1GSCM – Group 3
The Great Inventory Correction
2001
Edward Teach
Group member:
Huynh Quang Vu
Le Huu Dien
Le Thi Phuong Tu...
2GSCM – Group 3
Outline
• Summary
• Answers to case questions
• Conclusion
• Q&A
3GSCM – Group 3
Case summary I
• the remedy = rethinking of supply chain management
at large networking, telecom equipment...
4GSCM – Group 3
Case summary II
ALTERA
• California-based
chipmaker
(Programmable Logic
Devices)
• Supply to a giant
Taiwa...
5GSCM – Group 3
Questions on Altera I
1. How has Altera modified its strategy? Why?
BEFORE
• build-on-spec(ulation)
build...
6GSCM – Group 3
Questions on ALTERA II
1. How has Altera modified its strategy? Why?
AFTER THE BUST
A. postpone adding val...
7GSCM – Group 3
Questions on ALTERA III
2. Do you think Altera’s new strategy will be successful?
Advantages and disadvant...
8GSCM – Group 3
Questions on ALTERA IV
Advantages
• reduction of inventory cost
 reduction of COGS  improve
bottom-line
...
9GSCM – Group 3
Questions on ALTERA V
3. Altera’s customer reaction to this new strategy. Pros and
cons for the customer.
...
10GSCM – Group 3
Question on FLEXTRONICS
4. What information does Flextronics have that its clients do not?
• good track o...
11GSCM – Group 3
Question on IBM I
5. How does it manage suppliers and make its pull strategy better?
• Strategy : it buil...
12GSCM – Group 3
Question on IBM II
• Make it strategy better
- forecast at different level of details
 very detailed for...
13GSCM – Group 3
Conclusion
• inventory correction: supply network management
• Technology in forecasting demand
- helpful...
14GSCM – Group 3
Thank you
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MBA Assignment on Global SCM Course

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MBA Assignment on Global SCM Course

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  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • because the chipmakers did not allow inventory to build up in the way it did in 1995 or 2000
  • As everyone one to be at the sure side to keep their inventory lean  to which point this die bank should be
  • MBA Assignment on Global SCM Course

    1. 1. 1GSCM – Group 3 The Great Inventory Correction 2001 Edward Teach Group member: Huynh Quang Vu Le Huu Dien Le Thi Phuong Tu Pham Duc Hai Tran Ho Thanh Dong
    2. 2. 2GSCM – Group 3 Outline • Summary • Answers to case questions • Conclusion • Q&A
    3. 3. 3GSCM – Group 3 Case summary I • the remedy = rethinking of supply chain management at large networking, telecom equipment, PC and chipmakers • Consequences: huge amount of write-off or write-down of inventory + at Cisco : 2.25 billion dollar + at Altera : 115 million dollar • the problem cause • communication gaps among partners of the supply chain • volatile demand  forecast uncertainty  inventory glut = mountains of unsalable inventory
    4. 4. 4GSCM – Group 3 Case summary II ALTERA • California-based chipmaker (Programmable Logic Devices) • Supply to a giant Taiwanese company • Chute in revenue due to declining customer demand • Write-down 115 mio. worth of inventory FLEXTRONICS • One of world’s largest EMS (electronics manufacturing services) • Makes everything : from printed circuit boards to cell phone • Customers: Cisco, Lucent, Ericsson • Inventory growth 2000: from 470 mio. to 1.7 bil. dollars IBM • Giant, diversified risk • no exception in the dotcom crash • Flat sales
    5. 5. 5GSCM – Group 3 Questions on Altera I 1. How has Altera modified its strategy? Why? BEFORE • build-on-spec(ulation) build finished products stock inventory at distributors, sub-contract manufacturers • PUSH strategy ? to have product available for delivery upon order
    6. 6. 6GSCM – Group 3 Questions on ALTERA II 1. How has Altera modified its strategy? Why? AFTER THE BUST A. postpone adding value to die bank inventory • build-on-order • PUSH-PULL strategy  push to die bank inventory (stores of chips before packaging & testing)  pull to customer specific order B. requiring more customer’s input regarding their inventories  to build Altera’s plans C. applying SCM software i2  85% automatically production scheduling  to shrink planning cycle time from 4 to 1 week.
    7. 7. 7GSCM – Group 3 Questions on ALTERA III 2. Do you think Altera’s new strategy will be successful? Advantages and disadvantages of this new strategy. • a good strategy  the exchange of information between Altera and its customers • if Altera is able to build a trustful collaboration with partners
    8. 8. 8GSCM – Group 3 Questions on ALTERA IV Advantages • reduction of inventory cost  reduction of COGS  improve bottom-line • increase of customer value: + optimal match product-customer’s requirement • well-matching supply-demand • reducing risk of huge obsolete inventory Disadvantages • lead time – long in case of sudden increasing demand • customer’s readiness and ability (organisation, finance) • how well does such strategy reflect adversity? • dependence of the chain on such software as i2  what is plan B if this fails?
    9. 9. 9GSCM – Group 3 Questions on ALTERA V 3. Altera’s customer reaction to this new strategy. Pros and cons for the customer. Reluctance at first Advantages • close-tie collaboration  mutual benefits • ability to get better customised products to the new trend in market • in a well-informed lead time  to better plan their own production and time-to-market Disadvantages • Disclosure of strategic information esp. big important customers • Lock-in with Altera • Limited ability (finance, organisation) and interest
    10. 10. 10GSCM – Group 3 Question on FLEXTRONICS 4. What information does Flextronics have that its clients do not? • good track of historical data, business cycle and product life cycles • good record of demand via aggregated supply that Flextronics and other EMScs were producing  benefit both their suppliers (for Vender – Managed Inventory) and their clients (for better knowledge of market demand)
    11. 11. 11GSCM – Group 3 Question on IBM I 5. How does it manage suppliers and make its pull strategy better? • Strategy : it builds fast on pull or just-in-time basis • Managing of suppliers - material hub = located close to suppliers’ facilities - provide visibility of inventory level of IBM - limit number of suppliers - enabling e-business and EDI  save time and better collaboration with suppliers
    12. 12. 12GSCM – Group 3 Question on IBM II • Make it strategy better - forecast at different level of details  very detailed for shorter period: 90-day forecast update weekly  fairly detailed for 90-day to 1-year forecast  strategic for longer periods - with involvement of all suppliers  to cope with the unexpected change in demand • other practices simultaneously to work down inventories: focus on sharing parts • crystal ball = the energetic salespeople
    13. 13. 13GSCM – Group 3 Conclusion • inventory correction: supply network management • Technology in forecasting demand - helpful but still a “guesswork”  uncertainty - need input from close interactive market monitoring • other practices to keep lean inventory • Question: - pushing inventory upstream of the chain  how should we understand “collaboration” in supply network?
    14. 14. 14GSCM – Group 3 Thank you
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