supply chain management
Download
Skip this Video
Download Presentation
SUPPLY CHAIN MANAGEMENT:

Loading in 2 Seconds...

play fullscreen
1 / 142

SUPPLY CHAIN MANAGEMENT: - PowerPoint PPT Presentation


  • 100 Views
  • Uploaded on

SUPPLY CHAIN MANAGEMENT:. An Organizational Competency INTRODUCTION TO THE COURSE http://awhitebread.ba.ttu.edu [email protected] ALAN L. WHITEBREAD. IB 3353. Learning and doing in a business environment – always prepared! 4 TESTS EXERCISES / HOMEWORK

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'SUPPLY CHAIN MANAGEMENT:' - roger


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
supply chain management
SUPPLY CHAIN MANAGEMENT:

An Organizational CompetencyINTRODUCTION TO THE COURSEhttp://[email protected] L. WHITEBREAD

ib 3353
IB 3353
  • Learning and doing in a business environment – always prepared!
  • 4 TESTS
  • EXERCISES / HOMEWORK
  • No make-up tests! No extra credit!
slide3

COURSE STRUCTURE

  • Business environment
  • Read ahead to prepare for class everyday
  • Attend class AND take good notes
  • Analyze, create, learn, understand, and apply [versus memorize]
  • Form opinions based on facts and analysis
  • Participate
    • Some in-class activities
    • Your comments and questions
key learning outcomes
KEY LEARNING OUTCOMES
  • Understand the four major basic parts of supply chain management.
    • understanding markets and supply chains,
    • supplier management and supplier relationships,
    • the role of the focal firm, its strategy and systems, and
    • marketing channels of distribution and channel relationships .
  • There are many concepts and theories that are relatively easy to understand at a high level but are very complex and difficult to implement.
  • New product development [NPD] is critical to the continuing success of the firm and the role SCM has in the NPD cycle.
your career success depends on being
YOUR CAREER SUCCESS DEPENDS ON being
  • INDIVIDUAL & TEAM SUCCESS
  • ON TIME
  • UNDER BUDGET
  • ABOVE PLAN
  • NO EXCUSES
  • EVERY TIME!
learning outcomes and your career success
LEARNING OUTCOMES AND YOUR CAREER SUCCESS
  • Begin to understand the many forces that cause changes to marketing programs around the world.
    • Culture
    • Business practices and legal systems
    • Governmental issues and procedures
slide7

SUPPLY CHAIN MANAGEMENTSECTION 1Understanding the Market – Supply Chain Relationship1 – UNDERSTANDING AND CREATING VALUEALAN L. WHITEBREAD

key learning outcomes8
KEY LEARNING OUTCOMES
  • Understand the four major basic parts of supply chain management.
    • understanding markets and supply chains,
    • supplier management and supplier relationships,
    • the role of the focal firm, its strategy and systems, and
    • marketing channels of distribution and channel relationships .
  • There are many concepts and theories that are relatively easy to understand at a high level but are very complex and difficult to implement.
  • New product development [NPD] is critical to the continuing success of the firm and the role SCM has in the NPD cycle.
what is scm today
WHAT IS SCM TODAY?

It is the seamless end-to-end management of a complex set of decisions requiring the exchange and flow of information, products, services, and money.

Simply put,

business environment
BUSINESS ENVIRONMENT

Regulatory compliance and corporate governance

Ethical, government

Risk Management

Customer, planning, quality, research, supplier, systems

Human Resource Development

Staffing and compensation

Education and skill development: change, education, professional development, team

Information Technology

Knowledge Management, MRP/ERP, JIT

Sourcing

Inventory & Logistics

Customer Relationships

Supplier Relationships

Payments

Order fulfillment

Procurement

firms using supply chain management
FIRMS USING SUPPLY CHAIN MANAGEMENT

The Aromatics (Thailand) Public Co. Ltd.

plus every other company, governmental agency, and organization.

supply chain management12
SUPPLY CHAIN MANAGEMENT

Mining companies – Manufacturers – Suppliers – Assemblers – Services

Resellers of all kinds or final purchasers

Final purchasers of Resellers

MARKETS

Consumers:

Customers

Prospects

Suspects

FOCAL FIRM

NEW PRODUCT DEVELOPMENT

supply chains are interdependent
SUPPLY CHAINS ARE INTERDEPENDENT

SUPPLIERS’

SUPPLIERS

MARKET

Consumers:

Customers

Prospects

Suspects

CUSTOMERS

If you change one thing in a supply chain, you know that one or more other things will be affected. So you must make decisions for the good of the entire supply chain, not for a specific area.

For instance, the system losses in all other areas may greatly exceed the benefit to the one area. This causes the supply chain to lose efficiency.

major benefits of scm
MAJOR BENEFITS OF SCM
  • is due to the timely flow of information, products and services, and money.
  • is driven by the focal firm’s specifications, and requirements for their suppliers.
  • is a result from the close working relationships between your suppliers, your customers, and the focal firm.
  • results from the improved customer and supplier responsiveness and faster NPD.
major benefits of scm15
MAJOR BENEFITS OF SCM
  • are driven throughout the system with critical systems like Total Quality Management [TQM].
  • is required to minimize delays, inventory levels, and total cost structures.
  • as you build closer and more effective relationships.
  • From here on, the term products will mean products, and/or services, or any combination of products and services.
supply chain success some hard questions
SUPPLY CHAIN SUCCESS:Some hard questions
  • Who are we?
  • How do or should we …
    • Fit competitively?
    • Understand customer behavior at all levels?
    • Understand customer needs and wants?
    • Understand which competencies, technologies, and processes are required?
    • Understand the role of power in the supply chain?
    • Gain a detailed understanding of costs from a simple operation through to total system cost?
filling the gaps
FILLING THE GAPS

When?

