- Strategic: Higher customer retention, Greater market share, and ability to execute strategies and enter new markets.
- Marketplace: lower prices, greater customer satisfaction, differentiated offerings, stronger customer relationships, greater agility
- Operational benefits: lower direct costs, better use of assets, faster cycle time, increased accuracy, greater customization or precision, more added value, simplified processes.
- FedEx (Memphis): created best degree of speed and reliability
- Exxon (Tenn.): created most advanced system for tracking, scheduling, and rerouting oil shipment. Faced weather, political and military unrest, and changing market conditions.
- Houston 911: coordinated ambulances, fire, and police vehicles to respond to unpredictable time sensitive events with traffic, inaccurate/incomplete info
- Similar: coped with unforecastable demand using limited resources by using a system to quickly/accurately capture, respond, and share customer info
- They substituted management of information for deployment of costly assets (trucks, ships, employees) BITS IN PLACE OF ATOMS
- Core issue: create a system for reliable info flow and instantaneous transmission among customers, plants, and delivery vehicles.
- From paradigms: invest in engines to connect company in a efficient network
- CEMEXNET SATELLITE COMMUNICATION SYSTEM: connected 11 Cemex production facilities to coordinate them from a central clearinghouse
o Gradually automated the company's back-office functions: streamlined dissemination of financial/other info to facilitate accurate decision making.
- DYNAMIC SYNCHRONIZATION OF OPERATIONS (DSO): managed customer orders→ took time to develop, had early bugs, but execution is continually improving— solving the unsolvable problem
- Consolidated multi-truck fleet into a single pool under central control
- Built computerized operation centers where dispatchers had access to info to choose optimal combo of trucks and mixing-plant locations by looking at traffic en route, inventory, customer location, etc.
- Installed computer terminals in trucks with GPS so dispatchers knew location, direction and speed on-demand so they could dispatch right truck, reroute, and redirect deliveries.
Rationalization: the reorganization of products, services, parts, or entire company to minimize complexity of operations and enhance efficiencies. Duplication or redundancies are minimized. Lowers inventory levels, improves scheduling, and increases buying power (through economies of scale)= higher profits. Rationalization often includes consolidation of procurement, manufacturing, and support services (ex: IT services, call centers, or firm infrastructural activities). Consolidation: removes idle capacity, increases buying power, and improves efficiency of operations. - Functional: predictable demand, low margins, minimal customization, low stock out
- Innovative: unpredictable demand, high margins, high customization, high stock out
- Efficient supply chain: supply predictable demand efficiently at the lowest cost, maximize capacity utilization, cost and quality, supplier selected based on cost/quality, high inventory turns, minimize inventory.
- Responsive supply chain: respond quickly to demand changes, minimize stock out, markdowns, and obsolescence, deploy buffer to meet demand, invest a lot to minimize lead time, suppliers selected based on speed, flexibility and quality.
- Efficient- Functional: match
- Efficient- Innovative: mismatch
- Responsive- Functional: mismatch
- Responsive- Innovative: match
- Managing uncertainty (demand, supply, process): uncertainty comes from price, quality, quantity, delivery, technology changes, substitutes, etc. HART TO understand sources of uncertainty, estimate extent of uncertainty, AND comprehend the impact of uncertainty
- Coordination: hard 2 collaborate & communicate with all parts of V-chain
- Processes and technology: inappropriate processes, lack of optimization, inappropriate metrics, lack of right incentives.
- Industrial, organizational, and partner's culture: self-maximization, perception of threats, deep-rooted culture, people fear role changes, accountability, and job loss, power distribution (buyers, suppliers, intermediaries) is incompatible with efficiency
- Cost: legacy systems in the value chain lack of standards.
- Strategically important (global/regional): few customers, high volume/rev/profits, use knowledge/info sharing, VMI, ERP to ERP connectivity
- Medium sized customers: many customers, medium vol/rev/profits, reduce transaction costs, increase profit margins, aggregated demand, encourage self-help (e-markets)
- Small customers (fragmented): large # of customers, low vol/rev/profits, eliminate unprofitable customers, encourage self-help, consolidate/rationalize.
- Buyer to seller: field incidence rates, customer feedback, defective parts
- Seller to buyer: line reject rates, eng change orders, SPC (statistical process control)
- Buyer to seller: cost forecast, TCO, value-chain anaylsis
- Seller to buyer: cost alerts, forecast accuracy, price modeling
Continuity of supply:
- Buyer to seller: demand forecast, Manufactering plan, available resources
- Seller to buyer: work-in-progress, inventory, lead-time, capacity, available resources
- Buyer to seller: Product roadmap, change order
- Seller to buyer: early customer feed back, trade feedback
- Buyer to seller: field incidence report
- Seller to buyer: Parts availability, repaires
- Buyer to seller: contracts, events, FAQ
- Seller to buyer: quarterly reports, FAQ
- External factors: favorable long term wage rate, business interruptions, competitive cost disadvantage, socio/political backlash, terrorism/war
- Internal factors: global alignment, employee impacts, customer alignment, diversity impacts, senior management commitment, etc.
- Partner factors: partner quality, partner relationship, offshore employee turnover, partner alignment, diversity, etc.
- Implementation factors: good data security, effective knowledge transfer, well defined/clear interfaces, internal controls, maintenance, accessibility, etc.
Risks, reliability, security, additional cost of necessary network bandwidth, and possible lock-in to cloud-computing vendors
cloud-computing provider infrastructure:
Internet-connected servers, at one site or distributed across several locations that house applications and data. They also include virtualization, grid, management, database, and other types of software; user interfaces; APIs; a communications infrastructure for connecting to users over the Internet or a private network; and a usage monitoring and billing mechanism.
CLIENTS: use browsers or dedicated software to access the cloud apps, controlled via APIs
- People (social networking, video game network, instant messaging, cell phone)
- Consumer-to-Consumer network (e.g., eBay, AT&T, VZ)
- Computers (local and wide-area network, ATM network)
- Companies (supply networks, bank networks, travel reservation)
- Business-to-Consumer network (Amazon)
- Business-to-Business network (e.g., ChemConnect, Ariba)
- Information network (Google, Yahoo!, MSN, AOL)
- Places (airline network)
Rationalization is the reorganization of products, services, parts, or an entire company to minimize complexity of operations and enhance efficiencies. Duplication or redundancies are minimized. Rationalization lowers inventory levels, improves scheduling, and increases buying power (through economies of scale) and hence profits. Rationalization often entails consolidation of procurement, manufacturing, and support services (e.g., IT services, call centers, firm infrastructural activities, etc). Consolidation may remove idle capacity, increase buying power, and improve efficiency of operations; reorganization of a company in order to increase efficiency; reorganization may include expansion or reduction in company size, change in policy, consolidation of certain projects, etc. - IN-HOUSE: retains culture, knowledge, and networks, it becomes a "cost-center", retains employees
- SPIN-OFF: growth by providing services to other firms, retains employees (loyalty, culture-hard to create &define, knowledge), creates/retains all informal social networks (more efficient than formal process), specializes in GSB, becomes a "PROFIT CENTER", maintains employee morale
- OUTSOURCE TO 1 FIRM: transfers employees to 1 firms, coordination cost is lower, cultural changes, social networks degrade over time, knowledge reduces, higher lock-in, hard to find 1 to provide everything well.
- OUTSOURCE TO BEST-OF-BREED: fragments customers, easy to switch, easy to find best of each service, face more risk