Altera Case Study

The trend of forced write-offs of humongous inventories in the high tech industry during the turn of the 21st century pushed various firms to rethink their strategies towards supply chain. Supply chain in high tech industries is quiet complex because of its fickle growth, short product lifecycle and demands for mass customization. Keeping customers satisfied and costs down is a big challenge for high tech industries. Altera Corp., California-based chipmaker (Programmable Logic Devices - PLDs) recognized these challenges in-built in its industry hence it was forced to write-off their inventory stock totaling a mammoth $115 million dollars. Altera is a fabless chipmaker which outsources its chip wafers to Taiwan Semiconductor Manufacturing Corporation. …show more content…
Parts may not be available immediately. This would mean the customers of Altera have to plan with accuracy, the lead time to deliver to their customers. A complete transparency in terms of build plans and inventories and automatic ordering would translate to the customers being locked in with Altera as its main supplier for the PLD’s. The customers may lose on competitive sourcing strategies. The high tech market of semiconductor devices is highly volatile and forecasts are dependable only to a certain extent as technological breakthroughs would shift the demand in entirely new direction. Customers need to have flexibility in terms of owning inventories or writing- off orders during such market changes.
The supply chain of Altera before and after implementing the strategy is shown below:
Altera could revamp its inventory through little changes in its supply chain strategy. By moving the push-pull boundary upstream, the company could save millions of dollars. But the move was well though off, as the processes which were now part of the pull from the customers’ side involved a short lead time. This ensured Altera could still meet its customers’ demands at the earliest while being more efficient. After implementing successfully i2 technologies Altera made annual sale of $1.37 billion (Fusco, Kemp, Sanders & Vasquez,
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The company makes everything from printed circuit boards (PCBs) to cell phones for a variety of clients (incl. Cisco, Ericsson etc.) who are involved in manufacturing high tech electronic goods. With a $12 billion earned in revenues, the management enjoyed a rather envious place of comfort during the period of inventory corrections. However, they failed to act on the aggregate demand information at the turn of the century and their inventory tripled under a year from $470 million to $1.7

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