THe graet inventory recorrection
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Transcript of THe graet inventory recorrection
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……