Where?

How many?

In what mix?

Delivered how?

When is it made?

Where?

How many?

How is it scheduled?

How is it delivered?

demand pulls all product
DEMAND PULLS ALL PRODUCT!

B2C

B2B

Suppliers

Manufacturers

Warehouses or Distribution Centers

B2C is business-to-consumer.

B2B is business-to-business.

Resellers

B2B or B2C Consumers

Planning and forecasting accuracy are critical as any delay in the system has a ripple effect! That ripple effect costs members time, money, and damaged relationships.

empowered customers
EMPOWERED CUSTOMERS
  • Customers have quick access to extensive product and pricing information.
  • Consumers are increasingly demanding
  • Consumers are demanding more and better services.
creating customer value
CREATING CUSTOMER VALUE

Benefits

These are some of the tools available to you to create and increase customer value. A great SCM system will strive to add value throughout the supply chain with everything it does.

Innovation

Quality

Delivery

Cost

Flexibility

slide21
Benefits are the reason we buy everything!
  • Benefits
    • May be
    • Must be
    • Must always
  • Delivering meaningful benefits and exceeding customer expectations are the keys to customer satisfaction in every step of the supply chain.
quality to the end user
QUALITY TO THE END-USER
  • David Garvin identifies the following factors that comprise quality.
    • of the products
    • of the products

-

    • of the products
    • Conformance to standards and specifications
    • Durability of the products
    • Serviceability of the products

-

    • Aesthetics of the products

-

    • Perceived quality of the products
additional aspects of quality
ADDITIONAL ASPECTS OF QUALITY
  • Service level
  • Product Flexibility
  • Delivery
quality manufacturing
QUALITY: MANUFACTURING
  • Productivity
    • Improve current processes
    • Develop innovative processes
  • Strategic locations
    • If you had a product that would be sold frequently to most adults in the U.S., how would you get enough inventory in the right places to service customer needs?
    • How do the differences between a sophisticated and an unsophisticated product affect service levels of the locations?
  • Supply chain management in place
quality design and specifications
QUALITY: DESIGN AND SPECIFICATIONS
  • Design to meet
  • Design to meet
  • Design for
  • Exceed standards organizations specifications
quality processes
QUALITY: PROCESSES
  • Works right the first time and every time!
    • A batch lot sampling approach to quality [percent defective]
    • At a customer specified level
    • Standards might include
      • Mil-Std-105E; ANSI/ASQC Z1.4-1993 and 2003; ISO 2859-1 [1999]
    • It is frequently found in
      • food, pharmaceutical, medical device, communications, apparel, software, and many more industries.
quality processes27
QUALITY: PROCESSES
  • are used when a process variable is counted rather than measured. Here’s how its done.
    • Calculate the mean [average] for the variable.
    • Calculate the standard deviation [σ ]for the variable.
    • The control chart limits for an acceptable product = Mean ±σ
quality processes28
QUALITY: PROCESSES
    • A statistical approach to quality
    • It is frequently found in
      • communications, financial services, healthcare, many manufacturing firms, and others.
  • Supplier rating / categorization
    • Suppliers are rated / categorized and each supplier level has its minimum requirements
    • Ship-to-stock is generally the highest level of supplier. They will ship products in your packaging directly into your inventory for shipment to your customers.
quality service
QUALITY: SERVICE
  • Exceeding service expectations is the key to value realization. Value realization is the customer perception of your worth versus your cost.
    • You purchased something for its perceived benefits.
    • It performed better than expected.
    • It was a better value than you initially thought.
    • What are you likely to do?
  • Service must be seamless for the customer!
quality cost
QUALITY: COST
  • Continuous improvement drives process efficiency!
  • The International Metric is Landed cost [LC]

