Cisco: A Lean Company Under the Radar

Not every company on a lean journey seeks or gets a lot of publicity regarding that effort. One such company is Cisco.

I had not heard previously about Cisco’s lean strategy. I don’t recall ever reading an article about it, and I’ve never heard anyone from Cisco speak at a conference.

But I recently became aware that Cisco is, indeed, taking a lean approach. And while it is hard to say whether lean has had much of an impact yet – Cisco is still fairly early in its lean journey – the company is very successful.

A recent Forbes cover story profiled the high-tech provider of networking products and services, noting that Cisco has bounced back from a near-disastrous 2001 to much better times, and appears poised to get major revenues related to the growth of large data centers.

The article, by Quentin Hardy, brings out some interesting aspects of how Cisco is run. That information comes when CEO John Chambers talks about why certain high-level people left Cisco.

"They were good people, but they were command and control people," he says. "I have to have collaboration, with sustainable, repeatable processes below the CEO level."

Much the way the Nexus switches unify the sprawling complexity of a data center, Chambers has searched for ways to handle the human chaos of engineering and selling a diverse set of products for the world. In the last few years, Chambers replaced a traditional structure of senior managers leading large divisions with a puzzling series of groups, councils and boards, each made up of people from radically different backgrounds. Some groups and councils deal with functions like manufacturing, others with concepts like ecology.

John McCool, who took over running the switch business, sits on a Cisco Green Board, an Enterprise Business Council, a Development Council and an Enterprise Architecture Group. All but the Green Board have budget responsibilities, and he has to form common concepts and goals with people he barely knows, while running his own business and hearing from his lieutenants about what happened at their group meetings.

How does he keep from going nuts? "Good question," McCool says. "This is an evolving problem. The forces compete. The trick is knowing when to move back and forth." Given the complexity of a world run on data centers, he adds, "This is the way a lot of companies are going to have to go."

I also discovered that the Cisco website features an interview, from March of last year, with Angel Mendez, the company’s SVP of worldwide manufacturing. He comments,

Since Cisco outsources close to 100% of its manufacturing, Cisco developed its own lean manufacturing model in partnership with our contract manufacturers and suppliers. We call this model Cisco Lean. The success of Cisco Lean to date is due to the close partnership with our supply chain partners and long-term benefits for everyone in the extended supply chain, as well as our customers.

The long-term benefits include:
· Reduced inventory across the extended supply chain
· Greater lead time and on-time shipment predictability
· Simplified processes including planning, payment, costing, materials management and inventory transactions
· Increased customer efficiency because of better Cisco delivery reliability

Implementation of Cisco Lean has been a highly controlled process, phased over several quarters and planned in close cooperation with our contract manufacturing partners. Earlier in Cisco's fiscal year, four of our five primary contract manufacturers transitioned to the lean process, and Solectron, our last contract manufacturing partner to be transitioned, completed the lean process during the current quarter. This phased process has helped us minimize any disruption to our customers, contract manufacturers, and suppliers.

Regardless of how well or poorly Cisco is implementing lean, they seem to understand it. And I suspect their implementation is not half bad.