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Lucent Technologies

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Lucent Technologies redesigned its global supply chain in 1996 to address issues with its previous US-centric model. The new "hub and spoke" approach established Taiwan as the hub for Asian supply chain operations, where custom engineering, manufacturing, and technical support for Asian orders were centralized. This reduced long lead times and high costs compared to shipping parts from Asia to the US. The redesign faced initial discomfort from employees concerned with loss of control and jobs. However, it resulted in 82% of Asian order value being sourced within Asia by 1998, with throughput time decreasing from over 5 weeks to 1 week and margins improving by 10%.

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Lucent TechnologiesGlobal Supply Chain ManagementBino JosephKishore Thomas JohnSaranya MVygha N K
Company Background
Growth of Lucent TechnologiesAfter becoming independent in 1996, operated in more than 90 countries.Network Systems unit generated 57% of revenue.Market leader in US for switching systems.Flagship product was 5ESS速 Switch.
Large-scale, software based digital switching platform.This switch was custom configured (unlimited configurations possible).Engineered-to-order product.5ESS速 Switch
Case Facts
Scenario Before 1996 RedesignAsian customers away from order processing and manufacturing activities.Parts produced in Asia shipped to US long lead times & high costs.
Changed US centric supply model to hub & spoke approach.Taiwan : hub of Asian supply chain.Orders placed with TaiwanCustom engineering & manufacturing of Asian orders done hereInfeeding to Asian JVs and technical support too.Asian JVs did final assembly & testing using materials from Taiwan if low volume.For higher volumes level of local production more.Sourcing from local suppliers quality control essential.Supply Chain Redesign in 1996
Discomfort of employees with changeFunctions in US reducedFear of losing control & jobsUneconomical to assemble Asian parts in US, so Lucent concentrated on parts that were proprietary or costly to obtain locally.Higher mark-ups applied to such partsJVs felt vulnerable to Lucents parts pricing & led to animosity among partners.Issues in 1996 Redesign
By 1998 all Asian orders processed in Taiwan.82% by value sourced within Asia.Changed to pull from push manufacturing.Throughput time decreased form over 5 weeks to 1 week.Margins improved by 10% 5ESS速 Switch had greatest cost advantage.By 2000, unprecedented growth in cellular & internet sectors.Component demand outstripped supplyMaterial shortagesScenario After 1996 Redesign
5ESS速 Switch efficient for voice networks.Current demand was for data networksContd

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Lucent Technologies

  • 1. Lucent TechnologiesGlobal Supply Chain ManagementBino JosephKishore Thomas JohnSaranya MVygha N K
  • 3. Growth of Lucent TechnologiesAfter becoming independent in 1996, operated in more than 90 countries.Network Systems unit generated 57% of revenue.Market leader in US for switching systems.Flagship product was 5ESS速 Switch.
  • 4. Large-scale, software based digital switching platform.This switch was custom configured (unlimited configurations possible).Engineered-to-order product.5ESS速 Switch
  • 6. Scenario Before 1996 RedesignAsian customers away from order processing and manufacturing activities.Parts produced in Asia shipped to US long lead times & high costs.
  • 7. Changed US centric supply model to hub & spoke approach.Taiwan : hub of Asian supply chain.Orders placed with TaiwanCustom engineering & manufacturing of Asian orders done hereInfeeding to Asian JVs and technical support too.Asian JVs did final assembly & testing using materials from Taiwan if low volume.For higher volumes level of local production more.Sourcing from local suppliers quality control essential.Supply Chain Redesign in 1996
  • 8. Discomfort of employees with changeFunctions in US reducedFear of losing control & jobsUneconomical to assemble Asian parts in US, so Lucent concentrated on parts that were proprietary or costly to obtain locally.Higher mark-ups applied to such partsJVs felt vulnerable to Lucents parts pricing & led to animosity among partners.Issues in 1996 Redesign
  • 9. By 1998 all Asian orders processed in Taiwan.82% by value sourced within Asia.Changed to pull from push manufacturing.Throughput time decreased form over 5 weeks to 1 week.Margins improved by 10% 5ESS速 Switch had greatest cost advantage.By 2000, unprecedented growth in cellular & internet sectors.Component demand outstripped supplyMaterial shortagesScenario After 1996 Redesign
  • 10. 5ESS速 Switch efficient for voice networks.Current demand was for data networksContd