Logistics & Supply Chain Management ( all inclusive)
FHNW BIT Logistic & supply chain management
FHNW BIT Logistic & supply chain management
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Flashcards
What types of customer segments are there from the point of view of supply chain management?
The benefit expectations differ according to customer segment. Customers can be divided into three basic customer segments.
- Business customers (Business, B)
- Private households (Consumer, C)
- Public administrators (Administration, A)
The goals and measures of the supply chain strategy can be categorized according to supply/demand relationships (see next slide). Most companies focus on two supply-demand relationships: B2B and B2C
Compare the classical supply chain management to the efficient consumer response
Classical supply chain management (SCM)
- Supply strategy runs downstream towards customer
- Upstream stages of the supply chain supply the downstream stages of the supply chain
Efficient Consumer Response (ECR)
- Pull orientation: pursues the "demand chain" approach
- Linking logistics and marketing
- Quick response: increase the efficiency of the entire supply chain through intensive information exchange between levels, shortening delivery and storage times
- Marketing Channel Management: Cooperation between manufactures and trade levels for the distribution of products and services,
- Constant data exchange by means of information technology
- Concept primarily implemented in the consumer goods industry and retail trade
Define supply chain according to different approaches
Demand-side approach: Demand chain focused on the market demand towards suppliers, the supply chain is steered by demand pull from the customer. Translates a customer goal into instructions for the suppliers. Decision-making process in four steps:
1. Definition of the purpose of the demand chain
2. Planning, e.g. in the form of a category plan
3. Control of consumption and requirements (e.g. inventory management)
4. Purchasing transactions, for example a call-off from a frame agreement
What are the components of efficient consumer response (ECR)?
- Efficient logistics
- Efficient assortment
- Efficient product launch
- Efficient sales promotion
Are the components of efficient data exchange to the ECR
What are efficient methods for data exchange and logistics?
Efficient methods for data exchange:
- Networked information systems: from the scanner cash register at the point-of-sale to the production control system at the manufacturer's site with standardized data
- Data exchange via e.g. EDI across all stages of the supply chain
Efficient methods of logistics:
- Vendor Managed Inventory (VMI)
- Responsibility for the management of stocks at customers lies with the supplier
- Cross Docking
- Delivery of different products to a central warehouse
- Picking of products for distribution to the customer
- Synchronized production
- Production quantities controlled by data of actual demand from sales
What is the role of Barcodes in the ERP systems?
Barcodes represent the connection between physical products and the digital data, which are used for further processing in ERP systems and processes with EDI.
- A barcode consists of machine-readable optical characters.
- Through scanning, the sequences of the width of the bars and gaps between the bars are interpreted as numerical or as alphanumeric data.
Barcodes and similar codes are used to identify products.
- The numbers are assigned by organizations. For example, GS1 for products in the consumer goods industry.
- Until 2009, the use of the European Article Number (EAN) was common. This has been replaced by the Global Trade Item Number (GTIN).
What is RFID?
Radio Frequency Identification (RFID) is a technology for the contactless, comprehensive identification of objects and the collection of data of any kind.
RFID technology represents a further development of the barcode.
- Data are not read (and also written) optically, but, rather, by using radio technology.
- RFID is already often used for the identification of, for example, of books in a library or for access cards to hotel rooms.
- RFID has not yet become established in retail because of the costs
- Really sensitive, sensors break easily so damage rate of unidentifiable items is probably high
What are efficient methods for marketing in ECR
Efficient methods for marketing in ECR:
- Assortment Management: harmonization of the products and services offered (assortment mix)
- "Strategic articles" to increase customer frequency
- “Bottom line articles" to increase the average margin
- Sales promotion: coordination of promotions between manufacturers and retailers
- Further development of Point-of-Sale (PoS) to Point-of-Difference (PoD)
- Product launch: new products to be successfully launched on the market
- Reduction of "flop rates" by bundling business partners' competencies in product development
What are the components in the European efficient-consumer-response-model (ECR-Model)?
- Demand Management
- Demand Side Strategy & Capabilities
- Optimize Assortments
- Optimize promotions
- Optimize new product introductions
- Consumer Value Creation
- Supply Management
- Supply Strategy & Capabilities
- Responsive replenishment
- Operational excellence
- Integrated demand driven supply
- Enablers
- Common data & communication standards
- Cost/Profit & Value Measurement
- Integrators
- Collaborative planning forecasting and replenishment
- E-Business business to Business
What does CPFR mean?
