Nortel Networks Essay Example | Topics and Well Written Essays - 1000 words

Nortel Networks - Essay Example When a customer initiates an order, it goes to one of twenty Logistics Operating Centers (LOCs) worldwide, which then determines the best combination of services that could be exchanged among the customer-centered rings. It is the LOC that is in-charge of the order that looks for the Nortel Network partners, key parts sources, and assemblers that are part of that ring around the customer and that would best meet the customer's order at the lowest cost and in the fastest possible time. This LLSS-based system differs from Nortel's old supply chain structure, which was built around an orderly sequence of activities that happened one after another. This traditional supply chain needed long lead times and higher costs. With the new global logistics system, designed around a networked framework, activities happen continually at the same time. What does this mean Rather than wait for the completion of a prior activity, say the assembly of sub-components before deliveries are made, Nortel's worldwide network of partners and suppliers are constantly on the move taking care of order fulfillment from several customers. An OEM for example can be doing production and assembly work for several clients at a time, each one with different or similar requirements, and managing various parts of the supply chain according to standards established by Nortel. In other words, by outsourcing the "lower value-added" activities like assembly to third party providers, Nortel can focus instead on the high value-added activities like the management of the global supply chain or research and development to improve existing products or come up with new ones based on more advanced technologies. This is only one among the many advantages that Nortel derives from its global logistics system. What are the others We have already discussed the customer-centered focus of the whole organization. By placing the customer at the center of the logistics network, Nortel can work at the important but very tough and challenging task of ensuring that everyone maintains that customer focus. Customers then feel special, being the center of attention of the whole global organization, knowing that its orders could be met no matter how tough its specifications and deadlines would be. Of course, it is hard work for Nortel to do the work of integrating all of its alliance partners all over the globe, but that is part of the design of the system. We can also see how the system ensures speed of delivery to meet tight customer deadlines, because the arrangement gives Nortel and its partners the flexibility it needs to get the work done on time. Instead of managing the whole supply chain, which requires coordinating several factors at the same time, Nortel's system delegates the management of portions of that supply chain by outsourcing. Rather than sweat on the large stuff, it seems that Nortel and its partners would rather sweat on the parts of that large stuff that they can manage well, and to concentrate on the "large stuff" of coordinating 20 manageable LOCs. This allows Nortel to keep its costs down, which it does in a very specific way. By keeping the suppliers of key parts in the supply chain conveniently located close to

The Time Value of Money Essay Example | Topics and Well Written Essays - 1000 words

The Time Value of Money - Essay Example However, this is not the case with the $10000 received 3 years from now. Its value will be $10000 only since no interest will be earned as illustrated in the figure below: In short, we can say that "a dollar today is worth more than a dollar one year from now" because the time value of money decreases over time. Why it decreases is the actual question. Interest rate, as we saw above is one apparent reason why money is related to time. Investing the money today would enable you to earn interest, causing it to grow to a larger amount over time. Let us now examine some of the other reasons and their impact on the time value of money. Present value refers to a value that is equal to a value or values in future that have been discounted at relevant interest rate. For example, if you are expected to receive $10000 three years from now, the value of this 10000 today would be $9497 if the interest rate is 5% (PV= FV/ (1 + i )N) ) but if you were to receive $10000 five years from now, the present value would only be $7836.This $9497 at the beginning of the period is equal to $10000 at the end of the three years , showing that the value of money is related to time and therefore, causing the present value of an amount in the future to be less and less, the more you have to wait for it. When you had to wait for 3 years, the present value of $10000 was $9497 but when you had to wait for 5 years, the value of the same $10000 fell to $7836. This process of finding present values from future values is called discounting. The opposite is applicable for compounding. Compounding causes the future value to be larger and larger t han the value today, the longer you have to wait for it because the value of money is related to time as illustrated by the numerical above. 2. Opportunity Cost: The time value of money also includes the concept of opportunity cost or the cost of foregoing the next best alternative. For example, if you decide to get $10000 in three years rather than now, you are foregoing the enjoyment, interest and other benefits you could have acquired by taking it now. How much you will have to forego depends on the interest rate. The higher the interest rate, the greater the interest that you will have to forego and hence, higher your opportunity cost. 3. Annuities: Annuities are a series of payments at regular intervals for a specified number of periods. If for example, you expect to receive the amount $10000 in 4 equal installments of $2500 each for the next 4 years, the present value of this stream of cash flows would amount to $8865 if the interest rate is 5% (PV = PMT [(1 - (1 / (1 + i)n)) / i]) while the future value would amount to $10775 (FV = PMT [((1 + i)n - 1) / i]). However, if the same $10000 was to be paid in 5 equal installments of $2000 each in the next 5 years, the present value would be $8659 and the future value would be $11051.Clearly, the same rules are applicable here and affect the time value of money in the same way. The longer it takes for you to receive your sum of $10000, the lower will be the present value of the annuity and the higher will be the future value. When you had to wa