TIM hw1

Weichih Sun 1/17/17 TIM 125

Homework 1

Problem 1
Problem 2
Problem 3
Problem 4
Problem 5

1. SCM software vendors

Step 1: Define the Problem

1. How large ($, % annual growth rate) is the SCM enterprise-software market? 2. Do a competitive analysis of the business landscape for SCM enterprise-software using Porter’s five (six) forces framework. 3. Then, characterize the competitive strategy of the major firms competing in this space. 4. If you were to enter this space, i.e., be a “new entrant”, what would your strategy be? Explain.

Step 2: Create a Plan

1. Assumptions: What information do I have? Class notes and internet resources 2. Research the SCM enterprise-software market. How large ($, % annual growth rate) is the SCM enterprise-software market? 3. Create a Porter’s five (six) forces framework of the business landscape SCM enterprise-software and analyze the forces 4. Categorize and describe the major firms competing in this market 5. Explain strategies as a “new entrant” in this market

Step 3: Execute the Plan

1. Research the SCM enterprise-software market. How large ($, % annual growth rate) is the SCM enterprise-software market? a. Using google as my search engine. I was able to find an article detailing the % annual growth rate and $ from Forbes. In the table below Table 1.1 we can see that in 2014 the % annual growth rate increased by 10.8%. It also details the top competitors in this market and depicts the % annual growth rate for each company. We can see that SAP leads the competition with a 19.9% growth rate. While Manhattan Associates with the second biggest % annual growth rate at 12.0%.

Table 1.1

2. Create a Porter’s five (six) forces framework of the business landscape SCM enterprise-software and analyze the forces

New Entrants:

DataCulture Velo software, SkuBrain software

Complements:

Management applications Weblink, book keeping software, consultant services

Substitutes:

OpenSource, Free Software Movement, QuickBooks, manual accounts

Competitors:

SAP, Oracle, JDA software, Manhattan Associates, Epicor

Suppliers:

Oracle, FlexSystem, Epicor, SAP

Buyers:

Small businesses, large enterprises, company handling inventory and delivery

Competitors: The competitors force in this market is very high. Since the existing competitors in this market are successful, high market shares and offer products similar to other competing companies. New Entrants: The force for new entrants is low since products in this market are similar in purpose. It would be hard to compete against the top companies that dominate this market. Therefore, entering this market would prove to be very difficult. Substitutes: The force for substitutes is low. Even though there are substitutes such as free software OpenSource and manual management. Developing a substitute for SCM software would most likely not be successful. Even though small companies don’t need a very well defined SCM software, there are many other options out there that are cheaper from smaller companies that are providing these SCM software’s. Suppliers: The force for suppliers is medium this is because creating a SCM software that is unique from others has a high chance of being bought by larger companies. Even though a lot of the top companies supply themselves. Buyers: The force for buyers is high. Most buyers of SCM software are companies small or large that works with managing inventory, keeping track of transportation. With many more companies on the rise there will be a rise in demand for SCM software. Complements: The force for complements is low. This is because most SCM software that is being used doesn’t require any additional help to make it better and as such making complements have a weak force in this market.

3. Categorize and describe the major firms competing in this market

Competitors	Competitive Strategy
SAP	Long product life-cycle, high investment, perceived as ‘game-changing’, constant improvement releases, highly customizable, industry focused
Oracle	Create innovative integrated product that doesn’t require customers to constantly upgrade to a newer version, focus building technical strength to enable easy innovation, leverage strength from relational database management area
JDA Software	Strategic opportunities assessment, business diagnostics, network, inventory, forecasting and productivity optimization assessments, solution impact assessments
Manhattan Associates	Easy integrations of warehouse technologies, 24 by 7 operations, has ability to expand its capabilities with other features
Epicor	Provide a single point of accountability to promote rapid return on investments and low total cost of ownership, provides full enterprise software solution portfolio offering the scalability and flexibility to meet today’s business challenges and opportunities

4. Explain strategies as a “new entrant” in this market

a. A strategy for a new entrant would be to focus on a specific section of the market. Since large companies like SAP and Oracle control a huge section of the market and their product is very innovative. Their target audience is very large and this makes it easier for new entrants to target a specific section of the market and eventually become more well-known and generate more revenue.