LC = Standard Cost + Transportation1 +

Insurance + Duties + Other Fees

1 Inland location to outbound port + port fees + transportation to inbound port + port fees

quality flexibility
QUALITY: FLEXIBILITY
  • The outstanding firm has these characteristics.
    • Change is embraced and indigenous to all processes.
      • Any process can always be improved.
    • It can easily handle shorter lead times, special requests, unexpected events, and varying quality specifications.
    • It employs sophisticated information systems and highly developed processes are in place.
    • The thrust of the organization is to
quality delivery
QUALITY: DELIVERY
  • Correct products shipped
  • Correct quantities [exact amounts, no partial orders unless requested by the customer]
  • Correct
  • Correct order
      • An automotive supplier may be required to provide parts for the truck in the order they need to go to the assembly line.
quality innovation
QUALITY: INNOVATION
    • Suppliers can provide excellent advice. Get them involved early and you may get a nice surprise.
  • Joint teams with hand-picked members from each entity address
    • Design
    • Process improvement
    • Cost reduction
    • Major opportunities or problems
customer satisfaction
CUSTOMER SATISFACTION …
  • is based on the perceived benefits, the performance of the product and/or service, and the quality of the organization[s] that support it relative to customer expectations; and
  • It depends on understanding customer needs and wants then providing solutions with meaningful benefits, and
  • It must become deeply ingrained into the corporate culture.
customer satisfaction and expectations
CUSTOMER SATISFACTION AND EXPECTATIONS
  • Customer expectations must be managed so benefits always exceed them! Overcommitting only leads to disappointment and customer dissatisfaction.
  • Customer expectations are the bases for customers measuring their satisfaction.
  • Increased customer satisfaction leads to increased brand loyalty.
the value of customer satisfaction
THE VALUE OF CUSTOMER SATISFACTION
  • SCENARIO 1
    • Benefits greatly exceed expectations = Very satisfied customer
      • Customer is loyalty and recommending
  • SCENARIO 2
    • Benefits exceed expectations = Satisfied customer
      • Customer is less loyal, provides a weak if any recommendation
the value of customer satisfaction37
THE VALUE OF CUSTOMER SATISFACTION
  • SCENARIO 3
    • Benefits meet expectations = customer is indifferent
      • Customer is neutral, not recommending you
  • SCENARIO 4
    • Benefits are below expectations = Dissatisfied customer
      • Customer is not loyal, not recommending you
  • SCENARIO 5
    • Benefits are far below expectations = Very dissatisfied
      • Customer will not purchase from you again. Customer shares their bad experience others.
customer satisfaction38
CUSTOMER SATISFACTION
  • Metrics – ways to measure customer satisfaction
    • Percent on-time delivery
    • Percent of order complete
    • Percent defective products
    • Speed of response
  • Product / service gaps
    • What products / services are we missing?
customer centric strategy
CUSTOMER-CENTRIC STRATEGY
  • All supply chain activities are a result of a customer buying or wanting to buy a product and/or service.
  • A customer-centric strategy asks
    • What are the real needs of our
      • customers?
      • customer’s customers?
      • ultimate end-use customers?
    • What
      • information must be shared, and
      • capabilities developed, through the supply chain to meet these needs?
    • How can we improve the overall supply chain’s customer fulfillment capabilities?
customer centric strategy40
CUSTOMER-CENTRIC STRATEGY
  • A firm likely has different customer segments with different service expectations within a target market segment.
  • In addition to customer segments, very large accounts are likely to have specific individual service requirements.
market segmentation and customer centric strategy
MARKET SEGMENTATION AND CUSTOMER-CENTRIC STRATEGY
  • Market segmentation is the identification of unique groups or sets of customers and prospects who possess similar characteristics or needs.
  • Market segmentation is the basis for
    • understanding the needs of market segments,
    • developing market segment profiles,
    • determining an effective marketing mix, and
customer analysis
CUSTOMER ANALYSIS
  • To complete a thorough customer analysis, you need to be able to answer these questions.
    • What do each of our tiers of customers need to succeed?
customer segmentation
CUSTOMER SEGMENTATION
  • Your customer analysis by tiers from the previous slide may provide some interesting insights.
  • You may also need to analyze customer types within tier
    • For example, if a tier is B2B distributors it would be best to understand their needs by type of business they are in like electrical, MRO, medical, etc. They are likely to have some important differences.
customer segmentation44
CUSTOMER SEGMENTATION
  • Types of customers within tiers
      • “20% of your customers provide 80% of your sales” – but you have the ability to manage the mix.
        • “A” customers are the largest and should receive the best service.
        • “B” customers are the next largest and should receive sufficient service to grow.
        • “C” customers are the smallest and should be serviced with a minimum of resources [transactional accounts]. Possible candidates for direct marketing activities.
        • Just make sure your customers are never told they are a “B” or a “C” customer!
customer segmentation45
CUSTOMER SEGMENTATION
  • As you do your customer segmentation make sure you also define expected service levels.
    • Examples of things to consider could include
      • Communications: frequency, levels, …
      • Role of teams
      • Information systems
      • Processes
    • ?
evaluating customers
EVALUATING CUSTOMERS
  • What are the best measures for evaluating customers for our firm?
    • Net sales, profits, growth prospects, …,?
  • What tools can we use to measure this?
      • Ties specific costs directly to the customers that create them.
      • Used to identify the profitability of a business relationship.
    • Customer Relationship Management [CRM]
      • Used to create customer profiles that capture buying habits and determine customer profitability.
      • Many firms have a lot of work to do to incorporate relationships and tie this to an efficient direct marketing campaign.
    • These must be balanced with customer opportunity for growth in revenue and profit!
customer service gaps
CUSTOMER SERVICE GAPS
  • Our customers continually evaluate us and we must exceed their expectations in all areas to not suffer from a customer service gap.
  • Customer service gaps can exist in
    • Speed of response
    • Quality of response
    • Not delivering as promised
    • Poor or untimely information flow
    • ?
marketing degree emphasis in supply chain management
MARKETING DEGREE:Emphasis in Supply Chain Management
  • MKT 3353 Supply Chain Management
  • MKT 4358 International Marketing
  • MKT 4370 Logistics Management
  • MKT 4371 Logistics Analytical Methods
  • IB 4361 International Commerce

See my website for the brochure or your advisor for degree plan information.

