Submitted by: Sec-A

Group 8

Company Background
o 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.

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

Market leader in the United States for switching systems Tied for market leadership in worldwide telecommunications infrastructure equipment

o Operational efficiency became a major issue o Lost the back up of AT&T o Switching Solutions Group(SSG), a part of the organization made the flagship product 5ESS Switch

ASIAN MARKET
o Asia had tremendous potential for growth as it was an under served market (small segment of installation) o JV with Asian markets like Indonesia, China etc. for entry into market
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

5ESS Switch
o 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 each other 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

Suppy Chain prior to 1996

o Major production done in Oklahama o Assembly and Testing done by JV in Asia
Cost 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 pipeline o 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

Changes in Supply Chain

y Taiwan became hub of Asian supply chain y Outsourcing in Asia y Infeeding parts to Asian JV and technical support from

Taiwan y Custom engineering and manufacturing in Taiwan

Taiwan Accounted for 85% of the total circuit pack value China built 50 60 circuit packs locally India & Indonesia production outsourced to local contractors

Cont .
y Certification from Bell Lab ensured quality control y Production on drawing and test from USA y Direct and local procurement used y Only high volume assembly produced in Oklahoma

Major Barriers to Re-Design

o Employees discomfort with change o Resistance from Lucent Product Management Organization o SC design would result in loss of profit due to loss of markup revenues- coke syrup method o Venture partner sfelt vulnerable to part pricing o Resistance to from sales & support organization o Fear of the loss of made in USA label

Effects Of Re-Design
o 82 % of parts by value were sourced within Asia o Productivity increased three fold o Outsourcing of production process o 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 half o Margin improved by more than 10 % points o Reduced Bullwhip effect o Efficient bids & proposals

New Challenges
o Material shortage due to unprecedented growth
Internet and cellular sector

o Short product cycles o More focus on availability of parts o Changing business models o Increased inventory due to irregular supply o 5ESS Switch reaching its maturity stage o Problems with product shipment o Emergence of alternative technology o Long delivery time lead to risk of loosing customer

Recommendations
o Eliminate Logistics issue by partnering with leading logistics supplier o Avoid sole sourcing for bottle neck products o 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 suppliers o Develop global procurement strategy o R&D : increased spending to replace 5ESS

: Strengthen R&D to answer short product life cycle

Cont
o 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 match migrating technology