Lucent Supply Chain Case Study Term Paper

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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.

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Should they continue to drive internal breakthrough improvements or should they "harvest" their previous supply chain investments and direct their attention towards outsourcing for their future needs?

They should do both strategies, being selective of which areas need the internal breakthrough improvements, which earlier in this paper have been mentioned as supplier qualification, supplier quality, SRM strategies and strategic sourcing. In addition the further build-out of the distributed order management system using the hub-and-spoke model as the foundation is critical and could become a major global competitive advantage if replicated across multiple locations. From the "harvest" perspective, there needs to be a focus on outsourcing software development of the switch electronics to India for lower cost of development, yet more importantly, because many Indian firms now have greater and higher levels of programming expertise than Lucent potentially has inside. Lucent needs to "harvest" those areas that have run out of cost reduction potential, or alternatively, have been tapped out in terms of depth of expertise. Given these two factors and the fact that software that is necessary for making the SE55 Switch function is highly valuable, Lucent needs to consider outsourcing its development to India......

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