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

US Factory,
Oklahama City
Staging
Center,
California
Joint Venture
Order
Processing
New Jersey
Customer
Asi
a
US
Parts
Supplier
Parts
Supplier
4.Parts
Shipped
4. Parts
Shipped
5. Sub-
assemblies
Shipped
1. Order placed with
JV
2. Order placed with
AT&T
6. Kits exported
Prior to 1996: US centric Supply Chain Model
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?

Organizational
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
Long lead times, high cost associated with maintenance of part
pipeline existing between Asia & United States
Markets
Increased strategic importance of Asian market
High economic growth, great need for telephone infrastructure
Environment
and Economy
Structural changes needed to succeed in Asian environment
Significant price erosion for equipment, parts sourcing &
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?

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 Lucents 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
Sole sourced
component lead
times more than
doubled
Inventories 25%
increase,
assemblies could
not be completed
Taiwan Factory
commit to early
parts delivery to
ensure availability
Products
shipments to
customers were
jeopardized
Premium prices
for expedited
shipments of
missing parts
Supply was
Lucents
biggest
challenge
Fundamental changes in
business models and
customer-supplier relationships
due to internet and improving
IT

Shortening product cycles

Telecom industry progressing
at an ever increasing rate
placing higher value on growth
and ability to respond to
opportunities

Contract manufacturers
became a major force -
Lucent was questioning
whether invest in its own
manufacturing assets or
depend on supplier
Recommendations
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
Countering parts shortage
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
Track the supply chain
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
For Existing scenario: short 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
Shifting focus to R&D: Long term
Thank You