Read the case study below and answer ALL the questions thatfollow. SGI Sets New Standards for Global Service PartsDistribution Silicon Graphics, Inc. (SGI) is the world leader inhigh-performance computing, visualization and storage solutions.SGI’s desktop workstations, servers and software are used inmission-critical applications around the globe. The companyselected UPS Supply Chain Solutions to bring advanced technologyand scalability to its service parts logistics operations,enhancing SGI’s ability to deliver swift and seamless customerservice. Client Challenge Before engaging UPS Supply ChainSolutions, SGI managed all aspects of its service parts support,including customer service. The challenge of balancing its complexinventory with customer needs for rapid response times resulted inhigh operating expenses. SGI desired a new distribution model thatwould more efficiently manage its extensive parts inventory whileproviding consistent, timely coverage for customers in NorthAmerica and around the globe. The company challenged UPS SupplyChain Solutions to tailor a new distribution model, incorporatingour global reach, advanced technological systems and integratedapproach to parts planning and post-sales support. Our Solution In1996 UPS Supply Chain Solutions began centralizing SGI’s inventoryat its logistics and technology center in Louisville, Kentucky.Today, more than 65,000 SGI parts occupy approximately 33,000square feet of the Louisville complex, which totals more than twomillion square feet of warehouse space. A network of field stockinglocations (FSLs), located strategically throughout the U.S. andCanada, met stringent two- and four hour service level agreementsto serve SGI customers. UPS Supply Chain Solutions ships an averageof 7,000 SGI parts every month worldwide directly out of theLouisville distribution center. Its end-of runway location allowsorders received as late as midnight to make next day packagedelivery. In addition, the extensive FSL network dispatches some1,300 parts per month to meet expedited deadlines. Annually, UPSSupply Chain Solutions completes approximately 100,000 orders forthe SGI program. Advanced logistics systems facilitate accuratecommunication of order requirements, status and inventory levels.“UPS Supply Chain Solutions and SGI pioneered the centralend-of-runway distribution model. Its success exceeded allexpectations,” said Robert Ferrando, SGI Director of GlobalLogistics. As SGI’s needs evolve, UPS Supply Chain Solutions keepsadding value to the company’s service parts distribution model. Forexample, an accelerated reverse logistics system enables SGI fieldengineers to attach a preprinted label to a part returning forrepair and drop it off at any UPS pickup location. The label isencoded with detailed information that can be quickly downloadedwith a scanner when the part arrives at the SGI manufacturingcenter in Wisconsin. According to Ferrando “Since SGI outsourcedits inventory and distribution functions with UPS Supply ChainSolutions, the company has realized a reduction in inventory costs,increased visibility and accuracy of the inventory, dramaticallyimproved customer satisfaction, and improved overall efficiency inmanaging parts throughout the supply chain.” Expanding GloballyBuilding on the success of the North American model, SGI selectedUPS Supply Chain Solutions as its third-party logistics provider inAsia and Latin America. SGI also benefited from UPS’s extensivesmall package network in these regions. As a result, SGI begandistributing service parts from UPS Supply Chain Solutionsdistribution centers and field stocking locations in Asia and LatinAmerica. In addition, SGI’s Latin American customers can usecomputer technicians trained by UPS Supply Chain Solutions foron-site repair service of selected SGI systems. UPS Supply ChainSolutions also took on freight responsibilities for SGI, handlingthe movement of finished products from SGI’s manufacturing facilityin Wisconsin to Asia-Pacific locations, including Japan. “Theexpanding global capabilities of UPS and our long-term strategicrelationship are the primary reasons we continue to expand ourbusiness with them,” Ferrando said. “We now want to leverage UPSSupply Chain Solutions’ global network to further improveefficiencies and enhance our customer service in other geographiessuch as Asia-Pacific and Latin America.”

1.5With reference SGI, what is your understanding of supplychain integration?