Altera Supply chain & Logisitics Management - Essay Example

However, considering the emerging realities, come 2001, Altera’s inventory model started exhibiting the essential flaws of a push based supply chain. Altera successively failed to react appropriately to unpredictably changing demand patterns (Cohen & Roussel 2004). Going by the precarious shelf life of Programmable Logic Devices (PLDs), its augmenting inventory started to get more vulnerable to the risk of being obsolete. Owing to the bullwhip effect, the inventory pile up further worsened.

A lack of coordination with the customers also deteriorated the services levels extended by Altera (Cohen & Roussel 2004). Hence, Altera was left with no other option but to change or perish. Thus the intended and expected benefits of a push based supply chain that is cost minimization and optimal resource allocation started to appear elusive in the light of a debilitating write down. One plausible option was that Altera could have resorted to a pure pull based supply chain to diminish the inventory levels.

However, this would not have been a pragmatic strategy owing to varied reasons. First, considering the long lead times from the fabrication to the customer would have practically obliterated the possibility of a viable pull based supply chain (Handfield & Nichols 1998). Going by the long life cycle of semiconductors, it is next to impossible to react fast to the incoming demand data and information. Secondly, even if, and it’s a big if in the technology sector, a pull based strategy would have been put in place, it would have negated the viability of achieving economies of scale, while manufacturing (Handfield & Nichols 1998).

So the appropriate supply chain strategy for Altera, going by the very nature of PLD manufacturing, would have been a hybrid of push and pull strategy. This is exactly what Altera opted for. Therefore, as expected the eventual new strategy chosen by Altera is Push-Pull supply chain. As per the fundamentals of this strategy, Altera decided to let the initial stages of the supply chain, right up to the manufacturing of die banks be push based, while the remaining part of supply chain that began with the confirmation of the order from the customers to be pull based.

Thus in the new strategy, the push-pull boundary rested at the testing, packaging and shipping of the PLDs. This in a way offered Altera the best of both worlds. While the push part of the strategy allowed it to minimize costs, affect optimal resource allocation and deal with long lead times, the pull part of the strategy allowed it to maximize the customers’ service levels and allow for apt responsiveness to demand alterations (Blanchard 2010). Realistically speaking, Altera’s new strategy could positively be expected to be a success, as it is the most appropriate supply strategy for the mix of demand uncertainty and the requisite economies of scale that PLDs entail.

Besides, Altera’s new strategy makes it feasible to base demand estimates on aggregate forecasts, thereby adding to its reliability and chances of success (Blanchard 2010). The already initiated digital supply chain integration with the customers will further consolidate this new strategy. Customers’ Response Altera’s customers, if well informed will certainly react