Step 4: Check your Work

Using google as my search engine to find data on & annual growth rate and reading the chapters in the book. I can assume that the information I have provided is accurate and correct.

Step 5: Learn and Generalize

After researching, each major company in this market, I learned that each company’s competitive strategy is similar but there are some major differences in how they approach their product. This allows the companies to make their products unique to their target customers.

2. Supply chain strategy for cell-phone manufactures

Step 1: Define the Problem

1. Do a competitive analysis of the business landscape for cell-phones using Porter’s five (six) forces framework. 2. Then, characterize the competitive strategy of the major players using a 2x2 grid of “strategic target” and “source of the competitive advantage”. 3. What should the corresponding supply chain strategy of each player be in order to achieve the “right” fit with the player’s competitive strategy? 4. Develop a supply chain network for a cell-phone

Step 2: Create a Plan

1. Research the business landscape for cell-phones. Create a Porter’s five (six) model and do a competitive analysis 2. Characterize the competitive strategy of the major players using a 2x2 grid of “strategic target” and “source of the competitive advantage” 3. Use efficiency/responsiveness and Implied Demand Uncertainty to achieve the “right” fit with the player’s competitive strategy 4. Develop a supply chain network for a cell-phone

Step 3: Execute the Plan

1. Research the business landscape for cell-phones. Create a Porter’s five (six) model and do a competitive analysis

New Entrants:

Xiaomi, Blu’s, Lumigon, Geeksphone

Buyers:

Everyday consumers, companies

Suppliers:

Shenzhen Aysemo Technology, Xiaoniu International Trade Co., Xinruiming Technology

Competitors:

Samsung, Apple, Google, LG

Substitutes:

Computers, email, mail

New Entrants: The force of new entrants is low because the industry is already well established market. Capital requirement is high to compete in the market with large manufacturing costs, high research and development costs. Advanced technologies make it difficult for new competitors because they must develop those technologies before effectively competing. Substitutes: The force of substitutes is medium since the presence and availability of substituted products is a great threat for the successful survival of the organization since it can enforce the organization to cut the price of its product. Buyers: The force of buyers is high. The power for buyers is rising because of the increasing number of choices in the mobile telecommunication industry and very little differentiation of products. Low switching costs make it easy for customers to change the products they normally purchase. Suppliers: The force of suppliers is medium and there are two main suppliers in this industry: the hardware manufacturer and the software developers. Software suppliers have many open source mobile operation system providers, options are plenty and hence the bargaining power of software provider is low. An important factor is low bargaining power of the supplier is that there is intense competition among supplier’s acts to reduce prices to producers. Competition: The force in competition is high even though there is very little difference in their products. Companies try to differentiate their products in terms of application and services offered.

2. Characterize the competitive strategy of the major players using a 2x2 grid of “strategic target” and “source of the competitive advantage”

Competitive Strategy

Differentiation

Low Cost

Cost Leadership: LG	Differentiation: Samsung, Apple
Focused: Google

Broad

Strategic Target

Narrow

Differentiation: With well-known companies like Samsung and Apple they both sell similar products and their competitive strategy is differentiation. They both want to appeal to their customers by making their products different from others so customers will be attracted to it. With this they can capture a larger market while producing innovative cell-phones.

Cost Leadership: LG focuses more on lower the production costs of their phones in order to be able to compete with the larger companies in the market. Since their phones are not very innovative they want to have the advantage in their production and manufacturing. Appealing to people with a lower price on their products.

Focused: Google has just joined the cell-phone market but since they are well-known for their search engine and other innovative technologies. They have become one of the top competitors in the cell-phone market. They are in the focused competitive strategy because this is their first cell-phone production and they concentrated a lot of resources into making this product. They hope that with this product they will enter this market knowing that they have the product to satisfy the needs of customers.

