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SUPPLY CHAIN
MANAGEMENT IN LENOVO

INTRODUCTION                

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          Lenovo
is one of the leading pc manufacturers in the world and is the largest PC
manufacturer in China which is a major contributor in the field of electronics.
One of the major reasons for the company’s success in global PC industry is its
efficient usage of supply chain. Lenovo started the process of evaluation and
testing of supply chains in 2001. By 2002 the SCM system was successfully
implemented in all the production lines of the company. The system provided the
ability to gather consumer behaviour information , analyse it and use it to manage
the production process.

Lenovo received the Supply chain excellence
award in the year 20091
and has been ranked 24th in global supply chain rankings announced
by Gartner Inc in 20172.
Lenovo favours to use long term strategy rather than short term and prefers to
use outsourcing wherever possible so as to optimally utilize the resources.

HISTORY OF
LENOVO

          The
predecessor to Lenovo was ‘Legend holdings’ which was founded in the year 1984.
The following year the company ventured into PC distribution business. In the
year of 1990 the very first Legend Brand PC was launched into the Market. In
2001 Lenovo was started as a part of Legend holdings as the name legend was
being used by several companies worldwide and the company thus could not
register its brand in different countries . The name Lenovo was derived from “Le”
in Legend and the Latin word “novo” meaning new. After launching the new brands
the company advertised the brand with use of large media campaigns and
billboards3.

            In 2004
the company acquired the PC business from IBM Computers and thus stepped into
the PC manufacturing business globally. This acquision gave Lenovo the ability
to make use of IBM’s ThinkPad4brand
to its advantage.

Lenovo sold its Smartphone and tablet
division in 2008 for US$100,000,000 in order to focus on personal
computers and then paid US$200,000,000 to buy it back in November 2009. As
of 2009, the mobile division ranked third in terms of unit share in China’s
mobile handset market. Lenovo entered the Smartphone market in 2012 and quickly
became the largest vendor of Smartphone in Mainland China. On January
2014 Lenovo acquired the leading Smartphone brand Motorola by purchasing
Motorola Mobility from Google.

            Lenovo
provides the consumers with a wide range of products ranging from PCs like ThinkPad,
ThinkCentre, IdeaPad, Legion, high power computing solutions such as
ThinkServer, ThinkStation, IdeaCentre, Lenovo and Moto Smartphones and several
other electronic devices. The company also has launched a wide variety of
mobile apps which serve several different functions.

SUPPLY CHAIN
MANAGEMENT

          Supply
chain management is the process of strategic co-ordination of the supply chain
for the purpose of integrating supply and demand management. A typical supply
chain involved in a conventional manufacturing process is shown in the figure
below. Supply chain management involves planning and coordinating the various
steps in the below mentioned process thus increasing profits and optimise the
expenses.5

 

 

 

 

 

 

 

 

SUPPLY CHAIN
MANAGEMENT IN LENOVO

           Lenovo’s
global supply chain consistently drives customer focused innovation and
execution. Since June 2006,
in order to integrate Lenovo’s core values comprised of customer satisfaction,
innovation, operational excellence and trustworthiness into their supply chain,
the company became a member of the Electronic Industry Citizenship Coalition (EICC)6.

Following the EICC standards, Lenovo
created a new supply chain management style called a Hybrid Supply Chain
Strategy. Using this new style, Lenovo focused on achieving a balanced mix of
in-house and outsourced manufacturing. Supply chain management is done by
Lenovo by making use of three major objectives namely Innovation, Operational
Excellence and Customer Experience and different strategies are being
implemented to fulfil the objectives.

USAGE OF HYBRID
SUPPLY CHAIN

          Lenovo
makes use of a Hybrid supply chain to satisfy the customer requirements. Hybrid
supply chain process generally involves balanced use of both in-house
manufacturing process as well as outsourcing thus delivering a competitive advantage.
Thus hybrid strategy helps to optimise the manufacturing process via a trade
off between control and cost structure. Lenovo has 7 in house plants and 3
joint venture plants all over the world. In addition Lenovo products are also
manufactured in several outsourced sites across the world.

