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Case: Lucent Technologies: Global

Supply Chain Management

Group – 8
Anupama Prakash – PGP17/009
Anuradha Dhote - PGP17/010
Aparna Goswami - PGP17/011
Monisha Mehrotra - PGP17/026
Sarika Chauhan - PGP17/044
Outline the factors that explain why the original supply chain
network strategy used by Lucent in Asia was adequate prior to 1996
Prior to 1996: US centric Supply Chain Model

2. Order placed with AT&T


Customer 1. Order placed with JV
Order
Processing
New Jersey
Joint Venture

6. Kits exported Staging


Center,
California
5. Sub-assemblies
Shipped

US Factory,
4.Parts Shipped Oklahama City 4. Parts Shipped
Asia US

Parts Supplier Parts Supplier


Factors Behind the original supply
chain strategy

Prior to 1996, Asian demand was driven mainly driven by government-


owned telephone operating companies

Rate of capacity addition was low due to regulated telecommunication


market and hence low bargaining power of buyers

There was no pressure for lower cost, fast delivery and quick response

Since Lucent was producing in high volume at Oklahoma city, it was able
to realize low production cost due to economies of scale

Joint Ventures were lacking in manufacturing capabilities


What were the factors that drove the necessary changes in Asia in
1996? What did you see as the benefit of those changes?

• Lucent became independent and lost deep pockets of AT&T. It was no


longer insulated from consequences of inefficient asset management
and long delivery times
Organizational • Long lead times, high cost associated with maintenance of part pipeline
existing between Asia & United States

• Increased strategic importance of Asian market


Markets
• High economic growth, great need for telephone infrastructure

• Structural changes needed to succeed in Asian environment


• Significant price erosion for equipment, parts sourcing & manufacturing
Environment
and Economy capabilities
What were the factors that drove the necessary changes in Asia in
1996? What did you see as the benefit of those changes?

• US centric SCM model changed to Hub and Spoke approach

• Taiwan became hub of Asian supply chain

• All Asian orders processed in Taiwan

• Supply of Asian joint ventures came from Taiwan

• Lucent switched from push to pull manufacturing, reorganized shop floor, attacked
bottlenecks

• Outsourced production processes company did not do well

• Served as contract manufacturer for companies in processes they did well


What were the factors that drove the necessary changes in Asia in
1996? What did you see as the benefit of those changes?

Product manufacturing time decreased from over five weeks by 1997

Orders were delivered on time

Improvements in profitability and asset management measures

Support for Asian joint ventures & customers improved

Information distortion in supply chain mitigated

Increased enthusiasm amongst sales team

Improved competitiveness of Lucent’s Asian operations

Captured complete Switch market in Taiwan


What internal and external factors had changed from 1996 to 2000,
which necessitated the revisit to the supply chain strategy for
Lucent? What would you recommend Lucent to respond to the new
challenges?
FIVE PROBLEM AREAS
•Fundamental changes in business
models and customer-supplier
Sole sourced relationships due to internet and
component lead
times more than improving IT
doubled

•Shortening product cycles


Premium prices Inventories – 25%
for expedited Supply was increase,
shipments of
missing parts
Lucent’s assemblies could
not be completed
•Telecom industry progressing at
biggest
challenge
an ever increasing rate – placing
higher value on growth and ability
to respond to opportunities

Products Taiwan Factory – •Contract manufacturers became


shipments to commit to early
customers were parts delivery to a major force - Lucent was
jeopardized ensure availability
questioning whether invest in its
own manufacturing assets or
depend on supplier
Recommendations
Countering parts shortage

• Use forecasting to get an estimate on the number of parts


• Keep supplier informed about deadline changes, design, fluctuations and synchronize order placement
• Pre-order generic parts

Track the supply chain

• Track materials going through the supply chain


• Leverage upcoming IT to link suppliers with Lucent JVs and manufacturing facilities
• Create a level of second-tier suppliers are back-up in case of shortages

For Existing scenario: short term

• Continue to focus on projects where switch has feature/cost advantage over competing products
• Use manufacturing expertise to reduce lead time, costs and improve quality

Shifting focus to R&D: Long term

• Forecast the need for upcoming data network products


• Outsource the support activities a.k.a. non-value added functions to focus more on R&D in upcoming
telecom technologies
• Share knowledge and hold discussion forums to focus on new technologies
Thank You