Issue Jul Aug16
There are companies that are designed to fit in a specific box, but then there is Extron Inc., which is blazing a new trail. “We are a new genre of company,” CEO Sandeep Duggal declares.
Milpitas, Calif.-based Extron Inc. has pioneered what it refers to as “Last Mile Manufacturing” services, which consist of the installation and integration of intellectual property (IP) and volume-sensitive components late in the supply chain. This provides clients with an array of benefits, including enhanced flexibility, the reduction of inventory, reduced costs and the prevention of IP theft, Duggal says.
For example, when a retailer or OEM wants to create highly differentiated products out of a core product concept, or to protect valuable IP, it will bring those items to Extron. Companies that are dealing with rapid growth and companies that are dealing with highly volatile or unpredictable demand also see huge advantages with the Extron Inc. approach.
The company’s approach also allows their customers to keep more of their supply chain stateside, which reflects the trend of bringing manufacturing back to the United States, Duggal explains. “Companies like Extron sit on the front edge of that wave,” he says.
The company started operations 30 years ago as a provider of printed circuit boards. “It was labor intensive work and required expensive environmental compliance controls,” Duggal says. “At the time, many foreign countries had substantially lower labor costs and didn’t have the environmental regulations that we do, which obviously generated more interest in overseas operations. The result was that during the 1980s and 1990s, many companies moved this kind of work offshore.
“Beginning in the mid-2000s, the current management team came on board, and we realized that existing globalized supply chain models were becoming imperfect and needed to be refined. Not to say that off-shoring was becoming a completely bad idea, but it just needed to be refined a little bit more to deal with the new realities of increasing overseas labor cost, IP risks, long-chain inflexibility and slow response speed.”
This led Extron to focus on building services that utilized the advantages of both a globalized and domestic supply chain. “We built operational solutions that are specifically designed for the domestic supply chain needs of client; this included all-new operations management software because none existed at the time,” Duggal says.
Finding Good Fits
Today, Extron serves a broad client base, which includes many in the electronics industry. “With Extron being a Silicon Valley company, there are a lot of nearby customers that are a good fit for us,” Vice President of Marketing Doug Nesbit says. “We do a lot of work for consumer electronics and OEM electronics companies in the network, telecom and computing industry.
“This creates a lot of opportunities, because many of those products require special configurations,” Nesbit explains, adding that Extron also serves companies outside of the electronics industry. “The model can actually be applied to a very wide range of manufactured items, and the company now has clients in automotive, wearable electronics, IoT, lighting, robotics and other areas.
“Companies that want to build a new supply chain are coming to Extron,” he notes. “We’re able to help them design it from the ground up. With last mile manufacturing in place, we can take advantage of global sourcing as well as local manufacturing.”
But not all companies are a good fit for Extron’s services, he admits. “It depends on the product’s value and need for configurability,” Nesbit explains. “Inexpensive plastic toys would probably not be something that would work well.”
When evaluating whether or not Extron’s services would work for a potential client, the company utilizes several analytical models, including looking at their “value density,” Nesbit says. “That’s something we use to gauge the potential benefit of last mile manufacturing.”
Usually, he adds, the model works best for items that would have a high amount of value packed into a relatively small space.
Cutting Costs. Enhancing Flexibility.
Extron’s last mile manufacturing services help its clients cut down on costs while improving operational flexibility. “We eliminate a lot of the transportation costs, [such as] not shipping stuff at the last minute or relying on overseas air freight,” Duggal says. “We can improve flexibility by doing the final build here and reducing inventory in the process, in a sense, getting the best of both worlds. For companies where the cost of inventory, including obsolescence cost, is in excess of 20 percent per year, this approach can have a huge impact.
Duggal also notes that Extron also efficiently processes its clients’ products. “If you’ve designed your product for the last mile supply chain, the lead time from order to delivery can be very short,” he says.
“We have most of our customers’ products built in under 48 hours,” he says. “They’re designed to go together and be tested very quickly.”
