Marketing Principles - Using Supply Chains for Customer Value - PDF

CHAPTER 9 USING SUPPLY CHAINS TO CREATE VALUE FOR CUSTOMERS MARK-2010 PRINCIPLES OF MARKETING CUYAHOGA COMMUNITY COLLEGE THE SUPPLY CHAIN INCLUDES ALL OF THE ORGANIZATIONS THAT IMPACT PRODUCTS BEFORE, D...

CHAPTER 9 USING SUPPLY CHAINS TO CREATE VALUE FOR CUSTOMERS MARK-2010 PRINCIPLES OF MARKETING CUYAHOGA COMMUNITY COLLEGE THE SUPPLY CHAIN INCLUDES ALL OF THE ORGANIZATIONS THAT IMPACT PRODUCTS BEFORE, DURING, AND AFTER THEIR PRODUCTION Your product’s supply chain includes not only the downstream companies that actively sell the product, but also all the other organizations that have an impact on it before, during and after it’s produced. The process of designing, monitoring, and altering supply chains to make them as efficient as possible is called supply chain management The term value chain implies that your supply chain partners should do more for you than perform just basic functions; each one should help you create more value for customers as the product travels along the chain  SOURCING AND PROCUREMENT Sourcing is the process of evaluating and hiring individual businesses to supply goods and services to your business. Procurement is the process of actually purchasing those goods and services. If a firm can find a company that can add more value than it can to a function, it will often outsource the task to that company. Sometimes outside organizations can provide more value, more cost effectiveness or shorter lead times. – There are two goals for outsourcing: to lower their costs to focus on the activities they do best Outsourcing work to companies abroad is called offshoring. RISKS IN OUTSOURCING  Outsourcing is not a panacea!  Loss of control has serious consequences for the offshoring firm.  Quality and Safety:  companies test their suppliers’ products  companies also do on-site audits  other companies station employees with their suppliers on a permanent basis  Loss of control over proprietary technology  HIDDEN COSTS OF GLOBAL SOURCING Oops! This turned out to cost more than I bargained for! I Forgot… – International freight, insurance and packing (10-12%) – Import Duties (0-50%) – Customhouse broker’s fees (3-5%) – Extra inventory for JIC (5-15%) – LC Cost (1%) – International travel and communication(2-8%) Your cost has just increased from 19 to 81%!!!  SOCIAL RESPONSIBILITY IN OUTSOURCING Social Responsibility….Companies should manage their businesses not just to earn profits but to advance the well-being of society. Environmental sustainability is the idea that firms should engage in business practices that have the least impact on the environment so that it’s sustained for future generations. – the Fair Trade movement pays farmers and other third-world producers higher prices for their products to alleviate poverty. – companies produce “greener” products and dispose of them in ethical ways. improves a company’s image and differentiates it from competition many consumers are willing to pay more for green products  OTHER OUTSOURCING CONCERNS Logistics of transporting and storing – If outsourcing overseas (offshoring), transport lead time and customs challenges can significantly delay timely deliveries customers will shop elsewhere if they can’t find what they want Work force policies of 3rd world companies Should outsourcing prove untenable, firms may bring their production and component/raw material procurement back in-house. This is referred  DEMAND PLANNING AND FORECASTING Demand planning is the process of estimating how much a good or service a customer will buy. This affects… – the amount of goods and services you have to produce and the materials you must purchase to make them. – production scheduling Production scheduling is the management of the resources, events, and processes needed to create an offering. Lead time is the amount of time it takes for a customer to receive a good or service once it’s been ordered. Forecasting is the determination of how much product will be sold, and when. – Forecasting is often done daily, and takes into consideration: Sales history Industry trends When In members ofplanning, collaborative the supply Economic factors chain are collaborative, forecasting, and share Competitive moves information and work replenishment (CPFR)in tandem to satisfy the end user, it is Promotional activities supply chain partners share referred to as supply chain Changes in customer base information and coordinate visibility. Supply chain partner input their operations. I see a sales forecast of  INVENTORY