CISCO SYSTEMS THE SUPPLY CHAIN STORY

ABHIROOP SEN EPGDBM 4 ROLL NUMBER 1

QUESTION 1
'Few companies have grasped the far-reaching importance of the new technologies for management better than Cisco Systems. Cisco could well provide one of the best road maps to a new model of management.' Study the networked supply chain concept as implemented by Cisco and critically comment on its efficacy.

ANSWER
A single enterprise system: embracing contract manufacturers, distributors, logistics partners, development engineers, service engineers, sales representatives and customers into a single information system. This enables business partners to manage much of Ciscos supply chain. Information sharing in real time: the entire supply chain operates from the same demand signal. This means that any change in one node of the network is immediately transmitted throughout the network.

ANSWER
Direct fulfillment: whereby most of Ciscos contract manufacturing partners ship directly to customers. Today, suppliers directly fulfill 55 percent of the companys customer orders. Automatic testing: to ensure product quality by creating test cells on supplier production lines. The cells are able to automatically configure test procedures when an order arrives

ANSWER
Rapid new product introduction: reducing the number of iterations required during prototype development. Automation and better connectivity has also reduced time-to-market by three months.

Ciscos supply chain model has also provided a scalability and agility that allows the company to grow with incredible speed.
Taken together, these initiatives have had an immense impact on value creation.

QUESTION 2
Analyze why Cisco landed in financial trouble in the early 21st century. Would you agree that Cisco's problems were largely caused by inherent defects in the company's systems? Give reasons to justify your stand.

ANSWER
Care was taken by the company at every step to cure any defects that existed. Heavy capital investments were made to improve communication between different tiers in the supply chain.

Problem was in the interpretation information. The forecast for demand was artificially inflated. The forecasts were based on quantity ordered rather than actual sales.
There is evidence of bull whip effect due to wrong forecasts.

QUESTION 3
Aside from the information systems problems referred to, what other specific problems did you see in the case?

ANSWER
While Cisco was riding high on the wave of success it was oblivious to what was happening externally. Reportedly, Cisco failed to foresee the changing trends in the industry and by mid 2001 had to cope with the problem of excess inventory. As a result, the company had to write off inventory worth $2.2 billion in May 2001. It was the largest inventory write-off in the history of business.

ANSWER
Cisco wasn't able to scale up and down as quickly as it thought it could. Some analysts believe that it was the outsourcing model that Cisco adopted that led to its downfall. The flaw was more likely with how Cisco had implemented the outsourcing model and not in the principles. In an industry where product lifecycles are getting shorter in a volatile economy.

A clear understanding of performance expectations, capabilities, and risks will separate the leaders from the laggards.