A demanding supply chain

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Simplicity is key for Lucent Technologies Inc., which claims it has one of the most advanced Internet supply chains ever created by a legacy company.

The Worldwide Services business of Lucent, which is responsible for installing about $22 billion worth of telecommunications equipment annually, has connected 30 of its largest suppliers to a special Internet network. The goal is to make sure all the software, hardware, cable, connectors, nuts, bolts and personnel arrive at a job site at the same time—and to save big money in the process.

Though the network sounds mundane, Lucent says it has the potential to right the company’s financial woes and put it back in the forefront of the network equipment provider arena along with Nortel Networks Corp. and Cisco Systems Inc.

"We’re doing direct b-to-b connectivity between buyers and suppliers," said Tim Vaio, director of supply chain solutions at Lucent’s Worldwide Services unit. "We anticipate productivity improvement for our workforce and savings in expedited freight for materials to be in the many millions of dollars."

Prior to building the Internet network, Lucent notified suppliers of needs through electronic data interchange, which added at least one day to the supply-line equation. Moreover, problems with a delivery might take even longer to spot with EDI, so Lucent crews might be left waiting at a job site.

One more reason the network is vital: Lucent can’t recognize revenue until a job is completed, so any time saved with a coordinated installation bolsters the bottom line.

Lucent’s network demonstrates a common misunderstanding about b-to-b Internet. Though visionaries often speak of the "reactive company," capable of spotting problems in a lightning flash and correcting them on the fly, established businesses face an uphill battle getting business partners involved. Sometimes, tackling a single, simple problem is the best route.

The search for a niche

Lucent needs a boost. As a network equipment provider, it sits in an industry at the center of the Internet revolution. Yet major competitors Nortel and Cisco have claimed leadership in optical networking, thought by many to be the future of business communications. Lucent announced an expected 20% decline in revenue for the quarter ended Dec. 31 and said it would lose 25 cents to 30 cents a share.

Trading below $15 a share, Lucent’s stock fell more than 80% over the past year. Lucent recently ousted CEO Richard A. McGinn and faces an image problem for the foreseeable future, experts said. In trumpeting its supply chain capabilities, Lucent is attempting to position itself favorably in the telecommunications arena. Yet some questioned whether the supply chain would have the necessary impact.

"It’s like the Battle of the Bulge in 1944," said Al Ries, a principal with the Roswell, Ga.-based marketing strategy firm Ries & Ries Inc. "You could fault the Axis strategy, but what else were they going to do? If you are losing the battle, you have to do something."

Frank Cicio Jr., senior VP-general manager for Optum Inc., which pro-vided its TradeStream supply chain collaboration software to Lucent, begs to differ. By focusing on an Internet system that emphasizes real-time execution of orders—instead of real-time planning or forecasting—Lucent is deploying exactly the right type of application at exactly the right time in the Internet’s development, Cicio said.

"The focus on an order while it is taken, and the fulfillment of the order; Lucent is attacking a problem that costs businesses hundreds of millions of dollars," Cicio said. "For all those CIOs and CEOs trying to figure out how to reduce costs, retain clients and reduce barriers to entry, this type of environment takes a swing at it."

Vaio said system’s advantage is that it has been applied to companies with computer infrastructure in place. "One of the advantages Cisco has had is that they’ve been able to design their processes as they’ve built their company," Vaio said. "We wanted to match or exceed our competitors."

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