Cisco Systems, Inc.: Collaborating on New Product Introduction

1. What are the challenges faced by Cisco in introducing a major product like Viking? 1-1Time to market pressure There is only one year for Cisco to launch the Viking product to market with low cost. Otherwise, the market share might loss.

However, it is about 3 to 5 years for Cisco to launch a high-end product. To meet such tighten schedule, it’s imperative for Cisco team to perform a very collaborative operation and concurrent engineering in whole supply chain and NPI phase 1-2Cost pressure Bandwidth prices were constantly falling and customer expected continuous improvements in price-performance on their equipment. The competitor keeps intensive discount on price. Cisco had to implement most cost effective-supply chain at launch and product design. 1-3Technical complexity handling in contract manufacturing The product router contained about 300,000 components, about 30 times more than in a small business router.

How to successfully launch such a high complexity product in a low cost contract manufacturer like Foxconn requires Cisco monitor and cooperate with CM carefully. -4Continuous cost down pressure from emerging market Cisco needed to ensure that router would be attractive to service profiders worldwide.

Emerging markets were the fastest-growing part of Cisco’s business, which need lower cost. 2. In selecting Foxconn and involving it from the start (instead of doing a production launch in the US first before transferring production to China), what were the potential risks and values to Cisco? Potential risk: -Technical risk-Foxconn didn’t produce such complex product which may fail in fulfillment Cisco’s requirement in product quality and reliability. Foxconn has no experience on produce such complex product like Viking, which require Cisco spend lots of efforts, time and resource to develop with learning curve without guarantee on success.

-Foxconn failure in manufacturing qualified product to meet Cisco’s requirement will cause Cisco lose market share intensively, because the Viking is a very speed and cost sensitive product. Potential value: -Direct launch new product in Foxconn without transferring lead time from US which shorten the lead time for product to market. -Develop Foxcoon successfully can reduce the cost significantly from day one. This is big saving approach compare against transferring from US. Transferring approach initiate a high cost at beginning then work hard on cost reduction gradually which decrease Cisco competence on cost.

-Foxconn success in Viking production enables Cisco cost down in future high quality and high end product launch in Foxcoon with lower cost and shorten lead time. -Foxconn highly vertical integration gives lots of flexibility (fast response in schedule, capacity, synchronization, etc) in Cisco supply chain management. -Foxcoon’s strong bargain power in components and high economies of scale can support Cisco sustainable with lower cost. Foxconn will be developed from the beginning as one more the high-end products manufacturers, able to understand Cisco project management from inside the organization and become part in the portfolio of manufacturers making more flexible Cisco’s supply chain, because all their partners will be capable of manufacturing all Cisco’s products.

3. What should Cisco do to ensure successful development and launch of the Viking router? Cope with shorter lead time need highly collaboration internally and externally with partner like Foxconn. Internally, Cisco need handle cross functional teams and multiple sites work together with fine tuned work paces within limited timeline. Some IT platforms or tools like Cisco’s WebEx Web conferencing, TelePresence teleconference system, Cisco’s NPI Metrics are essential components to guarantee successful project management in Viking development and launch phases. Externally, a leak-proof linkage system assured technology links between Cisco and Foxcoon.

The Viking project status is transparence for both sides. The shared database like ERP enable engineers exchange information, knowledge and provide service like troubleshooting.

The accessible IT platforms supported multiple tasks and decision making proceeded without limitation on different locations and time zone. Train Foxconn in their new product introduction process; build an intercompany-multicultural team in charge to following up closely the project steps, interchange ideas and maximize the efficiency of manufacturing to reduce cost and comply lead times will be one of the main requirements to work aligned to their supplier to make a successful lunch. ——————————————END————————————

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