An interview with Bill McLennan, President of Global Operations for ModusLink Global Solutions, Inc., a leading provider of global supply chain business process management solutions.

By Nancy Ellen Dodd, MPW, MFA

Bill McLennan is the President of Global Operations for ModusLinkGlobal Solutions. He is responsible for strategic management of the company's worldwide supply chain business spanning North America, Europe, and Asia Pacific. He also provides oversight of the company's global e-Business initiative and facilitates the development of global solutions for international clients seeking to expand their business worldwide.

Although prior to ModusLink Mr. McLennan was a partner at Onyx Capital Ventures, a Chicago-based venture capital firm, much of his supply chain management and technology experience came while he was President of RR Donnelley Logistics and as President of Packtion Corporation, an Internet-based technology startup. He also served as CFO of Silgan Containers and held finance leadership roles at FMC Corporation.

Mr. McLennan holds Masters Degrees in Management from Northwestern University in Illinois, and in Engineering Management from the University of Kansas at Lawrence where he also earned his Bachelor of Science Degree in Mechanical Engineering.

One of my takeaways from this interview was that a significant amount of money can be saved when efficiencies in supply chain management are implemented-money that could instead be used to save jobs. As Mr. McLennan stated, "Costs are the first line of defense."

Reducing the impact supply chain processes have on the environment, is another type of savings that can be realized by thinking through both product and package design. “We recently helped some clients go from a plastic clamshell design to a more environmentally sound trapped blister design, which still provides the same level of security in the store, but it reduced the greenhouse gas emissions significantly and reduced the size of the package.” He estimates they were able to stack 33% more product on the pallet. “You can see how this continues to build on itself when you can reduce the footprint of the retail package.”

Another takeaway provided a clearer picture of why forecasting is so difficult: it's not just forecasting-it's consumer-demand forecasting. How do you calculate how many people are going to buy a television today? Or which brand? “Nobody can predict when a consumer is going to drive to a retail outlet, go inside, and buy something. And with all the promotions going on, sometimes consumers just go trolling for the good deals out there - opportunistic buying,” Mr. McLennan commented. Another side to that is predicting growth. “You could be forecasting a 20% increase this year over the holiday season, but only get 15% or 10%. That's still growth, but it also leaves a lot of televisions en route to stores or on the shelves.”

What about the future of supply chain management in five to ten years? “We all wish we had a crystal ball.” However, Mr. McLennan sees technology that can advise real-time adjustments. “If fuel runs up to $100 a barrel suddenly, I can see a supply chain inputting that information, analyzing it at an SKUlevel, then kicking out an optimized answer saying that we need to move these SKUs closer to the manufacturer or we need to postpone them closer to the consumer. It's really just developing a mathematical algorithm that can calculate a balance.”

By the conclusion of the interview, I had a new appreciation and sense of excitement for the challenges in supply chain management. It isn't just about moving products and services, it is about identifying solutions throughout a global environment to increase and implement efficiencies in time-to-business or time-to-customer while being socially responsible and still improving the bottom line in tough economic times. Mr. McLennan concurred, “It is absolutely the most demanding, intellectually stimulating job I've ever had.”

In the interview below, Mr. McLennan shares how he and ModusLink deliver global supply chain value.

How important is supply chain management to your clients' overall business strategy?

For our clients, supply chain management is a critical component of their overall business strategy, especially during these economically challenging times. The weakening of global consumer demand has driven significant overcapacity and excess inventories in many of the consumer product segments. This has resulted in an acceleration of average selling price declines at the retail level. If you visit many major retail outlets now, you will see prices have come down quite a bit, but the consumers still aren't pulling as many products off the shelf.

Effective supply chain strategies provide a roadmap to cost optimizing and revenue facilitation. Our experience has shown that optimizing management across the entire supply chain yields significantly more savings than a focus on isolated costs in functional areas. More importantly, a flexible global supply chain enables an appropriate balance between total delivered cost of the product channel inventories and time to market, and that's crucial.

What primary areas of focus, or key initiatives, should your clients be looking at for supply chain management?

Currently, and again in the face of this economic uncertainty and consumer demand softness on a global basis, postponement and deferred configuration of retail products is important. Value recovery solutions are high priority as companies look to build a more agile supply chain for the future and deal with the excess inventory resulting from the recent decline in consumer spending.

What we have seen at ModusLink is a rise in demand for our Optimized Configuration Solution that helps clients design and execute a more flexible global supply chain. Network design optimization takes a calculated approach to balancing time, distance, cost, and service using sophisticated modeling techniques and simulation methods to determine the best time and place for various critical processes such as final configuration, packaging, and distribution of products given user-defined constraints.

