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Angel Mendez, a senior vice president at Cisco Systems, delivered one of two keynote addresses at the 2007 Manufacturing Business Conference, held May 12 at the Kellogg School.

Kellogg team turns ideas into action

The business of production on display at annual student-run manufacturing conference

By Kevin McKeough

5/16/2007 - Angel Mendez never expected to be in the furniture business.

After all, the senior vice president of worldwide manufacturing for Cisco Systems Inc. was in the technology sector. But when his company decided to standardize the environments used in its new teleconferencing product, Cisco TelePresence, Mendez also became responsible for sourcing conference tables and chairs.

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  Shiailesh Rao ’99, managing director of sales and operations for Google India
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Mendez discussed his unanticipated foray into office furnishings during his May 12 keynote address at the Kellogg School of Management’s 12th Manufacturing Business Conference. Titled, “Ideas to Action,” the conference focused on how manufacturing companies implement innovation, while remaining mindful of key issues such as environmental sustainability and outsourcing. Students enrolled in the Master of Management and Manufacturing program (MMM), a joint degree offered by Kellogg and Northwestern University’s McCormick School of Engineering, organized the daylong conference.

Given his experience, it’s no wonder Mendez said that one of the key questions facing companies today is how to manage innovation. Cisco Systems, which provides Internet networking products and services and had revenues of $28.5 billion last year, spends $4 billion annually on research and development, with 800 of the company’s engineers dedicated to developing new products, he noted.

The company uses internal wikis and blogs to increase the flow of ideas and information among employees. Cisco also sets the bar high when evaluating new product ideas, looking for innovations that can produce $1 billion in five to six years.

Above all, the company emphasizes benefits to the customer. For example, Mendez said that Cisco Telepresence will enable Cisco itself to reduce staff travel (and related expenses) by 20 to 25 percent in the company’s next fiscal year.

“Innovation is all about improving customer value,” Mendez said. “Otherwise, what’s the point?”

The panel discussions following Mendez’s keynote included a discussion titled, “Sustainable Manufacturing: Balancing Environmental Benefits with Economic Costs.” Kimberly A. Gray, professor of civil and environmental engineering and chemical and biological engineering at Northwestern University, moderated the conversation among panelists Jodi D. Theut, policy analyst, General Motors Corporation; Michael E. Shepherd, technical marketing manager, GE Water and Process Technologies; and Susan M. Rokosz, principal facility environmental engineer, Ford Motor Company.

The panelists discussed environmentally friendly innovations their companies have incorporated into their manufacturing processes, including a General Motors plant that uses 25 percent less energy than its counterparts; GE’s switch to energy-saving lighting, which is translating into a $70 million annual windfall; and Ford repurposing auto paint fumes as fuel for its plants.

The panel also emphasized that any sustainability effort must include everyone involved in the manufacturing process. “You’ve got to get your employees engaged and show them what’s in if for them,” Shepherd said. “If we don’t bring our suppliers along, it’s a big piece that’s missing,” Rokosz added.

Another panel took as its title and topic “Challenges of Outsourcing Manufacturing to China.” Jan A. Van Mieghem, the Harold L. Stuart Distinguished Professor of Economics and professor of operations management at Kellogg moderated the discussion between panelists Joe Born, chief executive officer, Neruos Technology; Donald H. Bullock ’93, vice president and general manager-general products division, Eaton Corporation; Greg Fromknecht, vice president of global logistics, Emerson Corporation; Carl Thielk, corporate vice president, EMS/ODM operations, integrated supply chain, Motorola; and John Yoshimura, managing director, Asia Pacific, A.T. Kearney.

The panelists concurred that their companies’ decisions to outsource operations to China was driven primarily by the opportunity to penetrate China’s market, rather than lower labor costs. In fact, they reported that the country’s booming economy is creating double-digit wage inflation and intensive competition for white-collar workers. “More companies are coming in,” said Thielk. “The question’s become ‘how do I keep my workforce engaged and at Motorola.’”

They also noted the importance of only outsourcing those operations over which a company does not need to have direct control. “You have to decide what portions of business are important for you to manufacture and what portion are you going to rely on other partners,” Bullock said. Yoshimura cautioned that increasing globalization of China’s own industries meant a greater danger of compromising the intellectual property being made available to these companies. “You’ll see your product both in China and globally, depending on who you work with,” he warned.

Following the panels, Shiailesh Rao ’99, managing director of sales and operations for Google India led an innovation workshop. Rao reviewed how the Internet has shifted control of the production and distribution of information content from an elite group of providers (such as newspapers and television networks) to individuals (such as bloggers and YouTube video makers).

“To succeed in this challenging and hard-to-organize world you have to think differently, try different things,” he said.

For Google, the world’s largest Internet search engine with revenues of $10.6 billion last fiscal year, fostering that innovation means divvying up employees’ time, with 70 percent for core job functions, 20 percent to innovating around that core job, and 10 percent for “whatever the heck you want,” Rao explained. The company also uses its own intranet for employees to submit and respond to ideas and organize ad hoc teams to develop them.

One such idea is a new product, Google Checkout, a portal that organizes e-commerce for customers who shop with participating online retailers. After presenting the concept, Rao asked the workshop participants to offer their assessment of its strengths, weaknesses, opportunities and threats. Responses included concern that Google is venturing into a complicated area in which it has no expertise and a suggestion that the company could offer searches for products that meet certain criteria.

The afternoon concluded with a keynote address by Peter Swartz, director of IT for Dell Inc.’s global manufacturing, finance, supply chain group. Under Swartz, Dell — a $57 billion computer manufacturer and a platinum sponsor of the conference — has been replacing its fragmented software applications for factory automation and control with a single standardized information technology layer for all nine of its manufacturing plants worldwide.

“We’ve taken the idea of automating the factories using a standard software framework and rolled it out to all the factories,” Swartz said.

Under the new system, Dell managers can track the volume of work occurring at each step in the manufacturing process — from when parts are pulled through assembly, to software installation and on to packaging and shipping.

Swartz told the conference participants that during dinner the night before his speech, he had used his Blackberry to show his companions the graphic displays for production in Dell’s new factory in Brazil — where he was flying for the grand opening after the conference.

For more than a decade, the Manufacturing Business Conference has been showcasing the intersection of business and production, bringing leading innovators to Kellogg for the event. Organized by MMM students, the conference is one of the year’s highlights, attracting a range of industry executives and professionals as well as scholars and students. The event, one of more than a dozen Kellogg student-run conferences, is designed to create experiential learning opportunities for its organizers while also providing a forum for the school’s academic experts, including faculty, alumni and corporate friends.