Lucent Supply Chain Case Study

Lucent Supply Chain Case Study Was the hub-and-spoke process, despite its success, the right model for this evolving environment? Moving from the highly centralized approach of order management through Oklahoma City to a more distributed approach that relies on the hub-and-spoke model, basing the distributed order management hub in Taiwan was an excellent decision. Several of the major reasons why this was an excellent decision are defined here.

First, Lucent was struggling with staying on top of the complex and intricate demand requirements of customers in the Asian region, and it is clear from analyzing the case that the complexities of creating configure-to-order and engineer-to-order products from Asian customers to Oklahoma City is fraught with miscommunication errors and costly delays. Moving the hub-and-spoke supply chain architecture to Taiwan greatly simplified the order placement, order management and supply chain fulfillment tasks requires for completing complex configure-to-order and engineer-to-order products.

Second, Lucent must look at this integration of a hub-and-spoke model as an experiment in creating additional supply chain, order management, and fulfillment models throughout the Asian region. Replicating this model across multiple locations will lead to even greater levels of order accuracy and time-to-market, also minimizing errors in the 5 ESS Switch production as well. Third, this move to a hub-and-spoke model in Taiwan sets the foundation for a fundamental re-alignment of the entire order management, supply chain, and order fulfillment process workflows on a global scale.

It does this by illustrating how a truly distributed order management system can assist Lucent in becoming much more demand-driven, an issue the company is struggling with as it moves from push to pull production. In summary, yes, this was a very good decision for the reasons mentioned, as it sets the stage for the next level of supply chain integration across the region and also defines how the company can become much more demand- and customer driven while attaining high levels of accuracy in very complex, engineer-to-order product fulfillment.

How could they take advantage of the maturing resources both within and outside Lucent? The company could take advantage of these maturing resources by creating a more aggressive supplier relationship management (SRM) strategy throughout the region. It appears that initial efforts to define quality standards for product sourced in Asia have been successful. Yet much more work needs to be done here if Lucent is to realize the full cost and time efficiency savings of having low priced, local suppliers willing to work with them.

Lucent needs to study and implement parts of the Toyota Production System (TPS) which focuses on tight supplier integration and demanding standards for supplier quality. If Lucent can take the parts of the Toyota TPS and apply it to their unique needs, they will be successful in managing suppliers to get the pricing and quality levels required.

What could Lucent do to mitigate exposure to material shortages without increasing inventory? The strategy to mitigate exposure to material shortages without increasing inventories needs to start with their customers and their forecasts of demand for this complex, highly customized SE55 Switches. The need for creating a more accurate collaborative planning and forecasting system is critical in this regard.

By having a very accurate forecast, Lucent will be able to source only the specific components required and use inventory minimization techniques including Just in Time (JIT) and Vendor Managed Inventory (VMI) techniques to minimize inventory risk while having a more accurate forecast from customers. Was today's leading edge procurement effective for future environments? Simply put, no, it is not.

There is much room for improvement in this regard, specifically using the SRM strategies mentioned earlier in this paper, the need for creating a strategic sourcing initiative in Lucent, organized in Taiwan, and the need for a Toyota TPS-level of quality assurance at the supplier level. There is very little in the way of quality control and quality management across the suppliers, specifically processes for corrective action/preventative action (CAPA) workflows and nonconformance process definitions.

All of these would be included in the Lucent interpretation of the TPS initiatives Toyota has perfected. It is critical for Lucent to move quickly on these supply chain-oriented quality initiatives if they are to remain competitive. Should they continue to drive internal breakthrough improvements or should they "harvest" their previous supply chain.