http://awhitebread.ba.ttu.edu

slide49

SUPPLY CHAIN MANAGEMENTOnline/Distance Learning CourseSECTION 1Understanding the Market – Supply Chain Relationship2 – THE SUPPLY CHAIN: AN OVERVIEWALAN L. WHITEBREAD

the firm s environments
THE FIRM’S ENVIRONMENTS
  • Competitive
  • Cultural
  • Economic
  • Legal
  • Political
  • Corporate culture
  • Functional and cross-functional relationships
  • Reward systems
  • Strategic priorities
  • Comparative advantages
  • Core competencies
  • Overall competitiveness [key success factors]
supply chain management51
SUPPLY CHAIN MANAGEMENT

FIRM’S

ENVIRONMENT

MARKET POSITION

STRUCTURE &

OPERATIONS

[SCM]

THE PROCESS IS SOUND.

THAT IS WHY WE USE CONTINGENCY THEORY.

contingency theory
CONTINGENCY THEORY
  • Contingency theory sets the framework to evaluate alternatives using scenario planning.
  • Every good executive and manager is continually aligning the firm’s resources to take advantage of opportunities in the marketplace.
  • The central question a supply chain manager must continually answer is …
tree diagram
TREE DIAGRAM

What will they do?

?

What will they buy?

?

Underdeveloped Nations:

Poorly educated

Lack of water

Lack of food

Very poor infrastructure

Rapid increase in population

Normal increase in population

supply chain management54
SUPPLY CHAIN MANAGEMENT
  • requires
    • a common understanding by all entities [levels or tiers] of supply chain objectives;
    • an understanding of all individual entity roles;
    • the ability to work together across entities, functions, and levels of responsibility;
    • the flexibility to adapt in a timely manner to various or unpredictable situations, and,
    • the desire to create and deliver products and services that provide excellent customer value.
supply chain management55
SUPPLY CHAIN MANAGEMENT

CUSTOMERS

MARKETS

Consumers:

Customers

Prospects

Suspects

supply chain management56
SUPPLY CHAIN MANAGEMENT

Entities and their Roles

PLUS – Information Requirements – Flows and Processes – Repelling Competitive Thrusts – Building Relationships

SUPPLIER’S

SUPPLIERS

SUPPLIERS

FOCAL FIRM

CUSTOMERS

CUSTOMER’S CUSTOMERS

the supply chain at work a product flow view
THE SUPPLY CHAIN AT WORK: A product flow view

CONSUMERS

FORD, GM

CHRYSLER

FOCAL FIRM

VEHICLES

UPSTREAM

SUPPLIER

2ND TIER

FASTENERS

DIRECT

SUPPLIER

1ST TIER

Manage all other tiers.

RADIATORS

STEEL

COMPANY

3RD TIER

STEEL

DEALERS

RENTAL

AGENCIES

BUSINESSES

CONSUMERS

FLEETS

SPECIAL

VEHICLES

slide58
SCM:
  • INFORMATION
    • Market research
    • Supplier research
    • Process or system research
    • Technology research
scm pull and push information
SCM: PULL AND PUSH INFORMATION

FOCAL FIRM

CUSTOMERS

SUPPLIERS

Suppliers accessing Wal-Mart’s store data.

FOCAL

FIRM

RESELLERS

CUSTOMERS

SUPPLIERS

Toyota suppliers advising deliveries will be short due to the earthquake.

scm flows and processes
SCM: FLOWS AND PROCESSES
  • FLOWS AND PROCESSES
    • FLOWS
    • PROCESS INTEGRATION
      • Suppliers
        • Upstream
      • Focal firm
        • Internal Integration
      • Customers
        • Downstream
      • Complete
        • End-to-End Integration
scm flows and processes61
SCM: FLOWS AND PROCESSES
  • MAJOR PROCESSES [SYSTEMS]
    • Suppliers
      • Supplier relationship management
    • Focal firm
      • Demand management
      • Manufacturing flow
      • Order fulfillment
      • Product development and commercialization
    • Customers
      • Customer service
supply chains vs value chains an historical perspective
SUPPLY CHAINS VS. VALUE CHAINS:AN HISTORICAL PERSPECTIVE

SUPPLY CHAIN

The connected set of all

value-added business

entities and flows that

perform or support the

logistics function

required for production.

Focus on upstream

supplier and producer

processes, efficiency,

and waste reduction.

LOGISTICS

All discrete and

Interrelated activities

[regardless of ownership]

that seek to enhance

firm performance

VALUE CREATION

in every single event,

process, and/or system

from raw materials

through

customer satisfaction.

