IntroductionFounded in 1984 and headquartered in San Jose, California, Ciscois a technology conglomerate that specializes in the provision of networkingsolutions that connect people, computer networks, and computing devices. Thesenetworking solutions allow individuals and institutions to freely transfer oraccess information regardless of the distance, type of computer system they areusing and time differences that exist between them. Even though the companybegan as a developer and seller of network nodes, it has grown over time toincrease its product portfolio to over 300.
Moreover, the company today hostsmore than 85% of the world’s internet traffic on its systems (“Who is Cisco,”n.d.). “How Cisco Transformed Its Supply Chain,” (2014) ascribes this tremendousgrowth to numerous acquisitions that have been ongoing since its inception.Cisco has for the longest time deployed the configure-to-order(CTO) production model in its manufacturing endeavors. Under this approach,consumers forward their orders to Cisco specifying the requirements that theywould wish to see on a product. The company then builds the product inconformity with the buyer’s specifications. Productivity and supply chain underthis model are agile and only takes place at the reception of orders.
But sinceit began acquiring other companies, Cisco complicated its supply chain when itchose to allow some of the newly-acquired firms to continue using theirprocesses and supply chains rather than integrating them into its coreoperations even after the acquisition. A notable example was that of ScientificAtlanta in 2005. Unlike Cisco, Scientific Atlanta used the build-to-stock (BTS)production model whereby goods would be produced and held in inventory to meetthe demand in the marketas orders came in. Having Scientific Atlanta onboard meant using two different supply chains as CTO, and BTS production modelsrequired raw materials supplied at different times.Many acquisitions meant Cisco had to adopt different supplychains to suit the various production models of the acquired firms. By 2014,Cisco had more than 1000 suppliers and an incredible supply chain that involved4 BTS sites, more than 25,000 product IDs (PIDs), 16 manufacturing sites usingthe CTO model, and 8 strategic logistics center (“How Cisco Transformed ItsSupply Chain,” 2014). Additionally, the company had to make millions ofshipments every year.
The management realized that the supply chain wasrelatively long and complicated and wanted to simplify it and make it lesscostly. This paper examines the challenge that a long supply chain posed toCisco and the issues that arose out of the transformation. ChallengeCisco’s continued acquisition and failure to integrate thesupply chains of the acquired firms into its core operations eventually led itto the 11i version of Oracle e-Business Suite. The Oracle had over “2,500customizations, 30,000 custom data objects, 250 custom applications, and 19separate databases” (“How Cisco Transformed Its Supply Chain,” 2014).
Thisoverly tailored and complicated supply chain proved costly at a critical momentwhen the company wanted to enhance its agility and increase the scale ofoperation. The enterprise IT, on the one hand, could not respond hastily to thebusiness requirements of the supply chain, leading to delays in the productionprocess. The business, on the other hand, could not react speedily to thetransitions in the market, leading to opportunity loss. Cisco customers’experience consequently worsened, productivity wassubstantially hampered, and scalability was close to being brandedimpossibility. The supply chain definitely needed streamlining before thethought of increasing the business’s scale of operation could become feasible.
It was for this reason that the company’s Chief Information Officer (CIO)launched three strategic priorities in 2012. Conclusionand Recommendation Cisco’s decision to acquire other networking firms withoutintegrating their supply chains into its core operations proved to be costly ata time when it wanted to increase its agility and scalability. The many supplychains of the various acquired firms had significantly lowered the responsetime of IT and the business to the requirements and conditions in the market.
It became critical for the business to, first of all, optimize its supply chainbefore it could enhance its business scale and agility. In early 2012, thecompany’s CIO kick-started the supply chain transformation agenda by allocatingsufficient resources to three strategic priorities that entailed improvingcountry enablement, decommissioning the company’s San Jose data center andintegrating the Service Provider Video Group.Cisco’s supply chain optimization endeavors were fruitfulbecause as early as 2014, the company had already started feeling the positiveeffects of the transformation. San Jose’s data center was decommissioned fullyto a highly resilient Oracle R12 data center in Richardson, Texas.Decommissioning protected data availability and uptime if one center brokedown. The company moved all the supply chain processes to this center.
Also,BTS and business-to-business models were integrated into one supply chainmanagement system – a move that substantially reduced the complexity ofoperations and infrastructure. This streamlined supply chain significantlyshrunk the time of adding a new factory by three times from18 to 6 months. It also reduced the marketing time from 30 to 50% (“How CiscoTransformed Its Supply Chain,” 2014). Also, the new supply chain has made iteasy for Cisco to move into new and emerging world markets. Last but not least,it has made the acquisition process more rapid, meaning Cisco can now grow at afaster rate than it used to do in the previous years.
Even though Cisco has successfully managed to transform itssupply chain and enhance service delivery and customer experience, it is worthpointing out that there is still enough room for it to further improve itssupply chain by embracing the Internet of Things (IoT). Rather than depend onstep-by-step processes, this technology conglomerate can rely entirely on datato inform its production and inventory decisions. The IoT is advantageous overthe conventional supply chain optimization levers because it requires lessinvestment and costs and takes lesser time to bring results. The IoT willnotably transform Cisco’s inventory management.Tracing inventory is still likely to cause Cisco problemsespecially now that both BTS and CTO production models are in use. What appearsin records as far as stocking is concerned may fail to match with what isphysically available, and unless the discrepancy is noted and correctivemeasure taken promptly, Cisco will never produce the right quantities to matchthe demand in the market.
Since the IoT has sensory capabilities, it willalways provide accurate data regarding inventory figures, thereby informing thecompany’s production department. Also, the IoT will give exact numbers concerningthe demand for Cisco’s products in the market. The company can then compare this with the stock available and determine whether to manufacturemore or not. The company’s supply chain reaction to inventory changes will thusbe more real-time when the IoT is deployed than it is at the moment.Additionally, it will satisfy the customers more as products will be availablealways as and when they need them. Hence Cisco should consider integrating theIoT in its supply chain.