Problems for 19th century businesses were... Scarcity Limited Technology Adversarial Posture If still did this they would give poor service and hold too much inventory2What is the old paradigm of businesses Strong brands Large advertising budget Aggressive selling3What is the result of this old format?Uncertainty and inaccuracy in process = poor service and/or lots of inventory4What is the paradigm of new business? Win through capabilities and competencies Managing core processes better than competitors Sped along by commoditization of goods and industries How businesses have changed? -Accessibility of Info has changed -Competition has lowered prices- since 20th century We are in Information Age-Today (Information is power that is changing the way customers do business: Car buying example) Choose options then car made to exact specificationswould be better but cant do because laws prevent customers from being able to buy cars directly. Currently run by assumptions of scarcity, limited technology and an assumption of what is going to happen with demand. Order cycle time: can drastically improve cycle time by improving info (2/3) part of the order cycle is info (example by using barcodes andonce stock gets down to certain # then automatically reorder so that stock never runs out-this is manipulating the time parts of the order cycle) What your willing to pay for a product is how much you should charge. Example Fiji Water Whirlpool (many products): made in different warehouses then sent to distribution centers over to a third party logistics company. Needed to decrease transportation costs, so didn’t ship until full loads. So ended up owning 7 days more inventory. You cant just focus on one area of company or 1 firm of supply chain. Amazon: place & Time utility that willing to pay (cheaper than stores often) Time, form & place utility: Supply chain all about Purchasing: working with supply base to get items to make good Quality & Price: Important (cost of goods sold): want low Productivity: ultimate driver for manufacturer Getting customers goods fast=logistics5What is competitive advantage?Product Excellence (Form, Time, and Place Utility) x Process Excellence(Provide better service and availability to a picky customer)FORM UTILITY: Enhancing the marketability of a product by changing its physical characteristics.For example, boxed detergent can be produced in liquid form, which may be more advantageous for certain consumer requirements.TIME UTILITY: Enhancing a product's marketability by making it available at a convenient time. For example, a daily newspaper home delivered so that the customer has it available immediatelywhen he/she awakes for the day. (example in class: Amazon)PLACE UTILITY: Where the product or service is made available. For example, if it is a retail establishment, people should be provided with easy access. Mail order companies make it easy for customers to shop whenever they want and then have their purchases delivered to them.Porter’s Value Chain: inbound logistics, operations, outbound logistics, marketing&sales, service (primary activities: how businesses provide this value to customers)6The coordination of purchasing, inbound transportation, raw materials, component parts, work-in-process inventories and production scheduling.Inbound Logistics7The distribution function: coordinate forecasting, finished goods inventory management, warehousing, outbound transportation, customer service and production schedulingOutbound Logistics8How can we increase value advantage? Tailored Service Responsibility Responsiveness9How can we increase productivity advantage? Capacity Utilization Asset Turns Integration10How can we offer superior customer value?By becoming a cost and service leader. Low cost and high service (superior customer value)(Service leader = Value advantage Cost leader = Productivity advantage)11What are the 4 R's that help enable a competitive advantage? Responsiveness- Demand Driven vs. Forecast Driven Reliability- Primarily delivered through SC visibility Resilience- Coping with uncertainty Relationships- Network competition12What is customer value?Perceptions of Benefits / Total Cost of Ownership =Quality x Service / Cost x Time13What are the 4 P's? Product Place Price Promotion14What is the SCM role in the marketing mix?Place - Providing customers with the product they want, when they want it, in the right condition, at the right price, etc...The Integrated Supply Chain Evolution:Materials to Functional enterprise (procurement, operations, distribution) to distribution network to end consumers (core competencies, capital and human resources)Supply Chain Management: the systemic, strategic coordination of the traditional business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole. Silos: operate separate from each other3 ways supply chain impacts: 1) Increase top line reverse by doing things better than competitor (Revenue-cost=profit, 2) manage supply better 3) Manage capital investments. Less fixed capital can grow more, create products1) Revenue 2) Cost 3) Asset InvestmentsLogistics management is that part of Supply Chain Management that plans, implements, and controls the efficient, effective forward and reverse flow andstorage of goods, services, and related information between the point of origin and the point of consumption in order to meet customer requirements. (procurement, operations, distribution)What overarching goal should the drive the design and execution of a company’s supply chain?Return on assets, return on investmentsUnit sales and profitCustomers seek: Availability, cost, quality, speed… SMC: All about customer valueOne way to detect how lean you are operating with regard to operating capital—the funds available for use in financing the day-to-day activities of a business—is to measure the length of the cash-to-cash cycle. The cash-to-cash cycle1 calculates the time operating capital (cash)is out of reach for use by your business. The speedier your cash-to-cash cycle, the fewer days your cash is unavailable for use in propelling your value stream. You can use this metric to gauge whether you are operating "lean" with regard to cash. Also,
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