Focus on downstream

value creation for the

customer

supply value chain support activities
SUPPLY [VALUE] CHAIN SUPPORT ACTIVITIES
  • Infrastructure
  • Human resources
  • Materials Management
    • Purchasing or procurement function
  • Technology development
supply value chain direct activities
SUPPLY [VALUE] CHAIN:DIRECT ACTIVITIES
  • Inbound logistics
  • Operations
  • Outbound logistics
  • Marketing and Sales
  • Customer Services
supply value chain goal
SUPPLY [VALUE] CHAIN GOAL
  • To combine the support and direct activities to create the greatest value as perceived by the target market[s] segment[s].
external supply value chains
EXTERNAL SUPPLY [VALUE] CHAINS
  • CUSTOMERS
  • SUPPLIERS
  • MARKETS
  • STAKEHOLDERS
supply chain principles
SUPPLY CHAIN PRINCIPLES:
  • MAXIMIZE VALUE AT EVERY OPPORTUNITY FOR ALL YOUR STAKEHOLDERS [PUBLICS].
a supply chain
A SUPPLY CHAIN
  • REPELLING COMPETITIVE THRUSTS
    • Market [segment] share
    • Large customers
supply chain principles69
SUPPLY CHAIN PRINCIPLES:
  • Builds relationships
    • Suppliers
    • Focal firm stakeholders
      • Customers
      • Employees
      • Shareholders
      • Suppliers
      • Special interest groups
slide70

SUPPLY CHAIN MANAGEMENTOnline/Distance Learning CourseSECTION 1Understanding the Market – Supply Chain Relationship3 – INFORMATION [research for the supply chain]ALAN L. WHITEBREAD

what are the common goals of supply chain managers
WHAT ARE THE COMMON GOALS OF SUPPLY CHAIN MANAGERS?
  • In rank order
    • Increase sales
    • Get more value from current investments
    • Reduce the amount of direct labor and material
    • Migrate to a higher percentage of variable cost through outsourcing
scm management processes
SCM MANAGEMENT PROCESSES
  • Customer relationship management [CRM]
  • Customer service
  • Demand forecasting
  • Inventory control
  • Order fulfillment
  • Manufacturing flow and scheduling
  • New product development & commercialization
  • Procurement
  • Returns – Rework – Replace - Disposal
  • Supplier interfaces
the research process
THE RESEARCH PROCESS

Develop the

research

plan

Collect data

Present the

findings

Analyze the

data

information
INFORMATION
  • What information do we need about our external environment?
    • Competitive
      • Actions, new developments, new products, new entrants, …
    • Legal
      • New laws, regulations, and procedures
    • Cultural
      • How do we appear to be native to this culture?
    • Economic
      • How well do we understand the impacts of economic trends and cycles on our business[es]?
    • Political
information75
INFORMATION
  • What information do we need about consumers [markets]?
    • Strategy analysis
    • Market research
      • What are their needs?
    • New / existing business analysis
    • Market segmentation / share
    • How do markets view our competitors and their offerings?
    • ?
information76
INFORMATION
  • What information do we need about suppliers?
    • Capabilities
      • Facilities, output, technological prowess, … ?
    • Financial status and prospects [10K and 10Q]
    • Management team and style
    • How well do they comply with security needs?
    • How well do they meet standards and compliance needs?
    • What are there systems, processes, process flows, …
    • ?
information77
INFORMATION
  • What information do we need about our organization?
    • Competitively speaking, how do we fare technologically?
    • Are processes and procedures as efficient as they can be?
      • Inventory management and live inventory
    • Do we have an above average supplier management program?
    • Do we have exceptional
      • market segmentation?
      • customer classifications?
    • Have we implemented best practices throughout the organization?
    • How do we expand and streamline global operations?
    • ?
information78
INFORMATION
  • What information do we need about our organization?
    • Are we prepared to handle emerging key issues?
      • The rapidly rising cost of transportation
      • The falling or rising value of the dollar
      • Technology challenges
      • The challenge of energy efficiency?
      • The challenge of becoming ecology friendly?
      • ?
information79
INFORMATION
  • What information do we need about our
    • How do they want to purchase?
    • What are they really good at?
    • How good is our reseller selection process?
    • What do they need to become better?
    • ?
information80
INFORMATION
  • What information do we need about our
    • How do they use our products?
    • What are their attitudes about …?
    • What do they like most about us?
    • Where do they perceive product and/or service gaps?
    • ?
slide81

SUPPLY CHAIN MANAGEMENTSECTION 1Understanding the Market – Supply Chain Relationship4 – MARKET DEFINITION, SEGMENTATION, AND TARGET MARKETINGALAN L. WHITEBREAD

market segmentation
MARKET SEGMENTATION
  • This is a multi-step process that must be done in a sequence of six steps.
  • It groups people or entities by their most important attributes.
  • It should determine unique [preferably] or nearly unique segments where each segment will have its own behavior pattern.
market segmentation bases market segment and target market
MARKET SEGMENTATION: BASESMARKET SEGMENT AND TARGET MARKET

1+ CHILDREN

HISPANIC

TARGET

AGES 25-34

HOUSEHOLD INCOME

OVER $50,000

In this example, the key attributes are Hispanic, ages 25-34, with household income over $50,000 per year having one or more children. The target market segment is the intersection of all four attributes. It is the small colored area named TARGET.

[Oxford - MacDonald - video]

market segmentation develop attractiveness measures
MARKET SEGMENTATION- DEVELOP ATTRACTIVENESS MEASURES -
  • WHY IS MARKET SEGMENTATION WORTH DOING?
    • It provides for very targeted communications.
    • It helps you provide products that fulfill needs and wants.
    • It allows you to respond to changing markets and conditions.
    • It makes your marketing more efficient.
  • BUT, IF THE MARKET SEGMENTATION IS WRONG, LITTLE SEEMS TO WORK WELL AFTERWARD!
market segmentation86
MARKET SEGMENTATION
  • Multiple market segments

When a firm uses the market segment approach it usually has between three and eight market segments.

