Altera learned a hard lesson in inventory management after losing $115 million worth of inventory in the 2000-2001 timeframe. Altera produced its programmable logic devices and stocked them in warehouses waiting for customer demands. Their thought was to provide a cost advantage to their customers by having readily available stocks. Altera also leaned forward to help customers by building new products from specs. This push strategy backfired, and resulted in the $115 million loss. Altera has now modified their strategy towards a push-pull strategy. The push strategy is to produce mainstream products in the form of die banks, which is the largest portion of the manufacturing process. This allows flexibility in their inventory with minimum risk. The final form of the product will start after orders are placed and confirmed. Altera will now only build to order and no longer lean forward by building from specs. This is the new applied pull portion of the strategy.
2. Do you think Altera’s new strategy will be successful? What are some advantages and disadvantages of the new strategy? I think the new strategy, implementing a push-pull strategy will vastly improve efficiencies throughout Altera. Some advantages and disadvantages are as follows; Advantages
* Risks will be decreased as bulk die banks will provide a readily available and flexible inventory for product demand while holding manufacturing time to a reasonable level. * Effective inventory management responsibility will display confidence in business operations and promote future joint ventures, such as those made with Motorola and Nortel. * Process improvements have reduced cycle time for wafer manufacturing and reduced long term planning time 75 percent with the implementation of supply chain management software.
* Reliance on more strategic forecasting information from customers may limit the customers...