Lisa Colnett, CIO of Toronto-based electronics manufacturing services provider Celestica Inc., linked her exchange strategy to that of her customers. Six of Celestica's biggest customers, including HP, have private exchanges through which they trade information with Celestica on product designs, sales forecasts and production capacity. Two others, Cisco Systems Inc. and Sun Microsystems Inc., have famously eschewed public exchanges. "We set up an infrastructure to have secure links with our customers even before [exchanges] came along," Colnett says.
Two years ago, Celestica set up a portal for its 10,000 suppliers, 1,000 of which now use it to pull production planning information from the company's supply chain systems. When Celestica gets demand forecast data from Sun, for example, suppliers can view it through the portal and let Celestica know how quickly they can get the right materials into the manufacturing pipeline. "We've been able to significantly improve our time to build, and we utilize assets and people better," says Colnett.
To build the supplier portal, Celestica dedicated servers, deployed certification software to manage access and used middleware to move information between internal systems. For some partners, Celestica deployed design collaboration software. The hardest part of building links with trading partners, Colnett says, is synchronizing each company's data and business processes.
It wouldn't be hard to integrate Celestica's systems with public exchanges, says Colnett, but she has little interest in doing so because their capabilities duplicate what she has built in-house. Besides, owning the infrastructure through which Celestica communicates with its partners gives her company a competitive edge. Colnett doesn't attribute specific financial results to Celestica's private ex-change participation, but she does think it helps the bottom line. "Because supply chain [management] is such a critical part of what we do," she says, "there's a major expectation that we are leaders in using e-business tools to do that."
Chris Whitmore, an analyst with Deutsche Banc Alex.Brown in San Francisco, thinks private exchanges are attractive because they're efficient. "When there's direct communication between suppliers and customers, information flows more naturally," he says. Public exchanges can add a needless middleman.
However, Colnett isn't ruling out using a public exchange in the future. "If we felt there was a design tool that was better available through an exchange and our customer agreed, absolutely we would invest in an exchange," Colnett says. Meanwhile, she has outsourced some of Celestica's online trade. Celestica implements Ariba's auctioning software when the company needs to buy commodity parts such as memory capacitors. Last fall, Celestica became an investor in PartMiner, a public exchange specializing in electronics components procurement. Celestica uses PartMiner to dispose of surplus parts and made the investment to influence the services it provides. Colnett decided auctioning capability isn't strategic, so she doesn't need to maintain it in-house.
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