Market segments that are not nearly unique result in lack of brand loyalty and consumers being less brand loyal [cannibalization]. Venn diagram explanation.

      • From 2009 to 2011 P&G is reducing the number of detergent segments in the U.S. from 13 to 6.

Remember - the number of market segments is a function of your market segmentation, not some arbitrary range. The more segments you have the more complex and expensive the marketing effort is likely to be.

consumer market segmentation methods demographic 1
CONSUMER MARKET SEGMENTATION METHODS – DEMOGRAPHIC [1]

“Lubbock’s leading radio station”

consumer market segmentation methods psychographic 2
CONSUMER MARKET SEGMENTATION METHODS – PSYCHOGRAPHIC [2]

ATTITUDES, INTERESTS, & OPINIONS [AIO] for instance:

Spends 1+ hours per day on the Internet, heavy e-mail user

Buys on the Internet, goes to stores only as required

Professional, income above $75,000 per year

Belongs to multiple frequent traveler programs

The market profile should provide almost everyone that reads it a very similar picture of the people in this target market segment!

u s consumer communications market segment profiles
U.S. CONSUMER COMMUNICATIONS MARKET SEGMENT PROFILES
  • Older [define age range [45+]], low communicator [define [<1 hour per day on the phone]], low income [define range or maximum [$15,000-30,000 per year]
  • Middle-aged, higher income, empty nester [no children at home], who talks a lot on the phone
  • Technology interested [extensive user of several communications modes], well educated, high discretionary income

You must define every term so there is a clear understanding of the profile!

b2c expected buyer behavior
B2C EXPECTED BUYER BEHAVIOR
  • Exercise:
    • Describe the expected buyer behavior profile of the market for any current product.
    • Use key items like demographics, psychographics, purchasing patterns, quantity, the marketing mix, classification of your product, and other relevant items to generally describe how consumers would purchase this item.
      • ON YOUR OWN: Develop a buyer behavior profile for college students purchasing pens for class use.
market segmentation filling the gaps
MARKET SEGMENTATION:FILLING THE GAPS

CHANNELS OF DISTRIBUTION

1

3

PRODUCTS

SERVICES

APPLICATIONS

4

4

2

TWO LARGEST TARGET MARKET SEGMENTS

MARKETS / SEGMENTS

In this example, you have to decide which target market segments are good for your firm. #1 needs a channel of distribution you are either not in or have a very weak position. That is very hard to do. #2 and #4 are nice size. A large firm will attack #2, but #1, #3, and #4 may be too small to be of interest. #3 is the hardest of all because it has channel and product mix issues.

b2c target market segment criteria kotler s 5 tests
B2C TARGET MARKET SEGMENT CRITERIA: Kotler’s 5 tests
  • MEASURABLE
        • Can I quantify the size of the market [segment]?
  • ACCESSIBLE
        • Can I access the market [segment] with my current channels of distribution?
  • SUBSTANTIAL
        • Is the market [segment] large enough to be worthwhile?
  • DIFFERENTIABLE
        • Can our products be clearly differentiated?
  • ACTIONABLE
        • Does my company have the necessary staying power?

YOU ALWAYS NEED TO IDENTIFY A UNIQUE OR NEARLY UNIQUE RESPONSE / BEHAVIOR PATTERN FOR EVERY SEGMENT!

levels of market segmentation
LEVELS OF MARKET SEGMENTATION

UNDIFFERENTIATED [MASS] MARKETING

The firm decides to ignore market segment differences.

One marketing mix

Same product to all segments

Salt Sugar Early Ford

DIFFERENTIATED [SEGMENTED] MARKETING

The firm decides to target several [large] market [s] segment[s]

Each market or segment has a marketing mix

Different products for each market segment

Proctor & Gamble detergents Current auto manufacturers

levels of market segmentation98
LEVELS OF MARKET SEGMENTATION

CONCENTRATED [NICHE] MARKETING

The firm decides to pursue a larger market share of selected [smaller]

market segments, sub-segments, or niches

Different products to the [sub-]segments

Different marketing mix for each segment or sub-segment

SUV’s standard to family to luxury

MICROMARKETING

Specialized products for individuals and locations

LOCAL MARKETING INDIVIDUAL MARKETING

[Brands, promotions] [1:1 marketing]

Local chain grocery stores Amazon, Dell

2 differentiated marketing
#2 – DIFFERENTIATED MARKETING
  • A different marketing mix for each large segment.
    • Marriott International [circa 2000]
      • Marriott Suites…………...Permanent vacationers
      • Fairfield Inn……………..……...Economy Lodging
      • Residence Inn………….……….....Extended Stay
      • Courtyard By Marriott………..Business Travelers

TRANSITIONED TO CONCENTRATED [NICHE] MARKETING [beginning in 2008 -13 brands]

market targeting choosing a market coverage strategy
MARKET TARGETING:CHOOSING A MARKET-COVERAGE STRATEGY
  • Some questions about key factors to consider when deciding on a market-coverage strategy include the following.
    • What are the available company resources?
    • How much market variability exists?
    • What is the product’s life cycle stage?
    • How much product variability exists?
    • What is the typical behavior of the competition and their actions/strategies?
the economy and naics every economy has a similar economic organizational structure
THE ECONOMY AND NAICSEvery economy has a similar economic organizational structure.