For example, we recently presented a global supply chain solution to a leading consumer electronics company that will reduce its costs in excess of $50 million per year and will also shorten time-to-market and reduce channel inventories. While the cost reduction figures are impressive, at a personal level I am more excited about our ability to shorten time-to-market for this particular client because I know that's going to translate to higher market share for them.

As for aftermarket services, this is an area that can represent a source of high-margin business for manufacturers. The reverse supply chain should be viewed as a source of value recovery and revenue generation, but many companies don't look at it that way. Manufacturers need to examine their postsale activities such as management of returns, recall, and disposition. A critical look at return locations and processes, for example, can reduce cost and increase operating efficiency while driving better service execution, higher margins, and a far better consumer experience.

It is key for manufacturers to also consider their e-business initiatives when analyzing supply chain design. We can seamlessly integrate our e-commerce solution with the entire range of supply chain activities including fulfillment, distribution, and financial management services to build a business-toconsumer model that integrates with the business-to-retail model. As more and more customers are migrating away from the retail shelf and shopping online, those companies need to have an integrated supply chain as well. In fact, Forrester Research estimates that by 2012, in the U.S. alone, online retail will grow to over $335 billion.

How can outsourcing enable your clients to be successful with these initiatives?

By outsourcing, brand owners are able to focus on improving their product offering rather than devoting resources and cash to infrastructure processes. I believe this provides a competitive edge in the marketplace. More often than not, those manufacturers that make the choice to outsource win consumer market share. Also, ModusLink has the global footprint that our clients just don't have to enable a flexible and fluid supply chain that can adapt to changing market conditions or rapid growth. Combined with our local market expertise, ModusLink is a good partner for clients looking for global expansion and new market opportunities.

Are your clients asking you to help them address the market's increasing focus on "green" supply chains and reducing the company's carbon footprint?

Absolutely. In response to the increasing focus on reducing the environmental impact of our client's supply chain processes, what we've done at ModusLink is to develop a Sustainable Solutions Suite, which takes an end-to-end approach that includes services from packaging design to network optimization and simulation and Greenhouse Gas (GHG) footprinting to recycling and asset disposition. Our Suite of Sustainable Solutions is designed to not only lessen the environmental impact of supply chain processes but also to reduce cost.

ModusLink is an active participant in the Wal-Mart Sustainable Value Network and a sustainable packaging advisor to the Consumer Electronics Retail Coalition/GreenSeal, both of which have afforded us valuable insight into future trends on the retail shelf. Using a 4D methodology, which is ergonomics, cost, sustainability, and logistics designs, we are working with some of the world's leading brand owners to redesign their product packaging to reduce material, pallet density, labor, and carbon emissions.

What do you think the key supply chain management priority for the coming two-three years is for your clients?

Without question, what I'm seeing is that it's really going to be the ability to adapt to change and to continue to help our clients achieve their goals to drive cost down, get to market faster, and reduce the risk of excess and obsolete inventory. In an uncertain economy it's essential to get this balance correct.

It will be increasingly critical for manufacturers to expand global supply chain mobility and flexibility, while maintaining reliability, in response to constantly evolving economic market conditions. We're seeing the source of manufacturers shifting from China to Vietnam and Eastern Europe. As the rate of change continues to increase, a supply chain that can react seamlessly to variable input values will be a critical success factor. With geographic supply chain boundaries quickly eroding, global supply chain leaders will need to implement network optimization, postponement strategies, and what we call multitier collaboration efforts as base requirements. Really, just more flexibility and adaptability to migrate the supply chain where the input variables are changing.

Let's expand that out to the next five-ten years, what do you think the priority is going to be for your clients?

I really see two emerging trends: one of them is dynamic supply chain management and the other is environmental sustainability. There is much talk about flexible supply chains today, but to really optimize requires a global network infrastructure that is close to the sources of supply and to the source of consumption-so the start and the end of the supply chain. Real-time data on input costs and forecasts at the SKU level will enable optimization as volatile input prices like fuel costs change. We are able to do this for some of our clients on a periodic basis today.

For sustainability, recycling, refurbishment, or excess inventory and value recovery programs to maximize the use of all products, will no longer be innovative in five years, they are going to be necessary. Consumers globally, and I travel all over the world and see this, want a better environmental balance and we will see an acceleration of the trend where product selection at the retail shelf will be along the environmental sustainability dimension, not just price.

What are the biggest internal challenges for manufacturers to achieve supply chain excellence?

