or the excuse-I don't have a system so I can't do anything. In reality, IT is an enabler that exists to simplify processes. What's important is to provide visibility, to give the organization a clear view of what's going on at any point in time. Because you are operating around the globe, because of time and language differences, it's crucial to have ubiquitous access to information-it's not as easy as walking out back and seeing what's in the bin.

WT: In terms of supply chain improvement, how important is the support of top management?

Molzon: Essential. Critical. Can't do it without. Whatever strong catchphrase you want to put in. Supply chain reform will not happen without the support of top management. It's a different way of doing business. You've got to get rid of the fiefdoms, the silos, and the 'site-centered' mentality and into a much more global reality.

WT: In accomplishing this, do people change, or do you get new people?

Molzon: A good question. In reality, it's a combination of the two. I think that with senior leadership support and with thought leaders in key positions, you can have an impact in changing the organization and changing people's minds. Those two criteria are essential-senior leadership support and changed leadership in key, influential positions. You won't do it without the latter. Frankly, I don't think you can do it without the two of them.

WT: I've heard that Solectron is undertaking supply chain activities on behalf of its customers. Is that a big deal?

Molzon: I think it's a big deal. It's a real vote of confidence in our capabilities when name companies-and typically our customer base is recognized name companies-say, 'hey, you guys seem to know what you're doing; we have confidence in your ability to manage the supply chain.' In many cases, we're the last touch before the product goes to the end customer; it goes to them directly from us. So, if we mess up, it's going to have a direct impact on our customer and their customer. There's no buffer out there. We're acting in the name of the OEM, and delivering it right to the customer. That's the trust that's been developed over a period time and the credibility it takes time to develop.

WT: What are the most important things you've learned in the time you've spent doing this?

Molzon: The most important thing is to listen to people-the people out in the factories, the people in the different countries, because they've got a lot of good experience and a lot of good rationales. This is particularly the case when you're talking about Romania, and China and Malaysia and Brazil. You need that combination of global awareness and local perspective.

WT: How many of your people get direct international experience?

Molzon: Posted overseas? Not a lot. My team has 50-60 people. Of those, the European team is Europeans based in Europe. The Asian team is Asians based in Asia. The U.S. team is predominately U.S., though there are foreign nationals here. I'm a big believer that you have to have local people, not parachute in Americans.

WT: Where would you like to be in two years?

Molzon: I'd like to be able to step back and say, hey, we have dramatically increased our penetration on customer fulfillment, that we're doing more for our customers-more than traditional manufacturing and repair. We've added fulfillment work; we're doing a lot more value-added service, as opposed to just a manufacturing job.

WT: Anything you want to add?

Molzon: One area in globalization that doesn't get enough attention is customs compliance: dealing with both U.S. government and foreign government regulations. It's a major challenge. There are a lot of regulations out there, and if you're going to be a global player you've got to understand them. If you've strictly been a domestic player-whether U.S. domestic or German domestic or even China domestic-then you have to aware of the regulations if you are going to be a player on the global stage. Every country's regulations, including the U.S., have their peculiarities. It's important to understand that most rules and regulations are not arcane-they may be unique, they may be different, but in a different culture, a different perspective, they make sense.

WT: Is supply chain more complicated since 9/11?

Molzon: Absolutely. Even some of the new regulations that were put in place right after 9/11-the 24-hour hold period and, now, the four-hour hold for cargo-it's a real morass of regulations and rules for the occasional player. For the regular player, once you understand the rules, you put processes in place; it's not that big a deal.

WT: Does the customs situation tie to why people look to you to do their logistics?

Molzon: Absolutely. People who know us tend to know us for our manufacturing capabilities. But when we sit down with a potential customer and say: 'We understand that you want to go offshore with manufacturing, but by the way, we've got experience with customs compliance, we've got experience with supply chain management globally, we've got experience in terms of where do you take title of the goods to optimize the tax situation.'

Given the complexity of the global environment, experience does matter. You don't want to be learning for the first time or going with a company that's learning it for the first time, when your supply chain is 10,000 miles long.

WT: How do you see the field at this time?

Molzon: It's an exciting area. There's so much opportunity. What we do today, what we do tomorrow, what we do next month-it's so much different from today. And that's what makes it exciting. And that's what makes it a real opportunity from a business perspective. Right now, supply chain is a window of opportunity, and that guys who get there first are going to do best, and we're going to be one of them.

Sidebar: Supply Chain Value Counts In High-Tech Contract Manufacturing

With headquarters in Milpitas, California, Solectron is the world's largest contract manufacturer of high-tech products, which it builds for such clients as IBM, Compaq, Cisco Systems and Nortel Networks. Two numbers frame Solectron's supply chain efforts. First, margins among EMS producers like Solectron are thin: by estimate, they commonly fall between two and three percent. Second, logistics costs can take an amount equal to half that margin.

But Solectron has become a supply chain leader not simply by squeezing out costs from its supply chain, but by building in value--a step-by-step process than has gained momentum in the past four years.

Early in that effort, Solectron moved to tackle simultaneously three major supply chain issues: trade compliance, carrier selection, and inventory visibility. Mastery of rules and regulations of international trade, the company realized, was a baseline requirement in the globalizing economy. Those global supply chains raised cost concerns--at the time, Solectron was spending $150 million a year on freight. And, inventory visibility built relations with customers; nothing so reassures customers as reliable knowledge of where their shipment is.

More recently, Solectron has been pushing the concept of Design for Supply Chain--an approach that addresses the full landed costs of products: price, lead time, transportation, customs costs and everything else. The purpose, says James D. Molzon, vice president of customer fulfillment and logistics, is to address every functional area in the supply chain "where we can add value to differentiate ourselves in the marketplace."

It's a solution that will spin out over an expanding range. With three-quarters of its manufacturing now occurring outside the U.S., the ability to manage extended supply chains will only increase in importance. Worth noting, as Molzon stresses in the accompanying interview, the supply chain field does not suffer from resistance to change so much as from a lack of grounded knowledge and experience in making a global supply chain work.