331 final331 final -Old Paradigm -1. Assumed problems of Scarcity, Limited Technology, and Adversarial relationships2. Resulted in uncertainty and inaccuracies in processes leading to poor service and high inventory3. Focused on Strong Brands, Large advertising budgets, and aggressive selling4. Examples- Ford, Procter and GambleNew Paradigm -1. Sought to gain Competitive Advantage by providing better service and availability to picky...2. Resulted in the integration of demand and supply facing processes, internally through...3. Focused on winning business through capabilities and competencies , managing core processes...4. Enabled by- Responsiveness, reliability, visibility, resilience, flexibility, and relationships5. Examples- Wal-Mart, Toyota, McDonalds, DellGaining Competitive Advantage through Supply Chain Management1. Goal to increase your Value advantage, Productivity advantage, or if capable both2. Commodity Market- Low value and productivity3. Service Leader- High customer value for a superior service but at a higher cost due to...4. Cost Leader- utilizes capacity well and thus can offer products at a lower cost at the...5. Cost and Service Leader- excelling in both areas and delivering a Superior Customer ValueEvolution of Supply Chain Management1. The Great Divide- Conflict between Manufacturing and Marketing Integration2. Bridging this gap makes businesses ultimately more Successful3. Manufacturing Integration- focuses on product, efficiency measured, economies of scale and scope4. Marketing Integration5. Companies often have too much inventory because they can’t coordinate the communication across the SC to get the customers wants when they want themService Leader- High customer value for a superior service but at a higher cost due to lower productivity advantageExample- Verizon offering many cell phones and better coverage but at a higher cost then competitorsCost Leader- utilizes capacity well and thus can offer products at a lower cost at the expense of customer serviceExample- Wal-Mart with everyday low prices but near impossible to find an employee to help youMarketing Integrationfocuses on customer, satisfaction measured, relevanceprocess of strategically managing the procurement, movement and storage of materials, parts and finished inventory and related information flows through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-efficient fulfillment of ordersGoal to maximize profits through cutting costPorter’s Value Chain1. Primary Activities2. Support Activities3. Actions, sources, and service are what creates the value that gives you competitive advantage4 R’s that help you gain competitive advantage1. Responsiveness2. Reliability3. Resilience4. Relationships – to customersDell Supply Chain planning Steps1. Supply chain management coordinates info, materials, and logistics to support customer requirements2. Supply constraints are continuously communicated to sales and managed at point of sale3. Focus on continuity of supply and direct vendor relationships ensure material availability4. Aimed to create visibility in the Supply chain to show where they need to spend time on relationshipsLogistics Management- process of strategically managing the procurement, movement and storage of materials, parts and finished inventory and related information flows through the organization and its marketing channels in such a way that current and future profitability are maximized through the cost-efficient fulfillment of ordersSupply Chain Management- goal to deliver superior customer satisfaction at the least possible cost to the supply ChainPrimary Activities- Inbound Logistics, Operations, Outbound Logistics, Marketing and Sales, ServiceSupport Activities- Firm Infrastructure, Human Resource Management, Technology Development, procurementResponsiveness- to customer wantsCustomer ValuePerception of benefits/Total cost of OwnershipReliability- doing it the same every timeResilience- ability to solve problems3 Level of Customer service1. Basic Service2. Satisfaction3. SuccessRelationships– to customersCustomer Service level Matrix1. Review Relationship- low profit margin and sales2. Efficient Service/Watch cost- high sales low profit3. Centralized inventory/expedited delivery- low sales but high profit per sell4. Customized Service /High Availability- high sales and profitEfficient Service/Watch cost- high sales low profitEx. Dell shipping with UPS and not making much per ship but a lot due to bulk of shipmentsCentralized inventory/expedited delivery- low sales but high profit per sellEx. Charging high price for overnight deliveryGoalFind a sweet spot in the middle where you can maximize your profits while still providing a serviceLogistics affects customer value throughcustomer service and Availability of productProblem with marketingis that it focuses on attracting new customers instead of keeping existing onesCustomer Serviceprocess for providing significant value-added benefits to the supply chain in a cost-effective way.Perfect Order Concept- getting everything right in respect to the customer experienceCompany ZARA- example about not making anything till you know its popular and being responsive, flexible, built on relationships with customersShrinking service Window- customers demanding higher level of serviceSupply Chain impacts ROA and ROI1. Service- increasing revenue (what service elements we can enhance for customers to pay us more)2. Cost- lowering cost (through making production more efficient)3. Asset management- better utilization ( invest in people, equipment, etc)companies have to reevaluate their inventory constantly to report Market ValueMore than half of a company’s cost is usually tied up in inventoryProblems with traditional functional measurements1. Bias toward cost and internal Customer service2. Belief that internally generated customer service and quality metrics reflect customer perspective3. Customer service metrics are not jointly defined4. Metrics are “on average, over-time” rather than de-averaged absolute metrics5. Functionally-oriented- unable to assess performance along horizontal process6. Unable to assess financial perspectiveFinancial Reporting vs. operational/managerial reporting1. Financial Reporting- focuses on the cost of activities and inputs2. Operational/managerial reporting- focuses on how much it cost to produce a productInternal