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Supply Chain Management of Cisco

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Supply Chain Management of Cisco - December 29th, 2010

Cisco Systems, Inc. (NASDAQ: CSCO, SEHK: 4333) is an American-based multinational corporation that designs and sells consumer electronics, networking and communications technology and services. Headquartered in San Jose, California, Cisco has more than 65,000 employees and annual revenue of US$40.0 billion as of 2010. The stock was added to the Dow Jones Industrial Average on June 8, 2009, and is also included in the S&P 500 Index the Russell 1000 Index, NASDAQ100 Index and the Russell 1000 Growth Stock Index.[4] Cisco is one of the world's biggest technology corporations.

Len Bosack and Sandy Lerner, a married couple who worked as computer operations staff members at Stanford University, later joined by Richard Troiano, founded Cisco Systems in 1984. Lerner moved on to direct computer services at Schlumberger, moving full time to Cisco in 1987. The name "Cisco" was derived from the city name, San Francisco, which is why the company's engineers insisted on using the lower case "cisco" in the early days. For Cisco's first product, Bosack adapted multiple-protocol router software originally written some years before by William Yeager, another Stanford employee who later joined Sun Microsystems. The company's first CEO was Bill Graves, who held the position from 1987 to 1988.[5] In 1988, John Morgridge was appointed CEO, and succeeded in 1995 by John Chambers.

While Cisco was not the first company to develop and sell a router,[6] it was one of the first to sell commercially successful routers supporting multiple network protocols.[7] As the Internet Protocol (IP) became widely adopted, the importance of multi-protocol routing declined. Today, Cisco's largest routers are primarily used to deliver IP packets.

In 1990, the company was listed on the Nasdaq stock exchange. Lerner was fired; as a result Bosack quit after receiving $200 million. Most of those profits were given to charities and the two later divorced.

Cisco acquired a variety of companies to bring in products and talent into the company. Several acquisitions, such as Stratacom, were the biggest deals in the industry when they occurred. During the Internet boom in 1999, the company acquired Cerent Corporation, a start-up company located in Petaluma, California, for about US$7 billion. It was the most expensive acquisition made by Cisco to date, and only the acquisition of Scientific-Atlanta has been larger. Several acquired companies have grown into $1Bn+ business units for Cisco, including LAN switching, Enterprise Voice over Internet Protocol (VOIP), and home networking. Cisco acquired Linksys in 2003.

Social and environmental standards vary from country to country and company to company. In developed countries, workers' rights, health, safety, and environmental protection are usually enforced by law. In some developing countries, social and environmental standards may differ with regulations absent or not effectively enforced.

The global supply chain for electronic components means many parts are manufactured in developing countries. As a result, issues surrounding employment and environmental standards have arisen in the electronics supply chain.
Working in Partnership

Cisco, working in partnership with other companies in the IT sector, has begun the process of addressing both human rights and environmental issues as they relate to the high-tech industry. We believe that by working together, our collaborative efforts can significantly improve social and environmental practices worldwide.

In 2004, Cisco announced its endorsement of the Electronics Industry Code of Conduct (EICC), which was developed as a voluntary measure to establish and promote a unified standard for social and environmental practices across the electronic industry's supply chain. It covers a range of social responsibility issues, including labor and employment practices, health and safety, ethics, the protection of the environment, and management expectations to ensure code conformity.
Implementation

The EICC Implementation Group helps facilitate adoption. The mission of the Implementation Group is to focus efforts on positive social and environmental change in our supply base through a shared approach to code implementation based on the EICC. This approach will provide consistent code expectations throughout the IT supply chain, reduce duplication of effort, and improve productivity. The group is facilitated by Business for Social Responsibility (BSR), a nonprofit business organization.

As a member of this EICC Implementation Group and as well as the Global eSustainability initiative facilitated by the United Nations Environmental Program (UNEP), Cisco is working with suppliers, partners, and other leading IT companies to develop common approaches to supplier risk assessment, supplier surveys, supplier auditing, and common audit reporting methods. Cisco's continued support of this industry effort reflects our ongoing corporate commitment to promoting the improvement of working conditions and the environment throughout our extended supply chain.

Increasing customer demands, competition, and rising development costs are changing the face of business. To stay competitive, companies must transform their supply chains from cost-based, back-office functions to flexible operations designed to effectively address today's challenges. Product life-cycle management provides the framework for this enterprisewide optimization.