GROW, BUILD, OR MAKE

SELL

SERVICE

GOV’T

Agriculture

Mining

Utilities

Construction

Manufacturing

Wholesale

Retail

Transportation

Information Finance

Real Estate Professional

Management Administration

Entertainment Health

Education Accommodation

Other

Public Administration

business classification you can find naics details at www census gov
BUSINESS CLASSIFICATIONYou can find NAICS details at www.census.gov
  • NORTH AMERICAN INDUSTRIAL CLASSFICATION SYSTEM [NAICS]
    • SUPPLY-ORIENTED SYSTEM
    • 20 SECTORS: 1,065 INDUSTRIES [in 2012]
    • Compatible with
      • NAFTA: 5 DIGITS + 6TH FOR COUNTRY CODE
      • ISIC Rev. 3 [UN]
reading naics tables pagers
READING NAICS TABLES - PAGERS
  • 51 Economic sector
          • Information
  • 511 Economic sub-sector
          • Broadcasting and Telecommunications
  • 5111 Industry group
          • Telecommunications
  • 51111 Industry group
          • Wireless Telecommunications Carriers
  • 511111 U. S. Industry specialized identification
          • Paging
types of markets
TYPES OF MARKETS
  • HORIZONTAL MARKET
    • Numerous NAICS codes define it.
      • B2C – Inexpensive pens, pencils, pads of paper, …
      • B2B – floor sweeping compound
  • VERTICAL MARKET
    • One or a few NAICS codes define it.
    • May be very profitable [niche]
      • B2C – $1,000 fountain pen
      • B2B – CT scanner
business segmentation variables
BUSINESS SEGMENTATION VARIABLES

Organizational Characteristics

-Industry

-Size

-Channel

-Operating characteristics

Buying Approach

-Centralization

-Functional involvement

-Partnering

Product[s] or Process[es] or Technology[ies]

-Level of technology

-Configuration

-Design

Application[s]

of Products / Services

-What are they used for?

-How they are used?

business market segmentation
BUSINESS MARKET SEGMENTATION
  • ORGANIZATIONAL CHARACTERISTICS
    • GEOGRAPHIC
      • How can I sell my new pen to ALL 400,000 businesses in the Chicago area?
    • DEMOGRAPHIC
      • How do I get my resume to all firms with 500 or more employees?
business market segmentation matrix
BUSINESS MARKET SEGMENTATION MATRIX

You get the same result using products within applications or applications within products.

b2b target market segment criteria
B2B TARGET MARKET SEGMENT CRITERIA
  • MEASURABLE
    • The degree to which you can measure buyer characteristics
  • ACCESSIBLE
    • The ability to focus on target market segments
  • SUBSTANTIAL
    • The degree to which target market segments are large enough and potentially profitable enough to pursue
b2b target market segment criteria111
B2B TARGET MARKET SEGMENT CRITERIA
  • COMPATIBLE

-The extent to which marketing and business strengths compare to current and expected competitive and technology states

  • RESPONSIVE

-The extent to which target market segments respond to elements of the marketing mix

positioning establishing customer value
POSITIONING: ESTABLISHING CUSTOMER VALUE
  • POINTS OF PARITY [POP] AND POINTS OF DIFFERENCE [POD]
    • RELEVANCE
      • It must be relevant and important.
    • DISTINCTIVENESS
      • It must be distinctive – superior [actual or perceived] is nice.
    • BELIEVABILITY
      • It must be believable and credible.
positioning establishing customer value114
POSITIONING: ESTABLISHING CUSTOMER VALUE
  • POINTS OF CONTENTION [POC]
    • Elements where there is disagreement as to how its performance or functionality compares to the next best alternative.
    • Seen in comparison or negative advertising
  • COMPETITIVE FRAME OF REFERENCE
    • Comparative advertising
    • Negative advertising
slide116

SUPPLY CHAIN MANAGEMENTOnline/Distance Learning CourseSECTION 1Understanding the Market – Supply Chain Relationship5 – SYSTEMS THINKING AND SUPPLY CHAINSALAN L. WHITEBREAD

functional organization thinking and goals
FUNCTIONAL ORGANIZATION THINKING AND GOALS

PURCHASING

Metrics: Standard cost [SC], PPV

PRODUCTION

Metrics: SC / volume / automation

MARKETING

Metrics: Average unit price [AUP]

