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Submitted by:

Sec-A

Group 8

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Company Backgroundo Found in 1996

o Formed from as a result of restructuring of AT&T

o Largest stock distribution

o Manufacturer of Communication equipments

o One of the separate public companies that AT&T was

restructured into.

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o Major growth attributed to Network Systems Unit (57% oftotal revenues)

Market leader in the United States for switching systemsTied for market leadership in worldwide telecommunications infrastructureequipment

o Operational efficiency became a major issue

o Lost the back up of AT&T

o Switching Solutions Group(SSG), a part of the organizationmade the flagship product 5ESS Switch

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ASIAN MARKEToAsia had tremendous potential for growth as it was an under

served market (small segment of installation)

oJV with Asian markets like Indonesia, China etc. for entry intomarket

No manufacturing facilities but to facilitate orders from customers

o Cost & Delivery Time were the major competitive factors

o Oklahoma was given due advantage due to economies of scale

o In feeding supply with appropriate mark up

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5ESS Switcho Software based on digital switching platform

o Provided communication platform for any type of signal over

any medium.Connected end users to central phone offices, and phone offices to eachother

Could serve up to 250,000 subscriber lines and 100,000 trunk lines

o The switch office was a modular design (expansion

possible) consisting of an AM, CM and SM.o Custom configured, engineered-to-order product but only a

portion of the assemblies could be built to stock

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Suppy Chain prior to 1996o Major production done in Oklahama

oAssembly and Testing done by JV in AsiaCost reduction measure use local parts certified by Bell

Local parts shipped back for assembly purpose

o Orders were taken from countries with or without local JV

o Flaws : 1. Long lead time

2. Large shipment costs

3. High cost of maintaining parts in pipelineo Issues : 1. Last minute order changes

2.Competiton based in price , delivery & technology

3. 60% components produced in Asia

4. Development of Contract assembly in Asia

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Changes in Supply Chainy Taiwan became hub of Asian supply chain

y Outsourcing in Asia

y Infeeding parts to Asian JV and technical support fromTaiwan

y Custom engineering and manufacturing in TaiwanTaiwan Accounted for 85% of the total circuit pack value

China built 50 60 circuit packs locallyIndia & Indonesia production outsourced to local contractors

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Cont.y Certification from Bell Lab ensured quality control

y Production on drawing and test from USA

y Direct and local procurement usedy Only high volume assembly produced in Oklahoma

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Major Barriers to Re-Designo Employees discomfort with change

o Resistance from Lucent Product ManagementOrganization

o SC design would result in loss of profit due to loss of mark-up revenues- coke syrup method

oVenture partner sfelt vulnerable to part pricing

o Resistance to from sales & support organization

o Fear of the loss of made in USA label

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Effects OfRe-Designo 82 % of parts by value were sourced within Asia

o Productivity increased three fold

o Outsourcing of production processo Less bottlenecks

o Shift to more responsive pull manufacturing

o Throughput time decreased from five to one week

o Inventory days of sale fell by more than halfo Margin improved by more than 10 % points

o Reduced Bullwhip effect

o Efficient bids & proposals

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New Challengeso Material shortage due to unprecedented growth

Internet and cellular sector

o

Short product cycleso More focus on availability of parts

o Changing business models

o Increased inventory due to irregular supply

o 5ESS

Switch reaching its maturity stageo Problems with product shipment

o Emergence of alternative technology

o Long delivery time lead to risk of loosing customer

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Recommendationso Eliminate Logistics issue by partnering with leading logistics

supplier

oAvoid sole sourcing for bottle neck productso Investment in capacity expansion of vendors by technology

transfer and information sharing (owing to cheaper parts)which could the be shipped to other JV

o

Build long term partnership with trusted supplierso Develop global procurement strategy

o R&D : increased spending to replace 5ESS

: Strengthen R&D to answer short product life cycle

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Conto Reliance on contract manufacturers for non proprietary

parts

o Use of efficient systems

Use of internet technology

Improved IT systems

ERP system

o Since Lucent has sufficient knowledge and capacity -Outsourcing is not preferred

o Should be considered only if Lucent is not able to matchmigrating technology

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