The Internet is proving to be a most effective tool in transforming supply chains across all industries. Suppliers, distributors, manufacturers, and resellers now work together more closely and effectively than ever as a single, virtual organization. As a result, companies change both how they conduct business and how quickly customers receive products from suppliers.

By implementing networked and integrated supply-chain management processes/systems, companies can reduce their inventory and associated costs, make better real-time forecasting decisions, speed the delivery of products and services, streamline the payment cycle, increase revenues, and improve service. Today's technology-driven supply chain also enables customers to manage their own buying experiences and increases coordination and connectivity among supply partners.


The electronics manufacturing supply chain extends worldwide and into jurisdictions where breadth, depth, and enforcement of social and environmental regulations vary. We share responsibility with our suppliers to raise social and environmental standards. We work collaboratively with suppliers toward the goals listed in the Cisco Supplier Code of Conduct.

As participants in Cisco's supply chain, suppliers commit to:

* Recognize and uphold the human rights of workers, and to treat them with dignity and respect as understood by the international community
* Recognize that the quality of products and services, consistency of production, and workers' morale are enhanced by a safe and healthy work environment
* Recognize that environmental responsibility for safeguarding the health and safety of the public is integral to producing world-class products
* Adopt a system to manage adherence to this code
* Meet social responsibilities and uphold the highest standards of ethics while achieving success in the marketplace

Performance Reviews

Developing and managing a world-class supply chain requires integration of components, including fabrication services, component supply, design and testing services, and logistics and transportation. It also requires building strong, collaborative relationships with suppliers to assure manufacturing quality and integrity.

To achieve this, we conduct routine performance reviews with our suppliers to proactively identify areas for continual improvement. These reviews are incorporated into our tracking and analysis of our suppliers' environmental, technical, health and safety, and labor metrics (also known as the "Cisco Scorecard") and identify areas where the supplier may need to improve in order to comply with our code of conduct.
Future Plans

To aid ongoing development of the code of conduct, Cisco is committed to collaborating with our EICC colleagues to assure a stronger supply chain for the industry. We intend to do this through development of common standards, tools, and processes for adoption across the electronics industry.

Cisco is currently launching, in a staged approach, a manufacturing-focused product compliance review to be implemented throughout its supply chain. The focus area for FY2007 is product environmental compliance
Cisco has one of the most complex supply chains in the IT industry, with more than 600 suppliers and some 50,000 purchased parts supporting almost 200 product families. Our partners provide electronic manufacturing, test, design, transportation, logistics, and other services. With this breadth of supply and critical fabrication partners, managing supplier relationships is a complex, demanding, and ongoing process.
Supply Chain Management

Cisco believes that a world-class supply chain allows us to offer our customers world-class products and services. We select suppliers whose standards align with our values, particularly with regard to business integrity. And we conduct quarterly business reviews of our suppliers’ business activities, financial stability, engineering practices, and quality procedures.

When necessary, we request third-party audits of a supplier’s business operations to assess their adherence to each point of our Supplier Code of Conduct. Despite a business model that is heavy on outsourcing, Cisco’s supply chain management structure gives us significant control over our supply chain, helping to ensure that deliverables meet our cost, quality, and delivery expectations.
Social Responsibility

Since 2004 Cisco has taken a leadership role in supply chain social responsibility. We support the Electronics Industry Code of Conduct (EICC), the Global e-Sustainability Initiative, and other key industry coalitions. As a member of the EICC steering committee, we have been able to help guide the expansion and management of this groundbreaking group, and we have actively contributed to the development of standardized methodologies, tools, and processes for assessing and monitoring supply chain social responsibility across our industry sector.

Cisco’s involvement in these supply chain initiatives reflects our commitment to working within the industry to improve the environmental, labor, health, and safety performance of our common supply base. Cisco’s Supplier Code of Conduct reflects the common rules developed through the EICC, but also includes additional requirements specific to our business and operating model.
Supplier Code of Conduct

The Cisco Supplier Code of Conduct forms the basis for our supply chain social responsibility program. All contracts with suppliers make reference to the Supplier Code of Conduct, and suppliers agree to the tenets of the Code before working with us.