LOGISTICS

Metrics: Inventory & transportation

supply chain management process thinking and goals
SUPPLY CHAIN MANAGEMENT:PROCESS THINKING AND GOALS
    • aligns decisions with corporate strategy, and
    • coordinates actions across
  • SCM is the maximization of value at every opportunity from supplier’s supplier to the customer’s customer.
  • SCM requires a process thinking approach that consists of sets of value-added flows and activities in three areas.
systems thinking
SYSTEMS THINKING
  • Systems thinking is the holistic process of simultaneously considering both the immediate outcomes and the longer-term system-wide ramifications of decisions.
  • It requires:
    • Information Availability and Accuracy
    • Teamwork
    • Metrics
    • Systems Thinking
information120
INFORMATION
  • Bar Codes
  • Radio Frequency Identification [RFID]
  • Data Warehousing
  • Data-Mining
  • Materials Requirements Planning [MRP] or Enterprise Resource Planning [ERP]
teamwork
TEAMWORK
  • Hand-pick teams to accomplish specific objectives.
    • Process improvement
    • Cost improvement
  • They may be
metrics
METRICS
  • With a systems thinking approach we must be able to quantitatively measure changes in processes as well as the impact of any single change or set of changes on the total system.
systems thinking123
SYSTEMS THINKING
  • Requires all firms and employees anywhere in the supply chain to understand their place in the larger chain.
  • All entities must participate in
    • Establishing the core goal[s]
    • Defining systems and their boundaries
    • Determining the nature of the interrelationships
    • Determining the information requirements
    • Performing trade-off analysis
    • Evaluating and implementing system constraints
the firm as a value added system
THE FIRM AS A VALUE-ADDED SYSTEM
  • Everything the firm does must be focused on
    • increasing
    • building
    • strengthening
the firm as a value added system125
THE FIRM AS A VALUE-ADDED SYSTEM
  • Core Competency
    • The skills and processes that together seek to deliver customer value at least equal to the most direct competitor.
    • The total value that the firm promises to deliver to the customer.
strategic direction of the firm the core competence of the corporation article
STRATEGIC DIRECTION OF THE FIRM[“THE CORE COMPETENCE OF THE CORPORATION” ARTICLE]
  • CORE COMPETENCY
    • The foundations [ ] upon which you build your business over a very long time. You need to compare your core competencies with those of your competitors.
  • THREE CORE COMPETENCY TESTS
key success factors
KEY SUCCESS FACTORS
  • NOT CORE COMPETENCIES
  • YOU MUST DO BETTER ALL THE TIME TO
  • Take a few moments now and apply the core competency tests to the following and see why they usually fail one or more of the tests.
    • Customer services
    • Design
slide128

SWOT ANALYSIS

Your firm and your major competitors

IP

Low cost structure

Market position

STRENGTHS

BUILD

Take advantage of the firm’s strengths

OPPORTUNITIES

EXPLOIT

Use the firm’s strengths to offset competitive threats

NPD

New markets, channels

Acquisitions

LEVERAGE

CONSTRAINTS

VULNERABILITIES

Breadth of offering

Lack of management talent

Weak finances

WEAKNESSES

CORRECT

Offset the firm’s weaknesses

THREATS

AVOID

Counter threats

Rapidly changing market

New entrants

Government regulations

PROBLEMS

swot example questions
SWOT: EXAMPLE QUESTIONS
  • STRENGTH
    • What do we do better than others?
  • WEAKNESS
    • Where has performance declined?
  • OPPORTUNITY
    • What new trends [short-term and long-term] are emerging?
  • THREAT
    • Is a major technology change underway or expected in the industry?
competitive advantage of the firm porter s three generic strategies
COMPETITIVE ADVANTAGE OF THE FIRM:PORTER’S THREE GENERIC STRATEGIES

Customer Perceived Uniqueness

Low Cost Position

Focus on perceived value.

Examples = ?

OVERALL COST

LEADERSHIP

STRATEGY

Hard to maintain

long term.

Examples = ?

Understanding and focus.

No direct battles with major competitors.

Examples = ?

process engineering
PROCESS ENGINEERING
  • is the design of business processes using a methodology to optimize each specific process.

PROCESS REENGINEERING

  • is the of business processes using
decision making and uncertainty
DECISION MAKING AND UNCERTAINTY
  • Economic Value Analysis
    • Requires you to have outcome steps and a probability estimate for each outcome step.
    • The Expected Value [EV] is the sum of the probability of an outcome [Pn] times the value [Vn] of that outcome.
expected value example
EXPECTED VALUE EXAMPLE

You are deciding between two alternatives with the following payoffs, states of nature, and probabilities. Which alternative should you choose?

decision tree example
DECISION TREE EXAMPLE

SUBSIDIARY PIECE PART PURCHASE OPTIONS

100%

Net cost

10.00 / 100% = 10.00

Buy from U.S.

[10.00 landed cost]

96%

Net cost

9.80 / .96 = 10.21

Buy from qualified local supplier

[9.80 delivered cost]

Subsidiary purchases

90%

Net cost

9.60 / .9 = 10.67

Manufacture the product

[9.60 cost]

process maps
PROCESS MAPS
  • A process is any activity that transforms an input set into an output set.
  • A process map is a visual representation that shows all steps in the correct sequence that is required to transform an input set into an output set.
  • A process map should show
process map problem
PROCESS MAP PROBLEM

Procurement

Input

[materials]

Process

[manufacture]

Output

[finished goods]

Output

[customer receives finished goods]

Movement

[to customer]

Delay

[warehouse inventory]

Movement

[to warehouse]

Process mapping has its own set of diagram symbols.

supply chain maps
SUPPLY CHAIN MAPS
  • Help to identify major linkages and bottleneck areas with customers and key suppliers.
  • Tools like a pipeline map may identify unnecessary complexity or steps, thereby leading to improvements in efficiency of the supply chain.
pipeline map example
PIPELINE MAP EXAMPLE

Receive customer specifications

Discuss final specs with customer

Make modifications to improve productivity

Customer approves sample parts

Engineering approves mold

Machine customer tooling

Test mold

Design customer tooling

Add cooling lines

Make sample parts

Production sample run

Production approves mold

Production begins

Review customer specifications

ad