Last mile manufacturing services now comprise 100 percent of Extron’s business, and the company is on a mission to win converts. Still, Duggal says, “There’s a very ingrained belief among supply chain managers that anything overseas is cheaper.
“It’s basically a belief system that we’ve had to crack over the last several years,” he adds, noting that Extron has overcome this by educating the customers. “We love it when we discover a potential customer who has that has begun to question the old way of thinking.
“They realize that they need this and they look for people who can do what we do,” he says, noting there are not many firms like Extron. “I believe we’re the only company that works with all the elements of the global supply chain.”
Additional services also fall under the category of last mile manufacturing, Nesbit notes. “Besides the integration, configuration, assembly and testing, we also handle the downstream end of the supply chain,” he says.
This includes returns management services after the product goes out into the marketplace. “We handle the return side of things, even for things we didn’t build,” Nesbit says.
“We even go beyond that,” he continues. “We can handle post-warranty type returns. For certain items, it makes a whole lot of sense for the manufacturers to help customers remain happy with their purchases even long after that warranty period.”
Extron also offers “demo loaner solutions, which are a way of helping a company get a product sold through a try-before-you-buy program,” he continues. “We handle getting those demo assets out into the field to support sales efforts, and then we ship out the actual items after the customer decides they want to buy.” This works particularly well for expensive, complex products, and can be a strategic tool for sales teams.
The company also offers fulfillment solutions. “Order fulfillment is a key part of the last-mile solution, and the company specializes in complex last-mile fulfillment and logistics challenges, particularly for retail organizations,” Nesbit says.
Making Good Sense
Duggal sees a strong future for Extron with its last mile manufacturing services. “To paraphrase Ross Perot, there’s going to be a huge sucking sound on-shore as people figure out the economics,” he says.
When they do, Extron will be there “to help its customers quickly analyze what specific structure makes sense for each product,” he says. “The big beneficiary will be the U.S. labor markets, as this actually has the potential to create a lot of domestic jobs.”
The company also plans to expand its footprint, Duggal adds. “We’re already outgrowing our 120,000-square-foot facility and expecting to add another location here in the Bay Area,” he says.
Extron Inc. is the North American manufacturer and distributor for Knurr, a line of customized enclosures, 19-inch racks, mobile electronic carts and control room consoles. While components for the company’s products are engineered in Germany, the final products are manufactured in the United States by Extron.
The enclosures, Extron Vice President of Marketing Doug Nesbit says, are often used for network electronics or are used to hold specialized OEM electronic equipment. “Good examples would be server racks and specialized test equipment and systems control equipment,” he says.
The mobile carts are often used in hospitals “such as mobile X-ray or endoscopy equipment carts,” Nesbit says, noting that the company also manufactures Knurr control station consoles.
“You would find [those] in a security office of a shopping mall where they require many screens, a refinery control room, or in an air traffic control facility,” he says. “You also find them in a lot of electronics labs.”
Extron CEO Sandeep Duggal adds that his company’s approach has brought benefits to Knurr, including reduced lead times. “When we instituted last mile manufacturing, [we reduced lead times] from 16 weeks to eight weeks,” he says.
Extron Inc. has won praise from its customers, which include Eric Stang, the former chairman and CEO of Lexar Media Inc. “Extron has been a major supporter of Lexar’s growth and success,” he said in a statement.
“Over several years of 50 percent to 100 percent-plus growth per year, Extron provided flexible, customized solutions and continuing cost reductions to allow Lexar to stay competitive and remain responsive to its customers,” he said.
Bob Wilson, the former chairman and CEO of Modulus Video Inc., also was pleased with its work. “Extron provided us with a high-quality, speedy and flexible supply chain solution that allowed us to get to market quickly, reduce costs and work with a partner who could solve our turnkey operations and logistics needs for our demanding, world-class customers,” he said.
Meru Networks Vice President of Operations Keith Matasci also was pleased with the company’s work. “Extron is Meru Networks’ domestic operations partner,” he said.