3. Growth of Lucent Technologies After 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® Switch.
4. Large-scale, software based digital switching platform. This switch was custom configured (unlimited configurations possible). Engineered-to-order product. 5ESS® Switch
6. Scenario Before 1996 Redesign Asian 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 Taiwan Custom engineering & manufacturing of Asian orders done here Infeeding 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 change Functions in US reduced Fear of losing control & jobs Uneconomical 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 parts JVs felt vulnerable to Lucent’s 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® Switch had greatest cost advantage. By 2000, unprecedented growth in cellular & internet sectors. Component demand outstripped supply Material shortages Scenario After 1996 Redesign
