Founded in 1984, Cisco Systems made its name in the end-of-the-millennium dash to connect the world’s computers together. The U.S.-based multinational provided the vital hardware and software required to route packets of data through the networks that were springing up in offices, on university campuses and across the world.
Cisco is still a leading player in global networking, although its offerings have expanded over time to encompass a broad range of categories, from internet-connected telephone handsets to cloud services and IT security software. In 2020, at the height of the coronavirus pandemic, the company reported that use of its Webex video conferencing system had tripled, with almost 600 million users worldwide.
Scaling up a service so rapidly sounds like a software challenge, but last year’s skyrocketing demand involved the deployment of plenty of hardware too. “It is a fabulous tool, but did we plan on running the world’s business on Webex last year? We certainly did not,” says Jack Allen, the company’s Head of Supply Chain Sustainability, Circular Economy, Security, Risk, and Resiliency. “We had to move an incredible amount of servers and equipment all around the world at very short notice to create the necessary network capacity for the world to work from home.”
And Webex wasn’t the only part of Cisco’s operations affected by the pandemic. The company also had to take radical action within its manufacturing networks. “With only a few days’ notice, we were having to move all the inventory and all the equipment from one factory to another,” says Allen. “We had plans in place to do that, but we’d never had to execute those plans.”
From risk to resilience
While 2020 was a year of exceptional events, Cisco is no stranger to complex, fast-moving supply chains. In a “normal” day, the company ships around 385,000 items through its global network. It manufactures 80,000 circuit boards every day, using 104,000 different component types sourced from more than 600 suppliers. “Our portfolio ranges from things that are really simple, like a phone, to really complex, like giant routers bigger than refrigerators that handle petabytes of traffic,” says Allen.
Much of the company’s product portfolio is also mission-critical for its customers. Today, the overwhelming majority of those customers are businesses and institutions that rely on Cisco equipment to keep their networks running. That makes reliable service a key supply chain theme, and a big part of Allen’s overall responsibility.
While COVID-19 has forced many companies to think harder about supply chain risk, the topic has been a key area of focus at Cisco for more than a decade. “You can look back to 2010 and find Cisco white papers on supply chain risk,” says Allen. “Today, we are moving into a new approach, where we don’t just think about risk, but also resiliency.”
Cisco’s resiliency program has three elements, he explains. “We talk about the ‘Shield,’ which involves identifying risks to the supply chain and taking steps to mitigate those risks. Then we have the ‘Twins,’ which is about building extra inventory and production capacity so we can continue to deliver to our customers even if there is a problem in our network. And finally, there is the ‘Spring,’ which is about how you bounce back quickly to restore operations after a problem.”
The company is still developing its resiliency framework, but the past year has provided a significant test for the new ideas, says Allen. Cisco coped well, he says, although the unprecedented scale of the pandemic has also “taught us a lot.”
“We used to think about resilience in terms of point problems,” he says. “Things like hurricanes, where you have a big disruptive event, and you need a backup plan to cover a few days or a few weeks. With COVID-19, we’ve seen that disruption can continue for months or longer.”
The duration of the pandemic has also created unexpected challenges, says Allen. Digital technology made the transition to working from home remarkably smooth, for example, but now many staff are struggling after months of lockdown and limited social contact.
Above all, the coronavirus has reinforced the point that resilience requires a mindset change. “I believe we need to broaden our view on what resilience is really about,” he says. “It isn’t just the big shocks. Everyday things, such as parts shortages or lead time problems, are really resilience events.” That insight is encouraging the company to consider the costs and benefits of resilience-boosting decisions as part of its everyday business planning. “With risk, you can look at the potential cost of an event and its likelihood, then decide how much you should spend to mitigate the risk,” he says. “We are working to develop the same approach for resilience, so we evaluate the costs and benefits of different strategies, then invest where it makes most sense to do so.”
Number of Webex video conferencing system users worldwide in 2020
A circular business
If the transition from risk to resilience represents one sort of mindset shift in Cisco’s supply chain, another even larger one is underway in the company’s approach to sustainability. Like risk, Environmental, Social and Corporate Governance (ESG) isn’t a new topic for Cisco. The company took the number-four spot in Fortune’s “100 Best Companies to Work For” list in 2020, topped that list in 2021, and has been a feature on it for more than two decades. It has established ambitious targets aimed at reducing the quantity of manufacturing waste, packaging and end-of-life products, and product return and reuse. As part of an effort to reduce consumption of virgin plastic by 20% by 2025, Cisco has started to offer collaboration devices manufactured using post-consumer recycled resin.
“We have made great progress in areas like waste reduction and recycling,” says Allen. “And recycling is better than landfill, but it is one of the lower levels of value in the circular economy. The real value is to reuse, repurpose and redeploy equipment. This is one of the biggest drivers of carbon reduction.”
Those circular economy principles have become central to Cisco’s efforts to reduce its impact on the environment. The company was a founding member of the Ellen MacArthur Foundation, established in 2010 by the former round-the-world yachtswoman to promote them. In 2018, Cisco CEO Chuck Robbins joined eight other senior technology sector executives in signing a pledge to take back 100% of the company’s products for reuse, remanufacture or recycling upon request.
Increasing the fraction of Cisco’s products that are reused is, says Allen, both a huge opportunity and a significant challenge. On the opportunity side, many Cisco products have a lot of life left in them when retired by their original user. When people replace Cisco products, it is usually because technology has moved on, or the user’s needs have changed, he notes. Those products may still offer significant utility to somebody else, especially as many modern network devices can benefit from ongoing software updates and upgrades.
The challenge is building the incentives and business models to support that re-use. “The overwhelming majority of our products are sold by resellers, so we don’t have a direct relationship with the end user,” says Allen. “Just getting things back presents a complex market dynamics problem.”
Re- and upcycling
Cisco is experimenting with a number of approaches to capture more end-of-life product. For example, users can use a phone app or website to arrange free-of-charge collection of any surplus equipment. It is exploring the use of incentive schemes to encourage third parties to collect and return used products. And the company is willing to receive other manufacturers’ equipment as well as its own.
Then there’s the question of the best markets for second-life products. Here again, Cisco is working on multiple approaches. In developed markets, the company offers a line of certified remanufactured products under the “Cisco Refresh” brand, and a rigorous testing and quality-control regime allows some second-life components to be built into new products. That’s an area that might be expected to grow over time, as more products are designed and manufactured with re-use and remanufacturing in mind.
“One really interesting area for us is the potential for second-life products to open up entirely new opportunities in new markets,” says Allen. As emerging economies develop their communications infrastructure, he notes, access to latest-generation technology may be less important than robust, high-quality equipment at a reasonable price.
“We know there is a real opportunity here, but there’s a lot of work to do in developing the channels, educating the market and building a community of technicians to install and support the product,” says Allen. Work is underway on all fronts, he adds, but “it is going to be a marathon, not a sprint. We are just in the early stages of a 30- or 40-year journey to circularity.” — Jonathan Ward
Published: June 2021
Images: Cisco; Seemanta Dutta/mauritius images