In my experience, one of the biggest internal challenges for manufacturers is poor communication. Many companies are still organized into functional silos that make business critical decisions on supply chains independently because the departments aren't interrelated. This is a breeding ground of inefficiency and communication breakdown because the company's not aligned nor have they aligned their own internal incentives. The manufacturer that takes a holistic view of the supply chain understands how increasing material costs to reduce the weight of the product can lower logistics costs for a greater overall savings.

The other challenge is inaccurate demand planning, and this is one that frustrates most companies. Supply chain strategies driven by sales forecasts rely heavily on accuracy to achieve successful metrics. Sophisticated analytical and evaluation tools are needed to effectively integrate the demandplanning functionality into inventory replenishment systems. Successful applications are dependent on collecting information on a global basis, applying it to drive inventory rules for replenishment and constantly evaluating it. So you have to look at the cycle times, you have to look at volumes and costs. The power of a demand-planning methodology is really to optimize the flow of goods for every item in every location. Many companies believe that because they cannot forecast, they cannot outsource. At ModusLink, we routinely deal with weekly client-provided forecast variations from 200% overshoot to 80% undershoot at many of our solution centers. We have built proprietary technology and business processes that enable us to meet our clients' retail delivery requirements under this wide range of short-term variability.

What are the biggest external challenges in achieving supply chain excellence?

The external planning environment constantly changes. I always start with the consumer whose demand for a client's product could change, or things like fuel prices, import duties, labor laws, or new environmental regulations are factors that change constantly. Achieving true supply chain excellence requires a flexible global infrastructure that can adjust rapidly to these changes.

What are the supply chain challenges to which clients should be paying more attention?

The competition does not stand still, the environment changes, and consumers are becoming more educated. Executives need to constantly challenge the status quo and seek new levels of supply chain performance. In my discussions with senior executives, the question of "what is next" is most in focus. A global supply chain partner like ModusLink can help enable companies to manage that balance of cost reduction, inventory reduction, and time-to-market.

What are the main skills and personal attributes that have helped you reach your current position?

You've forced me to have some self-reflection here. I think I have always had a level of personal curiosity and a desire to learn new things. I have been fortunate to get an education in engineering and finance, which enables me to understand how, theoretically at least, to optimize and make business trade-offs. My professional career has enabled me to work in Europe and Asia in a variety of line and staff functions that have really helped me learn how to think and act more globally.

How do you grade ModusLink's overall performance in client satisfaction?

We get very positive feedback from our clients but we can never become complacent in a dynamic environment with any client. Our success lies in the fact that we continually push the frontier of supply chain performance on our clients' behalf, creating true partnerships that adapt and change with our clients' growth and advancements. It's the collaborative partnership approach that has helped enable clients to become market leaders in supply chain performance.

During this economic downturn, how do you keep your entire organization motivated?

A little bit of a dichotomy here for us, our clients' volumes are down, but our activity levels are way up. The demand and inquiries for our services has never been higher as many companies have been forced to search for ways to improve their supply chain performance. We are very busy and motivated in helping new and existing clients develop solutions and add more services that will reduce their costs, their inventories, and their time-to-market.

What have you learned as President of Global Operations that has surprised you or changed the way you do business?

I think what I didn't count on most was the pace of change. You get a certain sense of it at the regional level, but until you are afforded a truly global viewpoint you just can't realize how rapidly things change and develop. It certainly keeps me busy!

Turbulent times should be the best time to implement changes. However, companies tend to paralyze due to uncertainty in the market or their human capital. What is your advice to maximize the opportunities to implement changes during tough times?

This is something I feel passionate about. First, you have to take care of your key leaders in your company because it's really all about the people you're working with. In difficult economic times like this, everyone is looking over their shoulder and nobody wants to be noticed. Executives really need to reach out to their key leaders and drive projects and increase their responsibilities to help affect change and provide organizational stability. This is an excellent time for companies to determine the real depth of talent they have and to make change "a positive" in their organizations.

About the Author:

Nancy Dodd serves as editor of the Graziadio Business Report, an online business practitioner's journal, at the Graziadio School of Business and Management. Dodd's journalistic career includes publishing more than 125 articles in local and national publications including interviews with celebrities and business leaders. She also served as editor of Marshall, a USC academic / alumni magazine, and started the Marshall Review, an online academic and business practitioner journal for the Marshall School of Business at USC. She began her career as managing editor of Elan magazine, a lifestyle and arts magazine. Dodd has also coached and served as consultant to other non-fiction writers and to start-up magazines.

March 2009

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