3. Use efficiency/responsiveness and Implied Demand Uncertainty to achieve the “right” fit with the player’s competitive strategy

Differentiation:

Efficiency/Responsiveness Spectrum

Highly Efficient Supply Chain	Somewhat Efficient Supply Chain	Somewhat Responsive Supply Chain	Highly Responsive Supply Chain
		Differentiation

Implied Demand Uncertainty

Low Uncertainty	Somewhat Low Uncertainty	Somewhat High Uncertainty	High Uncertainty
		Differentiation

Differentiation is somewhat responsive because the lead-times may take weeks to months. This is because of the time it takes to innovate or diversify a product. Differentiation shows a somewhat high uncertainty.  This is because these companies try to be innovative in many different sectors.  Therefore, while this may follow trends, and have researched completed, there is still that uncertainty about whether it will make it in the market.  

Cost Leadership:

Efficiency/Responsiveness Spectrum

Highly Efficient Supply Chain	Somewhat Efficient Supply Chain	Somewhat Responsive Supply Chain	Highly Responsive Supply Chain
	Cost Leadership

Implied Demand Uncertainty

Low Uncertainty	Somewhat Low Uncertainty	Somewhat High Uncertainty	High Uncertainty
	Cost Leadership

Low cost products do not tend to be customizable, and may take some time to design and manufacture.  Cost Leadership products are somewhat efficient because they have to compete with other companies for the product with the best bargain.  This sometimes means a price war.  It is not highly efficient because a product that doesn’t continue to develop will lose to competitor prices. Cost leadership has less concern when it comes to their products because most customer tend to like buying something that worth their buck, especially if it’s on sale.  With a low uncertainty rate, cost leadership is a steady place to be.

Focused:

Efficiency/Responsiveness Spectrum

Highly Efficient Supply Chain	Somewhat Efficient Supply Chain	Somewhat Responsive Supply Chain	Highly Responsive Supply Chain
		Focused

Implied Demand Uncertainty

Low Uncertainty	Somewhat Low Uncertainty	Somewhat High Uncertainty	High Uncertainty
	Focused

Focus competitive strategy tends to have a narrower market.   This means companies focus on building products that a sector of the market will for sure like or need.  There are two parts to the focus competitive strategy.  The first part is the “Cost Focus,” which focuses on a small market with low prices.  The other is “Differentiated Focus,” which focuses on innovative products for a small sector.  For the “Cost Focus,” the supply chain is somewhat efficient because as the cheapest product made specifically for that customer group, there is not much need for quick improvements.  Therefore, a somewhat efficient supply chain will do.  For the “differentiated focus,” the supply chain needs to be somewhat responsive because it is supposed to be innovative.  There is somewhat low uncertainty because these products were created specifically for those customers.  Therefore, we know it is a product they are likely to need.  However, there is still the possibility that is will not be popular.

4. Develop a supply chain network for a cell-phone

FAST Diagram of a Cell-Phone

Camera

RAM

GPU

SIM Card

Processor

Memory

Button Sensors

Power Button

Volume Buttons

Home Button

Display

Gorilla Glass Screen

Power

Battery

Battery Charger

Functioning Cell-Phone

Supply Chain for Cell-Phones

Step 3: Drivers for SCM

Step 3: Design the SC configuration or structure or network to meet certain desired performance objectives

Step 2: Design the SC strategy which must be aligned with the competitive strategy

Step 1: Design or define the competitive strategy (the manufacturer) for the firm.

Manufacturer

Customers

Online Retailers: Amazon

Store Retailers: BestBuy, Target, AT&T, Verizon, Walmart

Cell-Phone Distributors

Battery Materials

Button Components

Screen Materials

Chip Components

1. Inventory ( ): raw materials, work-in-progress(manufacturing), finished good 2. Facilities ( ): places where inventory is stored, or manufacturing, or assembled 3. Transportation ( ): movement of inventory from one facility to another 4. Information ( ): data and analysis regarding inventory, facilities and transportation, and the management & coordination of the information & data.

