Cisco 2t3w2

Cisco Systems, Inc.: Collaborating on New Product Introduction Supply Chain Strategy 2014

| Fall

Chiyul Song, 2014-4076 Christine Barrera, 20144282 Matthieu Lebigre, 20146471

I. Company Background

1984

2000

Len Bosack & Sandy Lerner invented the “multi-protocol” router “world’s most valuable company” $500 billion dollar market capitalization

2002-2008 Routers; 25% Advanced Technologies; 29% Switches; 45%

• • • • •

13.1% revenue increase annually

Fully global – operating in 120 countries with 61,535 employees and 40 business units “Overlapping circles” – organized both vertically and horizontally “Collaborative, cross functional organization” “Collaborative Leadership” “Collaborative Technologies” 2

II. Supply Chain and New Product Introduction Supply Chain •

• • • •

Globally networked and adaptive • Outsource all manufacturing and focus on product design and development • Partners have increased responsibility Reduction of contract manufacturers MX-Initiative • Major aspirational improvements rather than incremental changes Cisco Lean • “pull” – product is built only after customer ordered it Auto-test System • Real-time data of facilities from contract manufacturers

New Product Introduction Concept Commit Execute Commit

Phase 1: Strategy and Planning

Prototyping

Final Technical Readiness Review

Phase 2: Execution

Pilot Build

Orderability Review First Customer Shipment Time to Quality and Volume

Phase 3: Deployment

Post-Project Assessment 3

III. Viking Project Demand for product that can handle the demands of video, which used more bandwidth than other type of data

New Product Introduction

ASR 9000 Edge router platform for the next 10-15 years • • • • • • •

High speed High capacity Compact Footprint Power efficiency Low costs per connection Ability to scale up router’s capacity

Challenges 1. 2. 3. 4.

Accelerated Schedule Low Cost Pressure Handling of Technical Complexity by Contract Manufacturer New Product Introduction Expertise 4

Q1. What are the challenges and risks faced by technology companies in new product development? • • • • • • • •

Uniqueness • Product should have features that other existing products doesn’t have Technological Innovations • Risk of investing in a form of technology that might be obsolete soon Market Potential • Demand for this product should exist Time • Product should be introduced at a time when there is a need for this product. Competition • Awareness of similar products developed by competitors Production • How to make the product – prototyping/testing Pricing • Right pricing against competitor’s products Promotion • Determine the best promotion techniques for greater longevity in the market 5

Q2. What were the risks and benefits of using Chinese contract manufacturing from the start?

Cost Pressure • •

Chinese contract manufacturing

Demand for a fully advanced but cost-effective product Emerging markets were the fastest growing part of Cisco’s business

Risks • •

Unable to handle the router’s technical complexity Fall short on quality, reliability and ontime delivery

Benefits • • •

>> No room for error for carrier-class products

Low-cost Production Avoiding transition to another manufacturing site saves time, money and effort Long-term possibility of using China as manufacturing base.

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Q3. In selecting Foxconn and expanding its role in the supply chain, what were the potential risks and values to Cisco? Selecting Foxconn is a “high-risk high-reward” decision.

Strengths • • •

High-Level of Vertical Integration Deep experience in procuring components Extended supply chain concentrated in Asia

Weaknesses •

Lack of Experience • Might be unable to handle complexity • Just ed Level 3 Qualification

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Q3. In selecting Foxconn and expanding its role in the supply chain, what were the potential risks and values to Cisco?

Benefits •

Vertical Integration benefits • Flexible, responsive, efficient • Lower costs • Reduced inventory • Eliminate price markups • Easier logistics (save shipping time) • Ability to react more quickly to market demand shifts (shorter lead time) • Simpler information flow • Easier coordination

•

Flexibility in Cisco’s choice of contract manufacturers in the future

Risks •

Dependency on a single supplier • Miss out the chance to work with suppliers which might be more efficient • More devastating impact in case of natural disaster, catastrophe or poor performance

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Q4. What should Cisco do to mitigate these risks and ensure successful development and launch of the Viking router? Risk-Mitigating Measures • • • •

“design for manufacturability” • Engaging supply chain partners Early involvement of Foxconn in the development process • Cisco and Foxconn engineers collaboration Transferring of knowledge • Movement of prototype making closer to manufacturing site Production of more prototypes • Following strict schedule to produce more prototypes

Use of Technology • • • •

Cisco’s WebEx webconferencing and TelePresence Teleconferencing System NPI Metrics (web-based tool view of timelines and tasks) Utilization of different time zones • Meetings 3 times a day • “wiki” site Technology links • Logging in for testing and diagnostics

Effective Marketing • •

Pricing that would not disrupt 7600 router Unique Promotions (blog, videos, games, articles) 9

Thank you! 

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