Cisco’s supplier assessment process evaluates supplier performance on Supplier Code of Conduct issues. Our assessment is consistent with the process developed collaboratively within the EICC. It consists of:

* Risk assessment of each supplier facility
* Review of the systems for those facilities that are identified as being most at risk
* A process for conducting third-party facility audits (where appropriate)
* Corrective action program

Progress and Future Plans

In 2007 our supplier assessment process started with our participation in the EICC Joint Pilot Audits. The pilot consisted of third-party audits of more than a dozen EICC member facilities in China, including both contract manufacturers and commodity suppliers. Using the EICC-designed tools and reporting format, the audits focused on the labor, environmental, health, safety, ethics, and management system aspects of the code of conduct. The results of these audits enable Cisco to identify potential opportunities for improvement and work with our suppliers to resolve any challenges.

Beyond our supplier assessment program, Cisco is also evaluating other aspects of supplier performance, including ozone-depleting chemical use, energy consumption, and waste disposal programs.

For FY08 Cisco plans to expand the scope of its supplier assessment process to include our first-tier supply base, as well as any key commodity suppliers that participate in Phase II of the EICC joint audits that will take place at the end of 2007. We plan to report metrics around this program in the 2008 Cisco Corporate Citizenship Report.
Supplier Diversity

Many of Cisco’s suppliers are small businesses or independent contractors that provide a number of services. Diversity among these suppliers is an important aspect of Cisco’s supply chain philosophy. We believe diversity is good for our business in a variety of ways.

* Regional diversity gives us access to worldwide skills and markets, and provides business resiliency if disruptions should occur in a particular region. It also helps reduce transportation costs.
* Cultural diversity, with suppliers offering different viewpoints and styles of interacting, helps us develop and market products that fit the needs of the broad global community.
* Social diversity promotes inclusiveness that benefits communities and local economies.

Any time we engage a new partner, we conduct an assessment that takes into account financial, technological, geographic, and political risks. In this way, we try to avoid possible problems by making sound business resiliency decisions at the outset. Regional diversity helps us balance the risks to the supply chain posed by such factors as potential civil unrest, natural hazards, and economic uncertainties.

The Cisco Global Supplier Diversity Business Development (GSDBD) program was established more than 15 years ago to provide equal access to businesses owned by minorities, women, disabled people, and military veterans, as well as to companies in Historically Underutilized Business Zones (HUBzones). Cisco has an internal goal of awarding 10 percent of our supplier expenditures to such businesses.

The GSDBD team also provides ongoing supplier diversity training throughout Cisco’s business units. To help identify diverse suppliers, Cisco is working with external inclusion organizations as well as with Cisco’s own employee networks. We also have implemented a vendor management tool that allows us to manage and prioritize certified diverse suppliers.

For the past four years, Cisco has been recognized for our supplier diversity efforts by DiversityBusiness.com. Cisco ranks as one of the top 50 U.S. companies providing multicultural business opportunities, based on feedback received from more than 350,000 women- and minority-owned businesses.

Social and environmental standards vary from country to country and company to company. In developed countries, workers' rights, health, safety, and environmental protection are usually enforced by law. In some developing countries, social and environmental standards may differ with regulations absent or not effectively enforced.

The global supply chain for electronic components means many parts are manufactured in developing countries. As a result, issues surrounding employment and environmental standards have arisen in the electronics supply chain.
Working in Partnership

Cisco, working in partnership with other companies in the IT sector, has begun the process of addressing both human rights and environmental issues as they relate to the high-tech industry. We believe that by working together, our collaborative efforts can significantly improve social and environmental practices worldwide.

In 2004, Cisco announced its endorsement of the Electronics Industry Code of Conduct (EICC), which was developed as a voluntary measure to establish and promote a unified standard for social and environmental practices across the electronic industry's supply chain. It covers a range of social responsibility issues, including labor and employment practices, health and safety, ethics, the protection of the environment, and management expectations to ensure code conformity.
Implementation

The EICC Implementation Group helps facilitate adoption. The mission of the Implementation Group is to focus efforts on positive social and environmental change in our supply base through a shared approach to code implementation based on the EICC. This approach will provide consistent code expectations throughout the IT supply chain, reduce duplication of effort, and improve productivity. The group is facilitated by Business for Social Responsibility (BSR), a nonprofit business organization.

As a member of this EICC Implementation Group and as well as the Global eSustainability initiative facilitated by the United Nations Environmental Program (UNEP), Cisco is working with suppliers, partners, and other leading IT companies to develop common approaches to supplier risk assessment, supplier surveys, supplier auditing, and common audit reporting methods. Cisco's continued support of this industry effort reflects our ongoing corporate commitment to promoting the improvement of working conditions and the environment throughout our extended supply chain.
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Last edited by abhishreshthaa; April 29th, 2011 at 04:47 PM..
   
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