The Great Inventory Correction
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
GSCM – Group 3
1
Outline
• Summary • Answers to case questions • Conclusion • Q&A
GSCM – Group 3
2
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 à forecast uncertainty à inventory glut = mountains of unsalable inventory
GSCM – Group 3
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
GSCM – Group 3
4
Questions on Altera I
1. How has Altera modified its strategy? Why? BEFORE • build-on-spec(ulation) àbuild finished products à stock inventory at distributors, sub-contract manufacturers • PUSH strategy ? to have product available for delivery upon order
GSCM – Group 3
5
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 à push to die bank inventory (stores of chips before packaging & testing) à pull to customer specific order B. requiring more customer’s input regarding their inventories à to build Altera’s plans C. applying SCM software i2 à 85%
2001 Edward Teach
Group member: Huynh Quang Vu Le Huu Dien Le Thi Phuong Tu Pham Duc Hai Tran Ho Thanh Dong
GSCM – Group 3
1
Outline
• Summary • Answers to case questions • Conclusion • Q&A
GSCM – Group 3
2
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 à forecast uncertainty à inventory glut = mountains of unsalable inventory
GSCM – Group 3
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
GSCM – Group 3
4
Questions on Altera I
1. How has Altera modified its strategy? Why? BEFORE • build-on-spec(ulation) àbuild finished products à stock inventory at distributors, sub-contract manufacturers • PUSH strategy ? to have product available for delivery upon order
GSCM – Group 3
5
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 à push to die bank inventory (stores of chips before packaging & testing) à pull to customer specific order B. requiring more customer’s input regarding their inventories à to build Altera’s plans C. applying SCM software i2 à 85%