W5: Case Discussion
Principles of Marketing 4.0
Jeff Tanner and Mary Anne Raymond
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CHAPTER 9
Using Supply Chains to Create Value for Customers
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THE SUPPLY CHAIN
Designing, monitoring, and altering these organizations is called supply-chain management.
In progressive companies, the term value chain is used to signify the important role they play.
INCLUDES ALL OF THE ORGANIZATIONS THAT IMPACT PRODUCTS BEFORE, DURING, AND AFTER THEIR PRODUCTION
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LEARNING OBJECTIVES
Explain why sourcing and procurement activities are an important part of supply chain management.
Describe the reasons why the use of outsourcing and offshoring has grown.
Explain some of the drawbacks companies face when they outsource their activities.
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SOURCING AND PROCUREMENT
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WHY OUTSOURCE?
Sometimes outside organizations can provide more value.
Sometimes outside organizations can provide more cost effectiveness.
Outside organization may provide products and services in a more timely manner.
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SUPPLY CHAIN FUNCTIONS OFFSHORED
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RISKS IN OUTSOURCING
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control
Loss of control has consequence for quality and safety.
quality
More than one-fifth of companies experience quality problems when outsourcing.
safety
Redundant safety checks may be necessary.
SOCIAL RESPONSIBILITY IN OUTSOURCING
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WHY FIRMS ARE GOING GREEN
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OTHER OUTSOURCING CONCERNS
The logistics of transporting and storing can be complex.
The workforce policies of companies in developing countries can be poor.
Some concerns lead to insourcing or moving activities back in house.
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MATCHING SOURCING AND CUSTOMER NEEDS
Customers can determine outsourcing and insourcing strategies.
The customer is the last link in the supply chain.
Recycling and reclaiming programs require the customer’s cooperation.
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KEY TAKEAWAYS
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.
Sourcing and procurement have become a bigger part of a supply-chain manager’s job in recent years, in part because businesses keep becoming more specialized.
Companies outsource activities to lower their costs to focus on the activities they do best.
Companies face numerous tradeoffs when they outsource activities, which can include a loss of control and product-quality and safety problems.
When firms can’t resolve their supplier problems, they find other suppliers to work with or move the activities back inhouse, which is a process called insourcing.
Customer should be the focus of any insourcing and outsourcing decisions companies make.
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LEARNING OBJECTIVES
Explain why demand planning adds value to products.
Describe the role inventory control plays when it comes to marketing products.
List the reasons why firms collaborate with another for the purposes of inventory control and demand planning.
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DEMAND PLANNING
Demand planning: the process of estimating how much a good or service a customer will buy.
Production scheduling: the management of the resources, events, and processes needed to create an offering.
Lead time: the amount of time it takes for a customer to receive a good or service once it’s been ordered.
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SOURCING AND FORECASTING
Sourcing decisions—deciding which suppliers to use—are generally made periodically.
Forecasting decisions must be made more frequently.
As an example, when President Trump imposed tariffs on foreign steel and aluminum in 2018, firms had to alter their sourcing and forecasting decisions.
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SUPPLY CHAIN MANAGEMENT
Supply chain managers consult with marketing managers and sales executives when they are generating demand forecasts.
Firms also look to their supply chain partners to help with their demand planning.
In collaborative planning, forecasting, and replenishment (CPFR) supply chain partners share information and coordinate their operations.
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INTEGRATING THE SUPPLY CHAIN IN PLANNING
Supply chain visibility: the trend is clearly toward more shared information.
Demand planning software: synthesizes a variety of factors to better predict a firm’s demand.
Inventory control: the process of ensuring your firm has an adequate amount of products to meet customer needs.
The goal of inventory management is to avoid stockouts.
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INVENTORY TERMS
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: a 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.
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MASS CUSTOMIZATION
Dell’s inventory and production system allows customers to customize their computers.
Dell keeps its inventory levels low.
It has components on hand which can be configured to suit customer preferences.
