Reference no: EM131681721

Problem: BUSINESS CASE

Supply Chain Collaboration in the Cloud at Lenovo

Lenovo is the world's second-largest maker of PCs, and it nearly doubled its market share between 2009 and 2011. Huge sales growth and expansion via mergers and acquisitions (M&A) forced Lenovo to rethink its global supply chain strategies and operations. Key M&A in 2011 included German PC and consumer electronics company Medion, and a joint venture with NEC to form the leading PC business in Japan. Global Supply Chain Runs on Legacy Systems Following its purchase of IBM's Personal Computing Division for $1.75 billion in 2005, Lenovo faced numerous system integration challenges. Without its own IT infrastructure in place to support a worldwide business, Lenovo had to operate its new global supply chain on legacy systems. Outsourcing core systems was too expensive at the time. Because of their inflexibility, the legacy systems could not be scaled to handle the growth in operations-so operations were handled using manual-based processes.

Goal: Build a World-Class Global Supply Chain The challenge for Lenovo and its global supply chain organization was to design and build a worldwide IT platform to transition from legacy systems as fast as possible and with minimal business disruption. The new platform needed to be able to provide visibility, efficiency, and responsiveness to manage its growing business trading network. Lenovo's average product innovation cycle is six months, which magnifies the cost of supply chain errors. Supply chain operations had to be flexible and reliable to guarantee fast delivery of the latest products to customers. According to Jon Pershke, vice president of Global Supply Chain, "access to real-time, actionable information-plus the ability to collaborate with partners to resolve exceptions-are critical to achieving this goal." Key objectives of its overall strategy to build a world-class global supply chain were:

• Leverage cloud-based systems to reduce operating costs, improve IT flexibility, and deliver superior customer experience

• Reduce the cost and time to add new trading partners

• Enable a real-time, consolidated view of processes and operations, providing a "single version of the truth" for Lenovo and its partners

• Eliminate the need for manual intervention

• Enable collaboration for key supply chain processes, including order-to-cash and inventory management

• Converge physical and digital networks to cut costs and improve service levels. From Legacy Systems to the Cloud Lenovo partnered with E2open's consulting and deployment teams (.e2open.com) to design and build a cloud-based supply chain solution for seamless information sharing, process management, and collaboration. The E2open cloud solutions have added significant value to Lenovo's global supply chain operations in a number of key areas:

1. The any-to-any platform enabled the company and its partners to exchange data in any preferred format. This platform cut testing and infrastructure maintenance costs.

2. Streamlined procurement processes have improved automation and collaboration; and improved the confidentiality of pricing agreements.

3. The cloud solution has enabled the convergence of physical and digital supply chain networks providing greater security and reducing the risk of error or fraud. Lenovo's cloud-based supply chain and logistics solutions have improved operations and customer satisfaction at significantly lower cost. Questions

1. What major changes occurred at Lenovo between 2005 and 2011?

2. How did those changes impact Lenovo?

3. Explain Lenovo's goal for its supply chain.

4. In the transition from legacy to cloud, what were its two requirements?

5. Why is access to real-time, actionable information important?

6. How did the cloud solutions add value to Lenovo's global supply chain operations?