Lucent Technologies: Global Supply Chain Management

Erica Del Gallego – Section 26

Lucent Technologies: Global Supply Chain Management

Key issue

Current shortage of component parts brought about by the unprecedented growth of the electronics industry leads Lucent management to question changes already implemented in their supply chain, which had focused solely on cost and speed, ignoring the company’s vulnerability to imbalances in the supply of parts, which is now taking a toll on their ability to meet the needs of the evolving market and hindering their ability to take advantage of the new opportunities being offered.

Main factors

• Unprecedented growth in the electronics industry leads to component parts supply shortage.
• Asian contractors did not invest in new capacity
• Main product, 5ESS has reached maturity in its product life cycle, and is being challenged by new, alternative technologies.

Recommendations

• Reduce customization of their product to make it more “functional”, and employ mass customization.
• Contract with suppliers based on their level of flexibility, not on their ability to produce at low costs.
• Find low cost way to hold inventory buffers for critical/high shortage risk components.
• Reduce reliance on Asian contractors.
• Reduce number of contractors, perform activities locally to reduce lead times and increase flexibility and responsiveness.
• Employ accurate response forecasting.

Key takeaways

• Abroad, low-cost outsourcing is not always best – local production provides higher flexibility and responsiveness.  
• A supply chain must be constantly modified in order to meet demands of evolving market.
• Focus solely on cost reduction may leave other factors unattended which could result in negative outcomes.