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PRODUCT TRACKING
Electronic product code (EPC): similar to a barcode, only it is better because the number on it is truly unique.
Radio frequency identification (RFID) tag: emits radio signals that can record and track shipments.
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HOW RFID TECHNOLOGY WORKS
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KEY TAKEAWAYS
The best marketing decisions and supplier selections aren’t enough if your company’s demand forecasts are wrong.
Demand forecasting is the process of estimating how much of a good or service a customer will buy from you.
If you’re a producer of a product, this will affect not only the amount of goods and services you have to produce but also the materials you must purchase to make them.
Demand forecasting is part of a company’s overall inventory control activities. Inventory control is the process of ensuring your firm has an adequate amount of products and a wide enough assortment of them meet your customers’ needs.
One of the goals of inventory control is to avoid stockouts without keeping too much of a product on hand.
Some companies are beginning to experiment with new technologies such as RFID tags and blockchain in an effort to better manage their inventories and meet their customers’ needs.
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LEARNING OBJECTIVES
Understand the role warehouses and distribution centers play in the supply chain.
Outline the transportation modes firms have to choose from and the advantages and disadvantages of each.
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WAREHOUSING AND DISTRIBUTION CENTERS
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HOW DISTRIBUTION CENTERS FUNCTION
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Stock-keeping unit (sku)
Unique ID numbers used to find products.
automation
Robots are used to pick products.
Electronic data interchange (edi)
Computer to computer document exchange.
HOW CROSS-DOCKING WORKS
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TRANSPORTATION
Logistics: The physical flow of materials in the supply chain.
Trucks: More products are shipped by truck than by another means. Most products undergo some trucking.
Water: International trade could scarcely be conducted without cargo shipping.
Air: High cost of air transport limits its use to time sensitive products.
Railroads: In terms of its speed and cost, shipping by rail falls somewhere between truck and water transportation.
Pipelines: Generally used to transport oil, natural gas, and chemicals.
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KEY TAKEAWAYS
Some firms store products until their prices increase.
A distribution center is a warehouse or storage facility where the emphasis is on processing and moving goods on to other parts of the supply chain.
Warehousing products regionally can help a company tailor its product selection to better match the needs of customers in different regions.
Logistics refers to the physical flow of materials in the supply chain. Not all goods and services need to be physically transported.
Some goods are directly given to customers or sent to them electronically.
Products that need to be transported physically to get to customers are moved via, air, rail, truck, water, and pipelines.
The transportation modes a firm uses should be based on what its customers want and are willing to pay for.
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LEARNING OBJECTIVES
Understand why being able to trace products is important to organizations and their customers.
Explain what reverse logistics is and why firms utilize it.
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TRACK AND TRACE SYSTEMS
Track and trace systems electronically record the paths shipments take.
Most product shipments (tracking individual packages is harder) can be traced using:
GPS
RFID
Bluetooth
Barcodes
Consumers want 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, for example, by utilizing the Internet of Things (IoT) and/or blockchain technology.
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REVERSE LOGISTICS
Most companies set up reverse logistics systems to “turn trash into cash.”
A recent study suggests companies can recover up to 0.3 percent of their annual sales this way, which for Best Buy would amount to $100 million a year.
Upcycling is a process to extract value from waste and using it to create new products.
RUNNING PRODUCTS AND MATERIALS BACKWARDS THROUGH THE SUPPLY CHAIN TO EXTRACT VALUE FROM THEM.
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KEY TAKEAWAYS
Being able to trace products helps a company anticipate events that could disrupt the supply chain, including shipping mistakes, bad weather, and accidents so they can be averted.
Most shippers have track and trace systems that can track product loads.
Tracking individual products, especially after they are combined to make other products, is more difficult.
Consumers are more interested than ever in knowing where their products come from—particularly when there is a contamination problem with an offering.
Reverse logistics is the process of running damaged and defective products and scrap materials backward through the supply chain to extract value from them.
Companies are increasingly employing reverse logistics not only to save money but for environmental reasons.
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