Aletra Company experienced a downfall of revenue of approximately 25% unexpectedly when customers declined their products. In 2001, revenues from some of its customers like Q2 went down by 25%. In 2000, it was worse; the revenue fell at 37%. Altera had to do something to solve this dilemma. The company decided to undertake an inventory that would cost them $ 115 million (The great inventory correction, 2001, p.204). The main aim of the invention was to protect Altera from losing more revenues. As renowned designers of programmable Logic Devices, Altera decided to modify the strategy of production and distribution. They would only produce the chips on die rather than manufacturing, testing packaging and waiting for shipping. Altera would build its mainstream production on stock. There would be no packing or testing unless a customer makes an order then packaging testing and shipping will be done eventually. This idea is to produce quality products, add value to them and win the hearts of the customers (The great inventory correction, 2001, p.204).
The new strategy may not be so successful. One party will gain more while the other loses. Reason being that, chips may take some time to be produced that is between productions three to seven weeks. Its production will be determined on how complex the product is the amount the customer is willing to give (The great inventory correction, 2001, p.204). However, in real life situations, errors do occur and if a time limit is given in production, then if anything goes wrong then the customer will suffer more. Even though, the manufacturer will get the money, he will lose the trust of the customer. The advantage of this strategy is that, Altera may get more information on how to improve on their visibility. In the end, they will know where they are wrong and improve on their mistakes.
Customers will automatically benefit from this strategy. They will get quality products, as the Altera will only work on order terms. For example, through the joint venture of Altera, Nortel and Motorala, a new development would erupt. The use of the software that enhances supply chain management will reduce the number of shrink cycle around water fabrication . In addition, the weekly planning cycle will be reduced to 1 from 10 days (The great inventory correction, 2001, p.205). The long term planning will be reduced from four weeks to one week. Meaning 85% of the production will be automatically scheduled by the system. This ideology will benefit the customers, as they will do their orders electronically and via the United Micro electric Corps database. The advantage is that the MYUMCs automatically takes an order and gives the customer the best manufacturing slot (The great inventory correction, 2001, p.205). The customers will eventually get their orders on time, as the products will be made as per the schedules given. However, customers who will need the chips urgently may be disappointed if there are many orders done before them.
Flextronics is one of the largest electronic manufacturing services company ever known. It has managed to get revenues of about $12billion. The company deals with the production of printed circuit board and luxurious cell phones for its clients. In 2000, Flextronics inventories increases to $ 1.7 billion from $ 470 million by the end of the year. The company registered a boom after it decided to consider meeting the demands of its customers effectively. The company decided to obtain a clear understanding on the products their customers demanded more. Flextronics also considered the life cycle of products through getting feedback from the customer consumers. In order for the company to leverage, this information, Flextronics is addressing a supplier managed inventory environment, by bringing materials used by Flextronics close to the factory.
IBM depends on pull production strategy to make the company running. It only orders what it needs at a particular time and when the stock is almost done, it does another order. In order to keep its suppliers and make the pull strategy effective, IBM decided to reduce the number of its suppliers. IBM does the purchase of its orders electronically via the internet (The great inventory correction, 2001, p.207). The specific suppliers are allowed to know the amount of inventory IBM has. IBM does this using ASAP system that automatically informs the supplier if any new orders are required by IBM. The purchase is also done by a marketing expert who is assigned on a specific commodity that the company may need. Using electronic purchase, transaction is always first and effective. This strategy benefits both the distributor and consumer. In the end, the suppliers will, always have an estimate idea on when IBM might need more supplies and prepares the order in advance (The great inventory correction, 2001, p.207).
Apart from the method used by IBM, other companies can undertake successful strategies that will include aspects of push and pull promotional methods. Raising brand awareness by the supplier and undertaking valuable word of mouth referrals can also improve on inventory control. The only thing a supplier needs to do is win the heart of the consumer. If the products designed, meet the expectations of the consumer, then the push and pull strategy will be achievable.
Reference.
The great inventory correction. (2001). Retrieved October 17, 2012 from
http://leeds-faculty.colorado.edu/Lawrence/OM/Lectures/Flexibility/CFO%20-%20The%20Great%20Inventory%20Correction.pdf.
