Cisco is a networking and IT company based in the center of California’s Silicon Valley. They specialize in manufacturing and selling technological equipment for telecommunications, networking and many other technological services. In 2001, Cisco went from a leader in technology to inventory disaster.
Cisco Rises With Technology
The 1990s was a tipping point for technology as new technologies emerged. Businesses struggled to grow alongside quick-changing technological advancements. For instance, in the early 2000s, Cisco was on track to become the world’s first trillion-dollar company. Their annual growth was projected to be between 30 to 40 per cent!
From Technology to Inventory Disaster
Throughout the 1990’s Cisco was thriving with its virtual supply chain. The company’s process was highly reliable and had high customer satisfaction. Additionally, Cisco implemented global virtual manufacturing. This means Cisco had manufacturing plants around the world working with contract equipment manufacturers, allowing them to create a simpler business process.
Filled with success, Cisco was responding to high volume patterns of orders and accumulating a substantial amount of inventory. But by 2001, Cisco began to face barriers in their supply chain. Failures in their technology slowed a path in the chain.
Technological issues were not a problem for Cisco as they continued to push out product. This became their biggest mistake. The telecommunications industry faced a downturn and Cisco didn’t adjust its supply chain accordingly. Instead, they ignored the slowing demand and continued to produce high levels of product.
Cisco had a surplus of inventory and their once glowing management process fell short.
Results
The surplus of inventory was detrimental to Cisco. As a result, Cisco had to take a $2.2 billion write-down. Furthermore, the public criticized them for their practices. They also lost half of their stock value.
Lessons Learned
Cisco outsourced their manufacturing and because of their inability to look forward towards the upcoming trends in the industry, ended up with a costly lesson. It is important to understand your business processes and to maintain clear visibility in your supply chain process at all times.
