Question

ICMR: IBS Center for Management Research. "Cisco Systems - The Supply Chain Story." Case Study and Management Resources. 2010. Web

Read the CMR: IBS Center for Management Research article, "Cisco Systems - The Supply Chain Story."

When finished, answer the following questions about the article: What are the strengths and weaknesses of Cisco’s supply chain? Analyze why Cisco landed in financial trouble in early 2001. Would you agree that Cisco’s problems were largely caused by inherent defects in the company’s systems? Or possibly was it just because they had failed to forecast a market downturn? Give reasons to justify your stand. Aside from the information systems problems referred to above, what other specific problems did you see in the case with the company's supply chain system and/or with Cisco’s overall business strategy? From content studied this term, identify three strategies or tools you would suggest that could have helped Cisco during the market downturn. Explain how the implementation of each strategy or tool would have aided Cisco's operations. Be sure to explain your answers thoroughly and support these explanations with evidence either from module readings/viewings or other alternate valid and reliable resources.

Answer 1

Cisco is an American MNC based in California. It specializes in manufacturing telecommunications and hardware requirements for new technologies.

The Cisco supply chain has the following strengths:

a. Cisco has a very powerful and strong network of suppliers which enables it to overcome any unseen circumstances in the supply chain management.

b. cisco has a vast distribution network which reaches a huge number of potential and existing customers.

c. Cisco has become an expert in entering new markets and conquering them. Part of the credit goes to the highly trained and skilled staff.

All these strengths of the Cisco supply chain help it in minimizing risks and diversifying tis revenue streams from a large number of the market.

Although Cisco is highly successful, it doesn't mean that it doesn't have any weakness. Here are some of the weaknesses of the Cisco supply chain:

a. Cisco performs poorly in forecasting demands for the products and therefore, ends up with a huge inventory for products which are not much in demand

b. The current assets ratio and liquidity ratio of the firm shows that it is inefficient at handling its liquid cash effectively and there is poor management of funds at hand

c. Although Cisco is super successful and is an expert in conquering newer markets, its success is limited to the products it already manufactures. Cisco has failed terribly in entering new products segments.

In the year 2001, Cisco saw a major blunder when the company saw its shares prices falling from $82 to $13.63. nearly 8000 staff were laid off and the company had inventory amounting to $2billion which were infamously written off when the sales were plunged by 30%.

The most important factor in all these was the inability of the company to forecast such a scenario. While all other IT companies, big and small, had started forecasting the economic downturn, Cisco was forecasting economy rising in the future.

Most of the competitors had cut back on their inventories while Cisco was mounting them forecasting higher demands. all these factors lead to the downfall of Cisco in the year 2001.

While Cisco blames the unstable economy has the culprit, it is quite clear that it was their faulty systems and projections which refused to see what was there in front of their eyes.

I believe that both the faulty systems at the cisco as well as their inability to see the recession looming were the reasons Cisco 2001 debacle. When the downturn and recession were quite clearly predicted by every company, the system at the Cisco showed data on the basis of which they accumulate the inventories to meet the demands which they believed would be growing. all the while they were losing precious customer base of smaller companies which were shutting off their business due to economic downfall.

Problems with Cisco overall business strategy

1. Litigations - Recently the company was under fire for invading taxes and interests which amounted to $2.5 in Brazil. When you are a company with your business spread over the globe, such unlawful activities create a wrong image in the markets and harms the brand.

2. Volatility - The Cisco has so far failed to understand the volatile markets it deals with. the technological hardware like switches and routers it manufactures all form a part of the industry which highly fluctuating and not consistent from one quarter to next quarter of the year.

3. Undermining the competition - Cisco has so far fault to understand the rising power of its competitors and has ignored them s far in its life. From Alcatel-Lucent to HP, there is a whole herd of the competitors for Cisco and it fails to them into account when it forecasts its growth and sales for the future. Understanding the competitors and their combined power is a must for any MNC to have a clear cut planning system which enables them to tackle the competition.

3 tools that could have avoided the downfall of Cisco in 2001

1. Shifting the focus from engineering to Economics - This may sound lame for a company which is successful in engineering innovations for decades but that's where it went wrong. cisco had to look beyond the manufacturing part of its business and should have focused on the economics section. The engineering part is doing great but it could have saved the company from disaster had it been adopted in reading and analyzing the economic data as well. there should have been greater emphasis on the production volumes and sales volumes and the fluctuation between them which was becoming bigger every day in the year 2001.

2. Understanding competiton - In the earlier days, Cisco had little to no comptetion adn it was the ultimate king of the markets. It totally failed to understand the threats from new and emerging companies like Alcatel-Lucent, HP and Jupiter networks. Understand these new entrants and how they were shaping up the market in the year 2001 could have helped them in forecasting the demands better.

3. Maturity in company culture - The Cisco before 2001 was still being run as small companies still trying to make its mark in the market. What the company failed to understand was that it was now a billion dollar company with tens of thousands of investors and shareholders who have a stake in the company. You can't have the responsibility of such a large organization and be laid back in forecasting something as simple as an economic recession.