Global Logistics and Supply Chain Strategies - August 2008 - (Page 13) GL&SCS EXCLUSIVE impact of this all the way through our circuit pack assembly and down to the components needed for that assembly. So we could quickly understand how to respond to that change in demand. Before, it would have been a very big exercise to decide if we could accept that change in plan or not. Everyone would have been scrambling. This also really helped us in terms of promising delivery or making commitments to our customers. We were able to promise based on the actual situation, both in terms of material coming in from our contract manufacturers and our own materials. We would regularly update our projected lead times as we got new information so when a sales team would promise delivery to a customer they Lucent started its 2000 project to merge the supply chains of its various business units, the company had about $6bn in inventory. We reduced that to $1bn over three to four years. The Kinaxis software was certainly a part of that, but process and people also played an important role in achieving that result. With the combined Alcatel-Lucent we face these same challenges. Inventories are high, so we are doing this same type of modeling as quickly as we can across the entire company. Q: Where does the combined company come down on the issue of outsourcing? Ballakur: Lucent was much more heavily outsourced than Alcatel. At the time of the merger, it had only about five or six facilities that it owned, which were called integration centers and were mainly used for final assembly and testing. Most of the content was outsourced, probably 80 percent vs. 20 percent that was done in-house. Alcatel, on the other hand, was divided about 50/50 between outsourced and in-house suppliers. Since the merger, Alcatel-Lucent is doing a combination of both. I think Lucent had realized that having solesource EMS suppliers was not necessarily such a good idea and it had learned some Q: You are using Kinaxis for this? Ballakur: Yes. When the merger happened, we looked at various ‘what if’ solutions that were in use at each com- There was no way to quickly determine if we could accept a new demand plan. We needed a solution to address this problem, so about that point we evaluated several offerings for solutions that offered 'what-if' planning. could do that with a lot more assurance, which gave them a lot more credibility with their customers. pany and selected RapidResponse as the key engine for all of Alcatel-Lucent. Around April or May of last year—about four months into the merger—we started modeling the joint company’s in-house and outsourced operations. By the end of this year we will have modeled 90 percent of the Alcatel-Lucent internal and external facilities, so we can provide a capability picture for all of the company. Kinaxis Rapid Response is very flexible and easy to use as well as being very powerful. Many people from the Alcatel side were surprised at its capabilities. They had never seen a solution like this work company-wide. The key thing here, and this is true whenever you are implementing solutions, is that it is very critical to capture the benefits of what you are doing. With a tool like RapidResponse, which provides this daily feedback and support, the benefits are pretty easily seen. So it is not like a big two- or three-year project where you have to wait to see what happens before you can quantify the benefits. Return is very rapid from that perspective. lessons from perhaps having relied too heavily on some EMS partners. So it was ready to move to more of a hybrid or dual sourcing arrangement and Alcatel was ready to move to a little more outsourcing, so we met somewhere in the middle. The combined company is using a portion of the former Alcatel’s manufacturing capacity, but there was extra capacity and duplication in some areas. As a result, some manufacturing capacity, I would say about 20 percent, is being divested. That has been happening for the last year and will continue to go on for another year or so. Of course, there was also downsizing in terms of the workforce. Lucent was at about 35,000 employees at the time of the merger and Alcatel was at about 55,000. The combined company has around 80,000 employees worldwide. To access this article online, visit The Digital Edition at www.SupplyChainBrain.com. Q: Since you were one of Kinaxis’s early large customers, did you actually work together to develop solutions? Ballakur: Absolutely. We worked with Kinaxis to build a solution for Lucent to manage inventory across multiple sites. That later became the Kinaxis Glass Pipeline solution, but it was first developed for Lucent. Lucent also engaged Kinaxis to come up with a solution called Supply Chain Planner. This was a global supply planning solution that enabled us to model our entire supply network. It would take our demand plan and convert it from monthly to weekly buckets. Then it would look at all the constraints at each of Lucent’s factories and the outsourced facilities and come up with a plan. We also used it to model the allocation of finished goods inventory. We were able to make significant reductions in inventory. When the former Resource Link Kinaxis, www.kinaxis.com www.SupplyChainBrain.com GLOBAL LOGISTICS & SUPPLY CHAIN STRATEGIES 13 http://www.SupplyChainBrain.com http://www.kinaxis.com http://www.SupplyChainBrain.com
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