Presented by: HC Lalpanmawia

The way of measure of product and service

Internal quality assurance external customer satisfaction customer value

SCM is naturally an important component in fulfilling customer needs and providing value. SCM can also impact the important customer value of price by significantly reducing costs. Customer value drives changes and improvements in the supply chain. Customer value is also important for determining the type of supply chain.
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Customer value the way the customer perceives the entire companys offerings (products, services) Customer perception can be broken into several dimensions:

Conformance(mil) to requirements Product selection Price and brand Value-added services Relationships and experiences

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The ability to offer what the customer wants and needs is a basic requirement to which SCM contributes by creating availability and selection

market mediation(buaina kara palai) function the differences between supply and demand will lead to the costs associated with the market mediation
Supply > demand inventory cost Demand > supply lost sales and possibly market share

Customer access

the ability to easily find and purchase a product Products, services for customers The way for customers to know its products, services

In all, the company provides

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The contribution of product proliferation (rapid reproduction/increase in no)to customer value is difficult to analyze and understand.

The proliferation of products and difficulty in predicting demand for a specific model force retailers and distributors to hold large inventories. Sometimes there is no need to provide too many selections for one item

Three successful business trends

Specializing in offering one type of product : Starbucks, Subway Megastores that allow one-stop shopping for a large variety of products :Wal-Mart Megastores that specialize in one product area : Home Depot, Office Max, Sportmart Build-to-order model : Dell Larger inventories at major distribution centers: vehicles A fixed set of options that cover most customer requirements

Several ways to control the inventory problem of a large variety of configuration or products

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Price of products and the level of service are essential parts of customer value

The price may not be the only factor a customer considers, there may be a narrow price range that is acceptable for certain products. The internet and its impact on consumer behavior have increased the importance of brand names, because a brand name is guarantee of quality in the buyers mind. Mecedes cars, Rolex watches, Coach purses
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Brand an important factor affecting the price

Value-added offering can differentiate some companies from their competitors and provide them with more profitable pricing structures

Especially technical products : after sales services

Other reasons why many companies are adding more services around their products:

The commoditization of products The need to get closer to the customer The increase in information technology capabilities Support, maintenance Information access
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Value-added services

An increased connection between the firm and its customers makes it more difficult for customers to switch to another provider The learning relationship

Companies build specific user profiles and utilize this information to enhance sales as well as retain customers

Beyond relationship, some companies are also designing, promoting, and selling unique experiences to their customers.

An experience occurs when a company intentionally uses services as the stage, and goods as props, to engage individual customers in a way that creates memorable events Disneys theme parks
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Revenue management

selling the right inventory unit to the right type of customer, at th-e right time, and for the right price Use price as a tool to influence customer demand

Smart pricing

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Many companies use price as a tool to influence customer demand and apply the principles of revenue management techniques to their respective industries.

Smart pricing Customized pricing

The objective is to distinguish between customers according to their price sensitivity Dynamic pricing Dynamic pricing, or changing price over time without necessarily distinguish between different types of customers has traditionally been used only for sales or promotions Example : fashion clothing retailers offer discounts later in the season to reduce inventory, and this discount is the same for all customers at a given time.

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The objective in this section is to introduce various measures of customer value as well as supply chain performance measures Service level Customer satisfaction Supply chain performance measures

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Service level is the typical measure used to quantify a companys market conformance. Service level is usually related to the ability to satisfy a customers delivery date. There is a direct relationship between the ability to achieve a certain level of service and supply chain cost and performance.

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Customer satisfaction surveys are used to measure sales department and personnel performance as well as to provide feedback for necessary improvements in products and services. Customer satisfaction Customer loyalty Customer defections

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Information technology has produced many valuable benefits for customers and businesses. Customer benefits

Exchange of information between customers and business The use of information by companies to learn more about their customers Enhance business-to-business capacities
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Business benefits

Business-to-business benefits

Creating customer value is the driving force behind a companys goals, and supply chain management is one of the means of achieving customer value. Companies need to select their customer value goals since the supply chain, market segmentation, and skill sets required to succeed depends on this choice. There is no real customer value without a close relationship with customers.
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SUPPLY CHAIN MANAGEMENT SCM

