Cisco Systems - The Supply Chain Story

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. Consequently, Cisco saved more than $ 24 million in material costs and $ 51 million in labor costs annually.

CCO enabled Cisco's contract manufacturers to find out the exact position of demand and inventory at any given point of time. As a result, they could manage replenishment of inventory with ease. This resulted in a 45% reduction in inventory (Refer Figure II) and a doubling of the inventory turnover. Cisco slashed the inventory holding of its suppliers and manufacturers and brought it down from 13,000 units (approx) to 6,000 units within 3 months.

FIGURE II
INVENTORY LEVELS AT CISCO

Source: www.cisco.com

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Case Details

Case Code : ITSY001
Themes: EVA Financial concepts
Case Length : 5 Pages
Period : 1997-2001
Organization : L&T
Pub Date : 2002
Teaching Note : Available
Countries : India
Industry : Construction - Building Materials & Equipment, Financial Services

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