P1: C-166
Lairson WL040/Bidgoli-Vol III-Ch-32 July 11, 2003 11:52 Char Count= 0
CASESTUDIES 381company facing such a situation is Xilinx, which designs
high-end and customized semiconductors. The market
for application-specific semiconductors is highly variable
and the production process is technologically sophisti-
cated and difficult. Xilinx operates without fabrication fa-
cilities, using instead close partnerships with fabrication
foundries in Asia. The production process is split between
a push level and two different opportunities for produc-
tion based on pull. First, the fabrication of the chip is sep-
arated between an initial phase and a final phase, which
are carried out by different foundries. The final configura-
tion of the chip is delayed until actual demand is known,
which permits Xilinx to respond to shifts in customer
needs. Second the Internet is used for customized con-
figuration of products even after customers have received
shipment (Lee & Whang, 2001b). The field-programmable
logic devices made by Xilinx, and used in products like
communication satellites, need continual changes in con-
figuration. In normal circumstances this would require
frequent on-site service and replacement. However, Xil-
inx has developed the ability to use the Internet to modify
and upgrade these devices after they have been delivered
to customers, in effect extending the pull model to an after
delivery capability.
Another example of a firm making extensive use of
Internet-based communication and collaboration with its
suppliers is Adaptec (Hauseman, 2000; Lee & Whang,
2001b). The “fabless” semiconductor manufacturing busi-
ness model requires close connections with suppliers, a
significant challenge from both a cost and performance
perspective, especially given that the elements of the sup-
ply chain are dispersed around the globe. Adaptec uses
specialized communication software for the Internet to
link its customers to the design, production, assembly,
and packaging stages of the supply chain. The informa-
tion includes purchase orders, production forecasts, ship-
ment schedules, prototype specifications, and test results.
In a market based on rapid response to custom demand,
Adaptec has used this information system to cut in half its
cycle time for new product development. The relationship
with suppliers has helped to generate trust, which facili-
tates continuing investment in the technology needed to
make the information system work.CASE STUDIES
Nortel
A number of firms have adopted some or all of the oper-
ations of e-business in an extended, real-time enterprise.
Nortel is a good example of a firm that rearranged its busi-
ness model and supply chain using the Internet in order
to cope with rapidly changing markets (Fischer, 2001).
The anticipated growth of fiber-optic networks offered an
opportunity for Nortel, but its realization required much
more agility in its production and supply chain system.
Nortel sold off production facilities and partnered with its
component manufacturers. Because the product required
extensive customization, each customer is now assigned
to a dedicated, but virtual, supply chain. This means that
Nortel’s role is to work directly with each customer to
design and configure products, and communicate this in-
formation in real time to the Nortel supply chain part-ners. The people at Nortel who design systems also com-
municate with suppliers, an example of linking product
design and the supply chain by customizing each simul-
taneously. Design of products also includes suppliers in
early stages, made possible by the increased communi-
cation flows. The benefits include shorter time for sup-
pliers to develop bids, greater willingness by suppliers to
commit capacity to Nortel because of visibility into Nortel
customers’ end demand and Nortel’s strategy, better un-
derstanding of supply chain capabilities by Nortel and its
customers, and more informed decisions about trade-offs,
shifting the push–pull boundary to permit delayed config-
uration of products, and more rapid response to orders.
At the same time, however, inventory has not declined,
and Nortel is still not as agile as some of its competitors
in the fiber-optic market.
Two other firms that have come to define many of
the benchmarks for implementing an Internet-based inte-
grated supply chain strategy are Dell Computer and Cisco
Systems. These firms provide blueprints for how inte-
grated systems can be constructed, along with the benefits
and the perils of such systems. Each firm is an example of
a radical outsourcing strategy based on the construction
and integration of a global supply chain.Cisco Systems
Cisco’s products are quite complex and include the
hardware (large-scale routers, LAN switches, and WAN
switches), software, service, and integration capabilities
to implement an end-to-end network solution for an enter-
prise. The extraordinary growth and the rapid technolog-
ical changes of the networking market present significant
challenges for Cisco. In response, it has adopted an aggres-
sive strategy for developing new technology and knowl-
edge assets. In addition, Cisco created a remarkable net-
working system to link its customers, employees, and the
myriad collection of assemblers, suppliers, semiconduc-
tor manufacturers, logistics, and service providers who
make up the Cisco system. Cisco’s acquisitions and the
creation of an extended, real-time enterprise have made
possible rapid expansion to meet sales growth and tech-
nology changes.
A central feature of Cisco’s overall business strategy
was the creation of an integrated information system
from customer to supplier, and selection of strategic part-
ners and suppliers to populate its supply chain. Indeed,
Cisco is one of the best examples of the use of the In-
ternet to create a collaborative system designed to ben-
efit all members of the system. The main goal is the
performance of the supply chain, not merely obtaining
the lowest price from suppliers. Internet-defined proto-
cols are used for all communications across the system
and common applications throughout the company. This
permits high levels of interoperability of communication
capabilities, information systems, decision support sys-
tems, collaboration systems, employee access to informa-
tion, and rapid access to all information concerning a
customer.
The implementation of this system at Cisco began in
1993, and the most recent version is the e-Hub (Grosvenor
& Austin, 2001). This is a private e-marketplace that