Cisco Systems: The Supply Chain Story

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Case Details:

Case Code : ITSY001
Case Length : 08 Pages
Period : 1984-2002
Pub Date : 2002
Teaching Note : Available
Organization : Cisco Systems
Industry : Computer Networking
Countries : USA

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Please note:

This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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Excerpts

The CCO & ICS Initiatives

In order to address the above problems, Cisco revamped its supply chain management to reduce the long ordering cycles. The company launched Cisco Connection Online (CCO), which connected Cisco with all its suppliers and contract manufacturers online.

As a result, when a customer placed an order, it was instantly communicated to all its suppliers and manufacturers. In most cases, a third party logistics company shipped the product to the customer.

CCO ensured increased co-ordination and connectivity between supply partners, thus reducing the operating costs of all constituents.

Automated processes within the supply chain removed redundant steps and added efficiencies. For instance, changes in market demand were communicated automatically throughout the supply chain. This enabled the networked supply chain suppliers to respond appropriately. CCO reduced payment cycles for suppliers and eliminated paper based purchasing. As a result, suppliers agreed to charge lower product markups...

The Problem and the Remedy

Analysts felt that the flaws in Cisco's systems had contributed significantly to the breakdown. During the late 1990s, Cisco had become famous for 'being the hardware maker that did not make hardware.' Its products were manufactured only by contract manufacturers and the company shipped fully assembled machines directly from the factory to buyers.

This arrangement led to major troubles later on. According to analysts, Cisco's supply chain was structured like a pyramid, with the company at the central point...

Exhibits

Exhibit I: Cisco - Income Statements