MANAGEMENT Inventory control: the process of ensuring your firm has an adequate amount of products to meet customer needs. Goal of inventory management is to avoid stockouts. – A stockout occurs when you run out of a product a customer needs Safety stock: backup inventory that serves as a buffer in case of a surge in demand. Shrinkage: used to describe a reduction or loss in inventory due to shoplifting, employee theft, paperwork errors, and supplier fraud. Just-in-time inventory: system in which a firm keeps very little inventory on hand. Instead, suppliers ship inventory as needed. Vendor-managed inventory: The practice of having your suppliers manage your inventories…Rubbermaid/WalMart! SKUs (stock keeping units): Unique ID numbers used to find products. EDI: electronic format that companies use to exchange business documents from computer to computer PRODUCT TRACKING TECHNOLOGIES An electronic product code (EPC) is similar to a barcode, only better, because the number on it is unique. – EPCs allow you distinguish between two identical packs of the same product. The codes contain information about when the packs were manufactured, where they were shipped from, and where they were going to. – Being able to tell the difference between identical products can help companies monitor their expiration dates or combat knockoffs in the marketplace. – Electronic product codes are stored on radio-frequency identification (RFID) tags. A radio-frequency identification (RFID) tag emits radio signals that can record and track a shipment as it comes in and out of a facility.  WAREHOUSING AND DISTRIBUTION CENTERS WAREHOUSES DISTRIBUTION CENTERS Needed to accommodate Warehouses or storage supply and demand facilities where the changes for products. emphasis is on processing Trends towards smaller and moving goods on to warehouses. wholesalers, retailers, or consumers rather than on to storage.  TRANSPORTATION Logistics: The physical flow of materials in the supply chain. – The goal of logistics is to decrease costs and transit time while increasing customer service. Transportation Methods! – Trucks – Water – Air – Railroads – Pipelines  RAILROADS CARRY HEAVY BULKY FREIGHT THAT MUST BE SHIPPED LONG DISTANCES OVERLAND. FACTORIES ARE OFTEN LOCATED ON RAIL SPURS FOR CONVENIENT LOADING AND UNLOADING  TRUCKS MOST FLEXIBLE SCHEDULES AND ROUTES MOVE GOODS DIRECTLY FROM FACTORY OR WAREHOUSE TO CUSTOMER MORE EXPENSIVE THAN RAIL. SUBJECT TO SIZE AND WEIGHT RESTRICTIONS  WATERWAYS FOR HEAVY, LOW VALUE, NONPERISHABLE GOODS BARGES CAN HAUL AT LEAST TEN TIMES THE WEIGHT OF ONE RAIL CAR OGV’S CAN HAUL THOUSANDS OF CONTAINERS  AIR TRANSPORT FAST EXPENSIVE! CAN CONTRIBUTE TO JIT COST EFFICIENCIES  PIPELINES BELONG TO THE SHIPPER AND CARRY THE SHIPPER’S PRODUCTS. PETROLEUM, CHEMICALS CHOOSING TRANSPORTATION SPEED DEPENDABILITY LOAD FLEXIBILITY ACCESSIBILITY FREQUENCY  COORDINATING TRANSPORTATION INTERMODAL TRANSPORTATION – TWO OR MORE TRANSPORTATION MODES USED IN COMBINATION PIGGYBACK FISHYBACK BIRDYBACK  TRACK AND TRACE SYSTEMS Track and trace systems that electronically record the paths shipments take have become almost as important to businesses as shipping costs themselves. Today most product shipments can be traced using GPS, RFID, and Barcodes; though tracking individual packages is harder. Consumers are more interested than ever to know where their products come from and when they will arrive. Companies are working to develop systems that may one day make it possible to trace all products. REVERSE LOGISTICS RUNNING PRODUCTS AND MATERIALS BACKWARDS THROUGH THE SUPPLY CHAIN TO EXTRACT VALUE FROM THEM. Most companies set up reverse logistics systems to “turn trash into cash.” Upcycling is a process to extract value from waste and using it to create new products.  EVERYTHING YOU EVER WANTED TO KNOW ABOUT THE REORDER POINT BUT WERE AFRAID TO ASK We’ve said that the objective of inventory management is to minimize inventory costs while maintaining an adequate supply of goods for customers. So, marketers focus on: – When to order – How much to order When to order? Calculate the reorder point! The reorder point is the inventory level that signals the need to place a new order. Reorder point = (Order lead time x usage rate) + safety stock Example: if the order lead time is 10 days, the usage rate is 3 units 50per day, and the safety stock on hand is 20 units, the units! reorder point is….? Order lead time: the average time lapse between placing an order and receiving it rate: the rate at which a product’s inventory is used or sold during a s period.