The great Inventory Correction

SCM Presentation -II

Astha paliwal 1226110108Alka tiwary 1226110105R.P. Eashwar 1226110129Voona Vivek 1226110144

Case at brief and problems

The economic downturn (its effect on High-tech companies; networking and telecom equipment, PC & semi conductor manufacturers)

Slump in demand

Pileup in inventory

Write-off huge amount of inventories Cisco 2.25 billion dollars Altera 115 million dollars

Price wars by PC makers

Rethinking on how to manage their supply chains.

Altera

Chipmaker originated from California.

Programmable Logic Devices

Manufacturing is outsourced to Taiwanese company (Taiwan semiconductor manufacturing corp)

Decline in revenues because of declining demand.

Write-down 115 million worth of inventory

Initially followed push strategy (cost benefits to customer in terms of holding inventory)

· Electronics manufacturing services

· Wide range of products from printed circuit boards to cell phone

· Cisco, Lucent, Ericsson are the customers

· Inventory increased from 470 million to 1.7 billion dollars in 2000.

Flextronics

1. How has Altera modified its strategy? Why?

Build-to-order strategy

No longer on speculation

Push- Pull strategy Push chips to die bank inventory Pull to customer specific order

Joint ventures (Nortel and Motorola for product development)

Altera’s i2 Technologies System (SCM Software ) Which helped them in reducing planning cycle time Shorter (weekly from 10 days to 1 day) Long term (four weeks to one week)

Why?

Reasons: To integrate suppliers, fabs and

distributors

To reduce cycle time

To seek better information from customers

To avoid past mistake which cost them $115 millions

2)Do you think Altera’s new strategy will be successful? Advantages and disadvantages of this new strategy.

Advantages Less risky and highly profitable strategy More visibility in the inventories and build plans

of customers Reduction in inventory costs Supply-Demand match

Disadvantages Increased lead time for its customers

3) How do you anticipate Altera’s customers will react to this new strategy? What are advantages and disadvantages for Altera’s customers?

Non-acceptance at the beginning

Eventually they will adapt

Advantages: Leads to high level customization

Brings both customer and Altera together

Disadvantages Big customers would not will to disclose their strategic information

4. What information does Flextronics have that its clients do not? Why? How canFlextronics leverage this information?

Information on historic data and business cycles

Aggregated information on demand and supply

Benefits both its suppliers for VMI and clients for its requirements

5. How does IBM manage its suppliers in order to make its pull strategy more effective?

Follows the pull strategy

Actions by IBM for effectiveness are:

Commonality

Size of suppliers are small

Electronic purchase transaction ( aids faster collaboration

with suppliers)

Enthusiastic sales force.

Forecasts for shorter horizons( 3 months )

Strategic for longer periods

with involvement of all suppliers

Learning from the case

Integration of supply chain is essential

Tighter collaboration with suppliers and all SC players is important

Timelier information from customer helps in reducing inventory

Shorter, transparent and flexible supply chains are better

Thank you……