Supply Chain Network for Cell-Phones

Chip Manufacturer

Chip Components Supplier

Store Retailers: BestBuy, Target, AT&T, Verizon, Walmart

Store Retail Distribution Center

Screen Materials Supplier

Screen Manufacturer

Customers

Online Retailers: Amazon

Online Retail Distribution Center

Button Manufacturer

Battery Manufacturer

Battery Materials Supplier

Button Components Supplier

Information System

Step 4: Check your Work

Using the lecture notes on the efficiency/responsiveness and Implied Demand Uncertainty I could find a competitive strategy that was a right fit. The lecture notes also helped during the steps of creating a supply chain network.

Step 5: Learn and Generalize

This problem allowed me to differentiate between a supply chain and a supply chain network. It also allowed me to get a better understanding of the E/R and IDU spectrum.

3. D 1.2 (discussion problem 2 in Chapter 1)

Step 1: Define the Problem

1. Why should a firm like Dell take into account total supply chain profitability when making decisions?

Step 2: Create a Plan

1. Read the textbook and find a solution to the discussion question

Step 3: Execute the Plan

1. The objective of a supply chain is to maximize its supply chain profitability, which is the difference between the prices paid by the customer and the total cost across the supply chain. The supply chain profitability is strongly related to the supply chain surplus, and the extent of supply chain profitability determines the success of supply chain. (SupplyChainSurplus = CustomerValue – SupplyChainCost) It is the profitability over the total supply chain network that determines the success of a supply chain rather than the profits earned at the individual stage. It is because profits earned at individual stage generally reduces overall supply chain profit. Therefore, a firm like Dell should focus on increasing profits over the total supply chain network.

Step 4: Check your Work

Using the book as reference and taking information from the book. I can assume that the information I have provided is correct.

Step 5: Learn and Generalize

This problem gave me a better insight on supply chain profitability and why a company should take that into account before making decisions.

4. D 1.5, 1.6

Step 1: Define the Problem

1. Consider the supply chain involved when a customer orders a book from Amazon. Identify the push/pull boundary and two processes each in the push and pull phases. 2. In what way, do supply chain flows affect the success or failure of a firm like Amazon? List two supply chain decisions that have a significant impact on supply chain profitability.

Step 2: Create a Plan

1. Using the textbook I will identify the push/pull boundary and two processes each in the push and pull phases. 2. Using the textbook I will find out how supply chain flows affect the success or failure for Amazon. And list two supply chain decisions that have a significant impact on supply chain profitability.

Step 3: Execute the Plan

1. A pull system was implemented when Amazon utilized Ingram Book Group, which supports many other booksellers, to supply customer demand. Amazon also shared profits with Ingram Book Group. A push strategy was implemented when Amazon began several warehouses, where the inventory is procured and orders are shipped using a pull strategy. The push and pull boundary exists between customer and retailer. Processes in the pull phase are shipping, fulfillment of order, customer returns, and customer billing. Processes in the push phase are production, replenishment of stock, shipping, and payments.

2. The success and failure of Amazon.com, the world’s largest bookseller, is decided by the effective functioning of the supply chain. The flow of products from publishers to distributors/retailers to customers should be rapid and effectively reliable in order to achieve customer satisfaction. The flow of information back to members helps to coordinate effectively through the supply chain, leading to a flow of money which allows all supply chain members to maintain consistency and operate efficiently. The probability of Amazon.com is influenced by sourcing, promotion, and fulfillment of decisions. Amazon uses a unique sourcing strategy, where it partners with Ingram Books Group which ships single book orders directly to customers to wait in; rather, it takes advantage of e-commerce technology via the internet along with its effective inventory management policies that saves them a lot of money. Amazon purchases directly from publishers and stocks books in anticipation.

Step 4: Check your Work

Using the book as a reference and obtaining the information from there. I can assume that the information I have used is correct.

Step 5: Learn and Generalize

This question gave me a better insight on how Amazon became a successful market. With it’s smart use in supply chains and utilizing the push/pull boundaries.

