Cisco Systems - the Supply Chain Story - Case Study Example

CISCO SYSTEMS Study the networked supply chain concept as implemented by Cisco. What are its strengths and weaknesses? Cisco is one of the leading companies that deals with computer networking components which boasts of a huge turn over. With reference to the assertion above, the size of the company, the demand it anticipates forms the basis for the invention of a specialized system which monitors the flow of inventory and finished products from the supplier to the manufacturer and the culmination of the process through the purchase of the products by the consumers. (Luthans, 2009) notes that the basis of Cisco’s business plan was based on the policy of outsourcing as the company sought services from different manufacturers and suppliers to meet the needs of the vast consumer base. In order to eliminate the loopholes associated with a broad supply chain, the company invested in different networking platforms linked up through the entire chain to ease communication through internet protocols (Wisner, 2004). The system is efficient and effective which is as a result of the role it plays in interlinking the gap between important players in the supply chain. The Cisco system as illustrated above is generally outsourced and the company relies on the swiftness of the system in complimenting individual services for customers to acquire their products fast. The system is also custom made to fit the needs of all customers in regard to their preferences, the company has also invested in increasing customer satisfaction by designing the network to fit the preferences of the customers. The importance of the concept is in relation to its ability to enable the company to alter commodities in regard to the customer preferences and also to avoid excessive inventory. The weakness of the system began from its shortcomings which disrupted the link between the supply chain stakeholders. The system was also susceptible to errors resulting from double entry for customers who requested products from more than one manufacturer. The system lacked in relation to its initial model which was based on the principle of growth, and due to the fact that the executives did not anticipate change in the growth pattern, the system failed initially. Additionally, the company did not have the resources to implement the system and as a result of these deficiencies, the network system performed dismally. 2. Analyze why Cisco landed in financial trouble in early 2001. Would you agree that Cisco’s problems were largely caused by inherent defects in the company’s systems? Or possibly was it just because they had failed to forecast a market down turn? Give reasons to justify your stand. Cisco’s problems began in early 2001, and (Shinal, 2000) states that the decline in sales and revenues was not anticipated. It would be appropriate to state that problems resulting from the system were the main causes of the unanticipated financial setbacks. The company is to blame for overwhelming the system due to the addition of different networking protocols meant to suit the change in the nature of the supply chain. Secondly the system lacked in terms of its application to the current changes in the nature of the adjustments in supply and demand. The model was initially set up on a preexisting rule of growth and the company ought to have implemented different alterations in the system to incorporate changes resulting from a large market, high demand, complex organizational processes and the change in the state of the supply chain. As illustrated earlier, the company had built the system on the assumption that assured demand was a component of the company’s structure. As a result of the assumption above, the company did not build the model used to anticipate changes in the demand pattern which affected the supply chain negatively. Additionally, the company had not implemented a suitable policy to ensure that the company would transition effectively in the event that the demand and the number of members of the supply chain increased rapidly. Due to the size of the company and the numerous orders it received from different consumers all over the world, the available systems were overwhelmed by the existing traffic. Secondly, the company had not built the appropriate infrastructure to improve communication between new manufacturers and suppliers and as a result there was a lapse in communication which increased the total number of inventory that suppliers availed to the manufacturers. Some lapses on the system also caused conflicts between suppliers and manufacturers as the payment system which catered for the delivered commodities was not efficient to the preferences of the suppliers which resulted to suppliers withholding manufacturing components. To sum up the failure of the system, problems which resulted to the overlapping of orders due to the subsequent customer orders which were mainly conducted to increase the rate at which orders were delivered, resulted to an increase in inventory. Other problems resulted from the company’s long term commitment with suppliers which increased the overall inventory factoring other factors resulting from poor communication. 3. Aside from the information systems problems referred to above, what other specific problems did you see in the case? Irrespective of the fact that Cisco was run on a networked platform, there are other vital issues ranging from projecting business changes and adopting the right model to favor proper business performance that should have been adopted. Poor planning and committing to long term strategies which did not factor changes in the supply chain also affected the company. To cushion itself against increased inventory, the company ought to have implemented a strategy meant to alter an existing status quo to accommodate changes in demand and supply. The company should have committed to short term contracts which were subjected to renewal over a given period of time. The model used failed to convince the overall supply-chain to invest on an international market which would guarantee independence from other extraneous factors (Lakenan, et, al; 2001). Cisco did not devise strategies meant to take control of the market by frustrating the products of their competitors through proper pricing approaches. As a result of the assertion above,the company succumbed to the effects of the market emanating from the activities of the competitors. Notably, in reference to the assertion above, the failure of Cisco was attributed to low demand thus leading to excess inventory which was later disposed resulting to losses. The inability of the company to control majority of the company’s operations also contributed to the failure of the business. Delegation of activities affected the company’s ability to control inventory due to priory implemented commitments. (McAfee, McFarlan & Wagonfeld, 2007) notes that some of the company’s delegated processes failed forcing the company to use its own engineers which increased the total expenses incurred from labor cost and other miscellaneous costs resulting to a long supply chain. References Lakenan, B., Boyd, D., and Frey, E. (2001). Why Cisco Fell: Outsourcing and Its Perils. Strategy + Business. 54-65 Luthans, Doh (2009). International Management: Culture, Strategy and Behavior, 7th ed. New York: McGraw Hill, 2009 McAfee, A., McFarlan, F. W., &Wagonfeld, A. B. (2007). Enterprise IT at Cisco (2004). Harvard Business School. Shinal, John. (2000). Cisco systems: A web profit prophet spread the word, BusinessWeek e-biz. Print Wisner, J. D., Leong, G. K., & Tan, K.-C. (2004). Principles of supply chain management: A balanced approach. Mason, OH: South-Western. Read More