Thursday, 22nd October 2020

Extreme Networks Revamps their Supply Chain

Supply chain processes present a challenge to almost any business. For companies going through mergers and acquisitions, however, it is even more complex as the newly combined organisation tries to streamline multiple existing processes.

Having gone through four acquisitions in rapid succession, Extreme Networks understands these difficulties well as the company had to synchronise various IT supply chains. What Extreme realised during these acquisitions is that manual processes were no longer up to the task and in order to ensure the greatest level of efficiency, agility, automation and scalability were essential. And with these new supply chains promptly challenged by trade war tariffs and the new complexities of the COVID pandemic, these qualities were quickly put to the test.


The Case for a New Supply Chain

In 2016, Extreme Networks was regarded as a fringe competitor next to the dominant equipment giants Cisco and Juniper. As such, Extreme relied on spreadsheets and siloed systems to manage their supply chain. Some parts of the business used Oracle enterprise resource planning (ERP) while others used standalone sales and operations planning solutions. At this time, Extreme had three original design manufacture (ODM) suppliers that handled between 85% and 90% of production. Yet, Extreme had difficulty managing an average of 5,000 transaction orders per quarter.

With this in mind, Extreme realised the need to diversify their offerings and scale to maintain market relevance. The future was clearly in automation, cloud-based processes and enterprise-level solutions. And this is where Extreme began its acquisitions. As Norman Rice, Chief Operating Officer, described "We needed to grow so we could achieve economies of scale in terms of buying power, competitiveness, footprint, and reach. So we set out, with very little currency, to consolidate the space."

Acquisitions, Acquisitions, Acquisitions

The first of Extreme Networks’ acquisitions was Zebra Technologies in October 2016, soon followed by Avaya's networking business in July 2017 and Brocade's Switching, Routing, and Analytics business from Broadcom in October 2017. The fourth and latest acquisition was Aerohive Networks in August 2019. With these acquisitions under its belt, Extreme now has 50,000 customers worldwide, nine ODMs as main suppliers and 25,000 transactions per quarter. With nearly $1 billion in annual revenue, Extreme Networks today is a far cry from where it stood four years ago.

However, this growth would not have been possible without the supply chain initiatives that were implemented along the way. Extreme now holds about $70 million in inventory which is monitored through deployed inventory management processes. These processes themselves have doubled inventory turns and have supported Exteme’s rapid growth.

The problem was that, once Zebra, Avaya and Brocade’s businesses had been integrated with Extreme Networks, the incohesive range of technologies being used to manage operations wasn’t efficient or sustainable. Manual workarounds, ‘Band-Aid planning’ and execution approaches were becoming increasingly difficult to manage as the business scaled.

Realising a Simpler Supply Chain

What Extreme Networks needed was a singular truth. Across all units, the supply chain needed to be simplified. Fortunately, each of the acquisitions brought with it an opportunity to modernise the supply chain through redesigning planning, order and inventory structures, processes and practices. New technologies were being made available that had relevant applications for Extreme’s needs.

In practice, this meant evaluating the mishmash of IT systems and processes being used across the board and finding which should be implemented into the new combined organisation. In other words: identify the best practices, eliminate the weaker ones and plug the gaps accordingly. For example, Zebra had excellent management of its distribution and supply levels through well-enforced regulation and rules. Likewise, Avaya has great visibility over the supply chain and Brocade has good vendor VMI and hub centralisation.

Witnessing these relative strengths, Extreme aimed to merge them all under one roof with their Supply Chain Center of Excellence (CoE). The CoE evaluated itself against the fundamental pillars of: demand, supply, manufacturing, and customer service. The CoE also needed to have dedicated supply chains and IT teams that prioritised new technological initiatives and - above all - performance.

Adding Links to the Chain

However, these solutions were not realised easily and didn’t happen overnight. Extreme conducted trials to see how well these solutions would work in practice. Although several were tried from a range of technology providers, Kinaxis were eventually settled upon. Avaya had success with them for seven years preceding the acquisition and they were a good fit for Extreme’s global end-to-end demand, supply, and inventory management tool. Kinaxis consolidates multiple data flows from multiple sources which provides Extreme with complete supply chain visibility. In turn, this allows for better planning and execution of on-demand, supply, and inventory fluctuations. Yet, this is not the only technology that makes up the CoE.

There are also partnerships with five key distributors to create a touchless electronic data exchange (EDI) ordering process. This was an essential replacement for the previously implemented manual processes that had a significant number of human touch points. This allows for order submissions through touchless EDI through Extreme’s Oracle-based ERP system that automatically validates, books, and sends orders to the third-party logistics provider for fulfillment.

Again, this implementation was gradual. Within two quarters of its deployment, it managed 29% of hardware orders. Touchless EDI transactions are still increasing, and Extreme is reviewing how these processes can be taken further to streamline a greater number of direct-to-customer fulfillment requests.

Alongside Kinaxis and touchless EDI, the VMI technology used by Brocade had a lot to offer. Brocade had enjoyed success using it with an outsourced provider - a subsidiary of Foxconn - at its distribution center in El Paso, Texas. With this in mind, Extreme decided to consolidate two of their legacy warehouses alongside three of Avaya's warehouses into Brocade's single site. As a result, the company now does VMI with eight or nine of its key ODM suppliers.

Where are they today?

The results of these initiatives have had clear results. Since restructuring, Extreme has reported a 92% reduction in product constraints, 51% reduction in quarterly distribution center run rate costs, and an approximate 20% improvement in customer request date performance.

Not only have these metrics been a boon to Extreme but they have gone a long way in mitigating the potential damage of the COVID pandemic. Thanks to improved inventory and supply chain visibility, they have been able to more effectively manage their inventory to match fluctuations in supply and demand. As a result, there have been minimal effects as factories, suppliers and costumes have managed their way through the crisis.

There are lessons to be learnt for any company wishing to upgrade their supply chain through acquisitions or mergers. The first is looking at the companies coming into the fold and seeing what they do well and if that’s applicable to your own use case. If so, test it thoroughly and if all the evidence says it will work for you, then implement it slowly. While innovation is important for releasing any kind of improvement, it cannot become before security. Though this makes it sound like a slow process, Extreme was able to realise its journey in nine months, and there is no reason other businesses can’t do the same.

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