BUSSPP 020 1st EditionExam # 4 Study Guide Lectures: 18 - 19Lecture 18 I. Push & Pull – Marketing Perspective A. Recall general supply chain layout B. Main focus: To whom (what party) does one particular player direct their promotion mix? 1. Consider Manufacturer (i.e. Matel Toys) 2. No wholesalera. Could direct promotion mix to retailer i. Retailer would then direct promotion mix to end user b. Could direct promotion mix to end user ii. Kids scream, moms demand from the retailer C. At one time pharmaceuticals could not be advertised directly to end users 1. Once this law was lifted – begin the era of drug commercials a. people go to their doctors: “I need _____” D. Push: directing promotion mix downward 1. Pull: end user’s response of demanding from upstream II. Push & Pull – Operational Perspective A. Estimation of demand 1. Issues with actual demand a. excess inventory b. stockout2. What if we didn’t have to estimate demand? B. Manufacturer: what if I don’t do anything until I receive an order from the retailer? 1. Retailer: well then I’m not ordering anything until the end user orders it. 2. Upstream players use the same logic 1. Push: estimating demand a. Pull: actual demandb. In order for this kind of a system to work, each player must work extremely close to the othersC. We’re back to special relationships to make this work 1. Ex: Toyota production system 2. 4 different platforms, 4 body styles, 2 trim packages, 2 engines, 10 paint colors, 5 interior choicesa. estimating demand for this is ridiculous b. cut down production/shipping/delivery time to 3-4 weeks, customer won’t notice a difference, but we eliminate MANY problemsc. This system must be very carefully orchestrated 3. Canon4. Lincoln Electric D. This is a PULL (Kanban, lean manufacturing, Japanese Manufacturing System, or agile) system – each player is pulling product from one player up 1. Virtually no finished product inventory anywhere in the systema. all intermediate inventory is constantly in motion – nothing is sitting around waiting2. TPS – Toyota production system 3. JIT – just in time system 4. NONE of this will happen if solid trust is not established between players a. critical to relocation of a manufacturing facility is the establishment of new partners/coercion of old partners to co-locate b. expect to see the emergence of closely related upstream partners with the emergence of manufacturers 5. Increasing delivery frequency of intermediate/raw material product allows for more concise control of stock & inventory a. Inventory amount moves closer and closer to 0 b. Delivery costs go up, but storage costs go way down 6. Benefits are significant: every player reduces inventory a. PROBLEM: any issue upstream produces massive problems downstream b. shocks that cannot be controlled by the trust system cause serious problems 7. Significantly greater efficiency traded for the fragility of the system to any disruption E. PUSH system – typical estimation of demand system Lecture 19 I. 2 Different Kinds of Processes A. Job Shop – 3 Characteristics 1. General purpose equipment 2. Huge level of underutilization 3. Multiple paths a. Optimal for multiple types of jobsB. Continuous Flow 1. Highly specialized equipment 2. High level of utilization 3. Single path a. Optimal for one specialized job C. In these, we find Production system vs. Differentiation 1. Generic commodities 2. Custom-made products a. frontier between the two to address different levels of Differentiationb. calls for some combination of the two kinds of processesc. Caters to needs for different levels of flexibility and efficiency D. Productivity 1. New entrants will want to utilize Continuous Flow to maximize productivity and minimize costs a. after a simpler system is established, it’s pricey and rather difficult to upgrade it for a higher degree of differentiation 2. Players notorious for massive differentiation are unlikely to reduce it because customers have come to expect ita. if the system is already designed for massive differentiation, it makes no difference in production costs to downsize
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