5. Developing Intermediate-level Microsoft Excel Skills:

Step 1: Define the Problem

1. What is the NPV of the Base Case Scenario? Explain your work. 2. What is the maximum development cost beyond which the development of the product cannot be justified? 3. Explain the trade-off law for NPV versus development cost 4. Explain the trade-off law for NPV versus sales volume 5. Create a graph of the Trade-off law relationship for Change in NPV vs Change in Development Cost. What is the equation of the Regressed trendline? Explain your work. Give the answer in the form y=mx+b. 6. Create a graph of the Trade-off law relationship for Change in NPV vs Change in Sales Volume. What is the equation of the Regressed trendline? Explain your work. Give the answer in the form y=mx+b.

Step 2: Create a Plan

1. Read handout “Getting Started in Excel” 2. Perform the exercise in the “Excel Tutorial” 3. Use the Excel workbook you built and update the worksheet ScernarioParameters to quickly analyze a new problem for the development and commercialization for a product called the “world car.” (A cheap affordable car designed for the whole world.)

Step 3: Execute the Plan

Scenario Parameters

Base Case

After plugging all the numbers into the Scenario Parameters and doing the calculations in the Base Case. The project NPV came out to be $61,888K.

Here we can see that if we changed the development cost from 25,000,000 to 78,783,155.15 the NPV would be come 0.

In this graph, we can see that if change in development cost (%) goes down our Net Present Value (NPV) increases and vice versa. This makes sense because if our development cost (%) goes up then that means it takes much more money to make the project and if we sell it at a set price means we should be losing profit. And if development cost went down which would mean that the product is cheaper to make and in return we will get a bigger profit. This is the trade-off between NPV vs Development cost. We can also see that the equation for the regressed trendline is y = -14565x + 0 where m = -14565x and b = 0

In this graph, we can see that if change in sales volume (%) goes up then our net present value goes up as well. And if sales volume goes down the NPV will also decrease. This makes sense since if our sales percentage was to go up means that we should more units and out net present value would increase. If sales volume went down means, we are losing sales and our net present value would go down. This is the trade-off between Change in NPV vs Change in Sales Volume. We can also see the regressed trendline is y = 84764x + 0 where m = 84764x and b = 0.

If there is a 10% increase in development cost. The original development cost was 15,000,000 a 10% increase would me (15,000,000) (0.1) = 1,500,000. 15,000,000 + 1,500,000 = 16,500,000 bring us to a total of $16,500,000 in development cost. To get back to our original NPV of $61,888K we would have to increase our sales & production value by a certain percentage. After doing calculations we find out that we need exactly 1,290 more sales to get back to $61,888K. Which is 1.27% increase in sales.

Change in NPV ($) vs Change in Dev Cost (%)

0.3 0.2 0.1 0 -0.1 -0.2 -0.3 -4369.3686817287453 -2912.9124544858278 -1456.4562272429102 0 1456.4562272429175 2912.912454485835 4369.3686817287453 0 0 0 0 0 0 0 15000 0.3 19500 4500 57518.51997617961 -7.0601353131965416E-2 -4369.3686817287453 15000 0.2 18000 3000 58974.976203422528 -4.7067568754643574E-2 -2912.9124544858278 15000 0.1 16500 1500 60431.432430665445 -2.3533784377321728E-2 -1456.4562272429102 15000 0 15000 0 61887.888657908356 0 0 15000 -0.1 13500 -1500 63344.344885151273 2.3533784377321846E-2 1456.4562272429175 15000 -0.2 12000 -3000 64800.801112394191 4.7067568754643692E-2 2912.912454485835 15000 -0.3 10500 -4500 66257.257339637101 7.0601353131965416E-2 4369.3686817287453

Change in Development Cost, %

Change in NPV, $

Change in NPV ($) vs Change in Sales Volume (%)

0.3 0.2 0.1 0 -0.1 -0.2 -0.3 25429.31663034307 16952.877753562039 8476.438876781096 0 -8476.4388767810233 -16952.877753562047 -25429.316630343063

Change in Sales Volume, %

Change in NPV, $