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1. Outline the factors that explained why the original supply chain network strategy used by
Lucent in Asia was adequate prior to 1996
Factors behind the viability of the original supply chain network strategy used by Lucent in Asia prior
to 1996 can be given as:
Prior to 1996, the demand from the Asian market was less. Demand was mainly driven by
government -owned telephone operating companies
Also, rate of capacity addition was low due to regulated telecommunication market and hence
low bargaining power of buyers
AT&T had huge cash flowing from phone bills and to add to that there was no pressure for lower
cost, fast delivery and quick response
Further, 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 also not lucrative at this point of time because most of them were lacking in
manufacturing capabilities. For example cost of Manufacturing was high in JV manufacturing in
Taiwan compared to Oklohamas Manufacturing in the US
Although the manufacturing capability was low in Taiwan, the assembly and testing lines in
Taiwan never went in short of supply due to additional local suppliers
2. What were the factors that drove the necessary changes in Asia in 1996? What did you see as
the benefits of those changes?
The factors that drove the necessary changes in Asia in 1996 are:
3. What internal and external factors had changed from 1996 to 2000, which necessitated a
revisit of the supply chain strategy from Lucent? What would you recommend to respond to
these challenges?
The internal and external factors which had changed from 1996 to 2000 are:
Internal Factors- 25% increase in the inventory occurred due to increase in production. Also, sole
sourced components lead time has doubled
External Factors- Demand Outpaces Supply tremendously along with Competition from contract
manufacturers. This coupled with Short Product Life Cycle adds to the woes. Further, 5ESS
product is in the maturity stage of the product life cycle so there is pressure from emerging
innovations. Finally, with China emerging as the low cost production center Lucent is also facing a
threat in that aspect.
Recommendations:
Lucent should make Investment in expanding the assets of Joint ventures for more production.
Rationale for this is Favorable market with a highly profitable company.
Also, Supply chain should be made more agile
Lucent should undertake necessary steps to make the Supply Chain more agile.
Summarizing, we can identify four key aspects on which Lucent can work to respond to current
challenges.