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Flow of products and services from:

Raw materials manufacturers Intermediate products manufacturers End product manufacturers Wholesalers and distributors and Retailers

Connected by transportation and storage activities Integrated through information, planning, and integration activities Cost and service levels
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Supplier Management

Material Flow Material Flow

Information Flow
Stock Deployment

Customer Management

Schedule / Resources

Conversion

Delivery

Leads to Business Process Integration

Plan

Source

Make

Deliver

Buy

Suppliers

Manufacturers

Warehouses & Distribution Centers

Customers

Material Costs

Transportation Transportation Costs Transportation Costs Manufacturing Costs Inventory Costs Costs 19

A set of approaches used to efficiently integrate

Suppliers Manufacturers Warehouses Distribution centers In the right quantities To the right locations And at the right time

So that the product is produced and distributed

System-wide costs are minimized and Service level requirements are satisfied

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Supply chain management is a set of approaches utilized to efficiently integrate suppliers, manufacturers, warehouses, and stores, so that merchandise is produced and distributed at the right quantities, to the right locations, and at the right time, in order to minimize system wide costs while satisfying service level requirements.

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Supply Chain Goals

Efficient supply chain management must result in tangible business improvements. It is characterized by a sharp focus on
Revenue growth Better asset utilization Cost reduction.

Uncertainty is inherent to every supply chain

Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues

The complexity of the problem to globally optimize a supply chain is significant

Minimize internal costs Minimize uncertainty Deal with remaining uncertainty

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Dealing with uncertain environments matching supply and demand

Shorter product life cycles of high-technology products

Less opportunity to accumulate historical data on customer demand Wide choice of competing products makes it difficult to predict demand

The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners

If you dont do it, your competitor will Major buyers such as Wal-Mart demand a level of supply chain maturity of its suppliers Firms have access to multiple products (e.g., SAP, Baan, Oracle) with which to integrate internal processes

Availability of SCM technologies on the market

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Forecasts are never right

Very unlikely that actual demand will exactly equal forecast demand

The longer the forecast horizon, the worse the forecast

A forecast for a year from now will never be as accurate as a forecast for 3 months from now

Aggregate forecasts are more accurate

A demand forecast for all CV therapeutics will be more accurate than a forecast for a specific CV-related product

Nevertheless, forecasts (or plans, if you prefer) are important management tools when some methods are applied to reduce uncertainty
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ISSUE Network Planning

CONSIDERATIONS
Warehouse locations and capacities Plant locations and production levels Transportation flows between facilities to minimize cost and time How should inventory be managed? Why does inventory fluctuate and what strategies minimize this? Impact of volume discount and revenue sharing Pricing strategies to reduce order-shipment variability Selection of distribution strategies (e.g., direct ship vs. cross-docking) How many cross-dock points are needed? Cost/Benefits of different strategies How can integration with partners be achieved? What level of integration is best? What information and processes can be shared? What partnerships should be implemented and in which situations?

Inventory Control Supply Contracts Distribution Strategies

Integration and Strategic Partnering

Outsourcing & Procurement Strategies Product Design

What are our core supply chain capabilities and which are not? Does our product design mandate different outsourcing approaches? Risk management How are inventory holding and transportation costs affected by product design? How does product design enable mass customization? 26

Source: Simchi-Levi

STRATEGY Make to Stock

WHEN TO CHOOSE
standardized products, relatively predictable demand customized products, many variations many variations on finished product; infrequent demand

BENEFITS
Low manufacturing costs; meet customer demands quickly Customization; reduced inventory; improved service levels Low inventory levels; wide range of product offerings; simplified planning Enables response to specific customer requirements

Make to Order Configure to Order

Engineer to Order

complex products, unique customer specifications

Source: Simchi-Levi
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View the supply chain as a strategic asset and a differentiator

Create unique supply chain configurations that align with your companys strategic objectives

Wal-Marts partnership with Proctor & Gamble to automatically replenish inventory Dells innovative direct-to-consumer sales and build-toorder manufacturing Operations strategy Outsourcing strategy Channel strategy Customer service strategy Asset network
Forecasting Collaboration Integration

Supply chain configuration components

Reduce uncertainty

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