SUPPLY CHAIN MANAGEMENT:

1. SUPPLY CHAIN MANAGEMENT: An Organizational CompetencyINTRODUCTION TO THE COURSEhttp://awhitebread.ba.ttu.edualan.whitebread@ttu.eduALAN L. WHITEBREAD

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

3. 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

4. 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.

5. YOUR CAREER SUCCESS DEPENDS ON being • INDIVIDUAL & TEAM SUCCESS • ON TIME • UNDER BUDGET • ABOVE PLAN • NO EXCUSES • EVERY TIME!

6. 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

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

8. 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.

9. 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,

10. 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

11. FIRMS USING SUPPLY CHAIN MANAGEMENT The Aromatics (Thailand) Public Co. Ltd. plus every other company, governmental agency, and organization.

12. 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

13. 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.

14. 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.

15. 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.

16. 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?

17. 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?

18. 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.

19. EMPOWERED CUSTOMERS • Customers have quick access to extensive product and pricing information. • Consumers are increasingly demanding • Consumers are demanding more and better services.

20. 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

21. 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.

22. 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

23. ADDITIONAL ASPECTS OF QUALITY • Service level • Product Flexibility • Delivery

24. 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

25. QUALITY: DESIGN AND SPECIFICATIONS • Design to meet • Design to meet • Design for • Exceed standards organizations specifications

26. 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.

27. 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

28. 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.

29. 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!

30. 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

31. 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

32. 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.

33. 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

34. 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.

35. 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.

36. 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

37. 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.

38. 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?

39. 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?

40. 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.

41. 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

42. 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? • …

43. 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.

44. 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!

45. 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 • ?

46. 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!

47. 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 • ?

48. 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

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

50. 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]