Lenovo\'s Layoff Plan The following article appeared in the Supply Management ma
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Lenovo's Layoff Plan
The following article appeared in the Supply Management magazine (Links to an external site.) website.
Lenovo's Layoff Plan Shows Supply Chain Management Critical To Electronics Manufacturing
BEIJING, March 20 /Xinhua-PRNewswire/ – Analysys International, a leading Internet based provider of business information about technology, media and telecom (TMT) industries in China, says supply chain management has become critical to the electronics manufacturing industry.
Chinese computer maker Lenovo Group Ltd. announced it will lay off about 1,000 employees, or five percent of its global workforce, and integrate its global sales and back-office support as part of a restructuring plan, which will cost it $100 million in charges but save it about $250 million annually from next year. Other components of the plan include moving the global supply chain closer to the manufacturing and suppliers, and moving its corporate headquarters from Purchase, N.Y., to Raleigh, N.C. Lenovo also said its desktop computer operations would be centralized in China.
Quick Analysis
Profit in the electronics manufacturing industry is becoming more marginal. Lenovo faces challenges to the costs and flexibility of its global supply chain. Cost and service quality determines the future development of Lenovo. Analysys International says centralizing desktop computer operations in China is, on the one hand, helpful for reducing manufacturing costs; on the other hand, it is helpful to improve the entire supply chain performance.
China is one the fastest growing PC markets in the world. Lenovo's integrating supply chain in China will have great benefits in the near future. However, in a long-term point of view, Lenovo has to take into consideration improving its global coordinated manufacturing capability and utilizing its global supply chain resources to expand its PC market share in the world.
Centralization of manufacturing reduces manufacturing costs, however, it is very likely the distribution channel and terminal retail sales costs will rise sharply. Lenovo must pay attention to its global cost control to avoid the counteraction.
As China's economy further opens up, Chinese electronics manufacturing industry faces pressure from international players both at home and abroad. The market has higher demand for cost control and supply chain flexibility. The electronics manufacturing industry should strengthen the supply chain management.
Analysys International's Position
In a short-term point of view, Lenovo's layoff plan reduces costs and improves operation efficiency, which shows Lenovo's consolidation of IBM PC unit has entered the practical stage. In a long-term point of view, this adjustment brings new challenges to Lenovo's global manufacturing capability of desktop PC business.
Analysys International will hold the First China Supply Chain Management Summit Forum in Beijing on May 17th and 18th, 2006. The forum will focus on topics of reducing total costs, improving supply chain flexibility, and global supply chain operation.
About Analysys International
Analysys International is the leading Internet based provider of business information about technology, media and telecom (TMT) industries in China with the mission to help their clients make better business decisions. They provide data, information and advice to 50,000 clients worldwide, representing 1,500 distinct organizations; they also deliver over 150 consulting engagements a year, and hold more than 20 events that draw in over 8,000 attendees. Their clients include executives from companies like technology vendors, vertical information technology users, as well as professionals from professional service companies, the investment community and government agencies. For more information, please visit the website at http://english.analysys.com.cn (Links to an external site.).
*******When you're finished reading the mini-lecture, put yourself in the position of Lenovo's purchasing department and then assess the market challenges of doing business with suppliers from all over the world.*******
Explanation / Answer
Market challenges of doing business with suppliers from all over the world :
1) Logistics
Challenges with the logistics play a major role for doing business with the suppliers from all over the world. Supply chain of the suppliers and the supply chain of the Lenovo should be very efficient. Failing to comply the needs of the supply chain can incur huge costs.
2) Language / communication
Suppliers should be in a position to speak the basic communication language that is English. Most of the suppliers while doing international business try to speak, but some of them will not be in a position to communicate. This may cause communication problems while dealing with the suppliers.
3) Time zone difference
The difference in the time zones can cause communication gaps. Working time of one country may not match with the other country due to different time zones. In that case, some of the important aspects of the business relationships may be affected. For example, the time zone of China, is different from the time zone of US. The working time of China is the closing time for US.
4) Weather extremities
Extreme weathers is an other challenge. Extreme weather conditions or natural calamities can be a challenge. For example doing business with suppliers in the country like Japan can be a challenge. Because, Japan is prone to unexpected natural disasters. Weather extremities can cause severe damages to the supply chain.
5) Political unrest
Sudden and unexpected political unrest in a country due to some local or country's political issues can delay the shipping of the goods. This could create severe delay charges on the goods. Sometimes, political issues may result in banning of the material too.
6) Packaging
Packaging plays an equally major role in the international business. Any lay back in the packaging may cause severe damages to the material.
7) Government laws/regulations
Government regulations of one country can sometimes pose challenge to the international business. Any changes in the government laws and regulations, can be a threat to the international business.
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