Xilinx changes its Supply Chain Outsourcing Strategy*



Case Code : CLOM005
Publication date : 2006
Subject : Operations
Industry : Computers-IT and ITeS
Teaching Note : Available
Length : 05 Pages
Price : Rs. 100

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Key words:

Supply Chain Management, Outsourcing, Xilinx, Cisco Systems, Virtual Direct Program, Vendor Managed Inventory (VMI), Demand-pull system, Lead time


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The caselet throws light on how outsourcing of core business functions like distribution or manufacturing could lead to serious problems for a company. Xilinx, a renowned supplier of electronic parts depended entirely on distributors for selling its products. This approach nearly cost the company its most valuable customer Cisco. The caselet throws light on how Xilinx restructured its distribution system. The caselet also describes the Vendor Managed Inventory (VMI) program initiated by Xilinx as part of supply chain restructuring to decrease the overall supply chain costs.


  » The pros and cons of outsourcing core business activities.
  » Using an online store for better inventory management.
  » Implementing a Vendor Managed Inventory (VMI) program.


Xilinx, a San Jose (California) based company, manufactures electronic components that are used by major manufacturers of electronic products across the globe. The company was set up in Silicon Valley in 1984 and its first product was a new form of semiconductor, now known as the Field Programmable Gate Array .

Since then Xilinx has increased its product line and has launched some very popular products like Virtex Series FPGAs, Spartan Series FPGAs , Cool Runner CPLDs, Xilinx IQ, etc. Xilinx operates in many locations like Europe, Asia Pacific and has a huge customer base. Some of the major customers of Xilinx include Samsung, Siemens, Gibson , Sensio , and NASA...

Questions for Discussion:

1. “Cisco had to undertake an inventory correction of $2million”. What in your opinion are the probable reasons for such a huge inventory correction? Enumerate the various steps Xilinx took to resolve the problem. Has Xilinx been successful using its new approach?

2. “Xilinx has asked its intermediate distributors to implement this program”. What are the possible advantages or disadvantages of this new approach, particularly for other electronic parts suppliers who intend to replicate this approach?