CISCO Case Review

1
CISCO Case Review

• BA 295 Fall 2002
• Prof. Fred Coleman, III

2
BACKGROUND--Structure

• Virtual manufacturer5 Contract Mfrs 60 FA/100
  BP
  
• Global Networked Business Model (Internal ERP)
  (Single Enterprise)
  
• Single Long-term Forecast Shared Throughout the
  Supply ChainDaily Build PlanMinimal to No
  Documentation btn 1st-2nd-3rd tier suppliers

3
BACKGROUND--Benefits

• 128 mm Annual SavingsSingle Enterprise
  Strategy
  
• 25 reduction --Time to Market
• 97 On-time delivery
• Order Cycle Time 4 yrs ago 6 to 8, now 1 to 3
  weeks. Direct fulfillment 55 of products
  
• UPS outbound logistics control in
  Europereal-time shipment tracking.
  
• FEDEX outbound logistics control in USall
  shipping and warehousing. Merge-in-transit
  direct shipment to final customers.
  

4
Problem

• Internet boom led to long-term forecasts from
  company sales force. Forecast shared throughout
  supply chain.
  
• Market leader placed advance ordering to lock in
  scarce components.
  
• Customer behavior in tight product supply
  markethedge and place 2nd order and buy from 1st
  deliverer.
  
• Current high demand in marketso cancelled orders
  absorbed.

5
Problem

• Cisco competitors utilize same five C.Mfrs. and
  2nd/3rd tier component suppliers
  
• Cisco and competitors C. Mfrs. compete to fill
  orders first, would seek to lock up scarce
  supplies
  
• Artificial demand from competitor orders (demand
  inflation) and competition from C. Mfrs. to meet
  all Cisco demand
  
• Dynamic Replenishment demand signals flow
  instantly to C. Mfrs.
  

6
Problem

• Inventories can be monitored by all supply chain
  partners on a real-time basis.
  

7
What Really Happened

• Artificially inflated forecasts--YES
• Contract mfr behaviorYES
• Internet Bubble BurstYes
• Cisco Order Backlog HighYes
• Did Cisco know its orders below C. Mfrs level
  from anybody elses?NO
  
• Did it know C. Mfrs. Behavior in seeking to
  fulfill the total order instead of a fair
  share?NO
  

8
Learning Take-Aways

• Focus on core competency is good.
• Outsourcing of the source, make, deliver of your
  product requires more than farming out those
  components with real or near real-time data.
  Tracking, evaluation, trend analysis.
• Inventory Control through global visibility with
  accurate data to provide end-to-end management of
  your orders (inbound through outbound)
  
• Inventory control with event management
  (exceptions, pre-determined levels) and
  analytical forecasting (trend analysis on
  industry capacity).