ModusLink Performs Advanced Value-Added Services for High-Tech Customers
Futian Free Trade Zone, Shenzhen, China Site Visit
November 13, 2012
By
Evan Armstrong
Key Personnel:
Tom Nightingale, President – Sales & Marketing
Jerry Tsai, General Manager, ModusLink – Futian FTZ, Shenzhen, China
Jody Peng, Operations Manager, ModusLink – Futian FTZ, Shenzhen, China
Foreslily Cao, QA Manager, ModusLink – Futian FTZ, Shenzhen, China
ModusLink Global & Asia Overview
ModusLink Global Solutions (NASDAQ: MLNK) has 3,700 employees deployed across 30 facilities in 15 countries within North America, Europe and Asia. Its operations process and ship 470 million units annually for over 220 customers. Having $876 million in gross revenue for 2011, ModusLink ranks among the top quartile of global third-party logistics providers (3PLs). Due to extensive manufacturing support services, its cost of purchased materials and transportation comprise 60% of gross revenue resulting in value-added 3PL net revenue of $350 million. ModusLink’s Asian operations contribute 40% of net revenue with the remainder evenly divided between North America and Europe. Key ModusLink accounts include: AMD, Cisco, HP, IBM, Lenovo, Microsoft, and Sony.
ModusLink operates in a Lean continuous improvement environment long on process control. Its global operations are ISO 9001:2008 certified, and the majority of operations are also ISO 14001 (Environmental Management Standard) and ISO 13485 (Medical Devices Standard) certified. Through March 2012, ModusLink completed 987 continuous improvement projects over the past five years.
In South China, ModusLink has eight solution centers and serves 12 key customers including: AMD, Belkin, Cisco, GoPro, IBM, Lenovo, and Sony. In addition, it performs value-added 3PL work for an additional 35-40 smaller customers annually.
To support its operations, ModusLink runs both SAP’s ERP (enterprise resource planning) and integrated WMS (warehouse management system). Demand planning, procurement and materials management, materials and finished goods inventory management, warehousing, and distribution are functions performed in all of ModusLink’s operations.
Futian, Shenzhen, China, Value-Added Supply Chain Management Operation
ModusLink operates as a WOFE (wholly-owned foreign enterprise) in China and its largest operation lies amongst the high rises of the southern Futian district of Shenzhen. ModusLink has been in the 258,336 square foot Futian FTZ (free trade zone) operation since 2006. The ISO 9001 and ISO 14001 certified operation has a full-time staff of 380 employees and also utilizes a third-party staffing company for temporary labor. Services performed in Futian include value-added warehousing and distribution, advanced kitting and packaging, configuration and postponement, materials management, and customs house brokerage. The Futian operation also has a licensed trading company which provides customers with significant materials procurement and import/export benefits.
ModusLink’s customs brokerage operation has a staff of 11 people and a highly regarded Class AA Enterprise Shenzhen Customs license for processing customers’ international shipments. It processes approximately 450-500 export customs declarations per month for its customers and trading company operation. According to ModusLink, it is one of approximately 15-20 companies in Shenzhen with an AA Customs license. To maintain the AA license, the operation is audited annually by Shenzhen Customs officials. The higher class of license provides ModusLink with expedited customs clearance and reduces its export inspection rate to 1.5% of total customs declarations versus an overall average of 4.5% for exports out of Shenzhen.
Strong security is a necessity for customers of the Futian operation. It is TAPA “A” (Technology Asset Protection Association) certified with processes in place for security vetting and background checking of employees, surveillance using 260 closed circuit security cameras, and procedures to ensure transportation security.
ModusLink works hand-in-hand with Sony supporting its memory card and USB flash drive manufacturing, kitting and packaging, and finished goods distribution from Futian. For Sony, as with most of its customers, ModusLink is managing vendors and material procurement of lower-value items such as packaging materials with individual values of less than $5.
ModusLink stores components–Sony memory cards and flash drives–and finished goods in a 16,000 square foot dedicated section of its warehouse. Planned batches of components are released into four kitting and packaging lines based upon demand with multiple quality checks performed throughout the process.
In approximately 43,000 square feet, ModusLink is running three kitting and packaging contract manufacturer factory feed lines for Lenovo personal computers. Kits of recovery disks, certificates of authenticity, and user documents are assembled and packaged. The three lines process 10,000 to 15,000 orders per month from an inventory of 10,000 SKUs (stock keeping units) of warehoused components. The operation works in a JIT (just-in-time) delivery environment and the order-to-delivery cycle time is just three hours. ModusLink manages two shuttle trucks making deliveries of 40-50 shipments per day to the manufacturers.