In India Lenovo products are being
manufactured in two major sites Chennai and Pondicherry. The Pondicherry plant
is a plant which is entirely owned and controlled by the company and
manufactures personal computers. On the other hand the plant in Chennai is owned
and operated by Singapore-based contract manufacturer Flextronics7. Lenovo
entered into a contract with the company in the year 2015 to start
manufacturing both Moto and Lenovo Smartphone.

 

INTEGRATION OF LEAN
SIX SIGMA

          Lenovo
hired Global Lean Six Sigma Executive, Master Black Belt & Executive
Development Sensei David Olski in 2006 to train its employees all over the
world with Lean Six Sigma8 practices.
Lean Six Sigma provides Lenovo employees around the world with a common set of
tools and methodologies along with a shared language for examining and solving
problems. This helped the employees of the company all over the world to have a
common ground by providing them with common sets of tools, terminologies and
methods for examining and solving problems.  As all Lenovo employees complete Lean Six Sigma
Awareness training, and many achieve different Lean Six Sigma Belt levels, the
continuous improvement approach allowed Lenovo to achieve high-performance
culture9.

 

END-TO-END
SUPPLY CHAIN MANAGEMENT

          Lenovo’s
end to end supply chain management enables the company to ideally manage the
entire supply chain as a single unit. Lenovo has predictive models in planning
and forecasting around run rates, seasonality, key deals with clients, etc.
that are focused on protecting supply and product transitions. There is a lot
of flexibility in production planning. Lenovo can build a product in multiple
locations, and can balance supply even though some sites are further away and
transportation can flex. Lenovo uses Steelwedge software10 to
bring all inventory visibility together. It is fed by SAP but comes together in
an interface. This goes beyond inventory visibility and identifies potential
impacts on inventory based on world events and provides a powerful tool for
future planning.11

            This
control over the entire supply chain assists the company with overcoming
unprecedented and disruptive events such as natural disasters.

 

TRANSFORMATION
OF PROCUREMENT PROCESS

Lenovo has managed to revolutionise the
procurement process with help of of SAP Ariba12
and Deloitte13. Being a manufacturing
company operations of Lenovo involved a lot of raw material procurement
processes. This procurement process involved not only cost management but also
required a lot of risk assessment due to the quality of raw materials in
question. Thus Lenovo reached out to SAP Ariba to provide digital solution for
its global operations with support from Deloitte to provide a collaborative digital
process of procurement. This collaboration led to formation of a more
transparent negotiation process which resulted in innovation and increase in
efficiency.14

 

 

1 http://news.lenovo.com/news-releases/lenovo-awarded-2009-supply-chain-excellence.htm

2 https://www.gartner.com/newsroom/id/3728919

3 http://www.legendholdings.com.cn/en/About/OurHistory.aspx

4 ThinkPad
is a family of notebook computers introduced by IBM in the year 1992.They are
known for having superior keyboard quality

5 William
J. Stevenson,   Operations Management, Eleventh Edition, McGraw-Hill

6
The
Electronic Industry Citizenship Coalition (EICC) is a coalition of
companies working together to create a comprehensive set of tools and methods
that support credible implementation of the EICC Code of
Conduct throughout the Information and Communications Technology (ICT) supply
chain

7 http://www.livemint.com/Companies/3OQBWXtDNp6Zqj65YTnSaJ/Lenovo-follows-Xiaomi-as-Chinese-smartphone-makers-rush-to-I.html

8
Lean Six Sigma is a combination of two powerful process improvement
methods: Lean and Six Sigma. In this method Lean accelerates
Six Sigma, delivering greater results than what would typically be achieved by
Lean or Six Sigma individually.

9
http://social.lenovo.com/en/blog/lean-six-sigma

10 Steelwedge Software
is an integrated business planning solution provider for sales, finance,
operations and executive teams

11https://scm.ncsu.edu/blog/2016/12/14/lenovo-goes-about-creating-the-end-to-end-transparent-supply-chain/

12  SAP Ariba
platform provides sellers with the ability to manage catalogues, bids,
purchases and invoices and it provides buyers with the ability to search for
suppliers, negotiate savings, procure goods and services and track spendings.

13 Deloitte Touche
Tohmatsu Limited, commonly referred to as Deloitte, is a UK-incorporated
multinational professional services network

14 https://www.ariba.com/about/news-and-press/lenovo-transforms-procurement-with-sap-ariba-and-deloitte

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