[From iSource Business, April 2001] Lucent's Worldwide Services business, a $5 billion operation that includes some 40,000 employees in 67 countries, is the company's installation arm. (Lucent as a whole is a $34 billion company that employs about 125,000 globally.) When customers purchase products from one of Lucent's other divisions, Worldwide Services installs the goods. The division does several thousand installations per month globally, and each installation can involve hundreds, even thousands, of components.
Because every installation is unique, the challenge for Lucent is to ensure that all the right components get to the job site at the right moment. Traditionally, Lucent has gathered all the site materials (all the miscellaneous components required to install the primary piece of equipment) at one of its numerous warehouse facilities. Once everything had arrived at the warehouse, Lucent would schedule the installation and then ship the materials to the job site.
The trouble was, that process of holding the materials in inventory was costly and inefficient, according to Tim Vaio, until recently Worldwide Services' director of supply chain solutions. In our minds, the materials didn't have to be sitting in a warehouse ready to be shipped out to a job site, Vaio says. Instead, if Lucent knew where all the materials were in its supply chain, it could plan for the materials to arrive at a warehouse facility, more or less simultaneously and then schedule the installation in advance with that arrival date in mind, creating a just-in-time, virtual fulfillment network. The warehouses would become in effect merge- in-transit locations rather than storage areas, with the components sitting idle for short periods, perhaps 24 hours. Of course, accepting this process involved a certain leap of faith on Lucent's part, since the company would be scheduling installations before it had the materials in hand, which is counter to Lucent's traditional mode of operation.
Lucent's EDI-based procurement systems could not provide a full view of all the components in an order and where they were in the supply chain, let alone do it in real-time. In looking at solutions, Vaio says, We had to find something that would help us develop embedded, B2B collaborative relationships with key distributors, transportation and logistics providers, and manufacturing sources so that we could control how material flows into our warehouses.
Eventually, Lucent selected Optum in part because of the solution provider's past experience in the industry, and in part because Lucent felt that Optum best understood Lucent's vision for its supply chain.
Lucent started implementing Optum's TradeStream product in August 2000, starting with three pilots. Lucent expected to complete the pilots by early January 2001 and to roll the program out across its North American business by the end of September. Lucent was not immediately prepared to discuss its anticipated return on investment for the program, although Vaio says, We were very comfortable that it would be a positive payback in a very short period of time.
The company's suppliers two primary suppliers of site materials and about 40 smaller, regional suppliers, as well as a single logistics provider have cooperated with the initiative. They very much saw that what we were doing helped strengthen the alliances and partnerships between companies, Vaio says.
Vaio was so excited about the possibilities he saw in the enabled supply chain that he opted to pursue supply chain strategies at consulting firm Experio, a 20-year-old division of Hitachi. Of note, his title at Experio will be the same as when he was at Lucent.
See additional sidebars:
- "Where S3 Doesn't Apply Yet" Deere hedges its bets on e-procurement (Deere & Co.)
- "From S3 to S4" An Arkansas company pushes the envelope (Southern Marketing Affiliates)
Back to cover story: Leap of Faith