Collaborative planning, forecasting and replenishment (CPFR)
In CPFR, retailers and (consumer goods) manufacturers jointly conduct planning and forecasting processes. This reduces planning uncertainties and coordination problems, and a joint learning process takes place through a predefined analysis phase
Elements of CPFR:
- Strategy and planning
- Demand and Supply Management
- Execution
- Analysis
Efficient Consumer Response leads to a strong integration of business partners via automated data exchange. Which conflicts of objectives can arise between business partners? Which risks can the business partners involved be exposed to?
- Who gets the data
- Both want to get rid of inventory as soon as possible. Who keeps it longer?
Define "Electronic Markets"
"Electronic markets are platforms on the Internet on which electronic commerce is conducted between different players. An electronic marketplace can thus be understood as an exchange platform for goods and services. (Leimeister, 2015, p. 348)
Electronic markets …
- are based upon Internet technology
- have a wide range of added value
- strongly influence the value creation processes
- can have different interaction patterns (actors, activities, applications, ..)
What are characteristics of electronic markets?
- Market participants
- Different customers and suppliers are facing each other
- 1:1, 1:n, n:m relationships are possible
- Delimination of Goods
- Horizontal marketplaces:
- Cross-industry offering, especially C-goods
- Coverage of part of the supply chain (e.g. distribution).
- Open user group
- Vertical marketplaces:
- Specialized and industry-specific, coverage of the entire supply chain possible
- Mostly closed circle of users
- Horizontal marketplaces:
- Functionality: Scope of functionality of marketplaces different
- Supplier list (e.g. yellow pages),
- Detailed product catalogs (e.g. price comparisons)
- Complete transaction processing (e.g. online shops, auction platforms)
- Interest orientation
- Demand-side marketplaces (purchasing alliances): reduction of search and transaction costs to reduce information asymmetries, creation of transparency, bundling of demand to strengthen market position (price reduction)
- Supply-side marketplaces (supplier consortia): information orientation to promote product differentiation, skimming-off added value through direct offers to customers
- Neutral marketplaces (intermediaries): enabling third parties to trade, bringing suppliers and buyers together, structuring information on offers
- Barriers to entry
- Open marketplaces: Accessible to all market participants (mostly horizontal markets)
- Closed marketplaces: Only a certain group of users (mostly vertical markets)
- Pricing
- Static pricing: Fixed price offers
- Dynamic pricing: Auctions
- Revenues
- Direct: transaction fees, storage fees, additional services
- Indirect: Analysis and evaluation of user data (e.g. for advertising)
- Offerings
- Trade
- Communication and Cooperation
- Information
- Entertainment
What characteristics would you assign to «airbnb»? Which to «SupplyOn»?
Airbnb
- Market participants: 1:m
- Goods Delamination: Horizontal, but also according to sectors, i.e. vertical (finding suitable suppliers and customers)
- Functionality: almost complete transaction processing (you have to visit the accommodation yourself)
- Interest orientation: Neutral
- Barriers to entry: Open
- Pricing: static - determined by the provider
- Revenues: Direct but also indirect with use of customer data for advertising purposes
- Offerings: Trade, Communication and Cooperation
SupplyOn
- Market participants: 1:m
- Goods Delamination: Horizontal, but also according to sectors, i.e. vertical (finding suitable suppliers and customers)
- Functionality: Complete transaction processing
- Interest orientation: Neutral
- Barriers to entry: Closed marketplaces
- Pricing: Dynamic pricing
- Revenues: Direct
- Offerings: Trade, Communication and Cooperation
What are assessment criteria's of the electronic markets?
- Information asymmetries
- Transaction cost
- Transparency
- trust
Describe the assessment criteria Information asymmetries
"Information asymmetries are situations where the relative bargaining strength of two parties in a transaction is determined by one party having more information relevant to the transaction than the other party. (Leimeister, 2015, p. 351)
In principle, electronic markets prevent information asymmetries
- Facilitate search and comparison.
- The bargaining power of customers increases
Analysis of data on the provider side creates new digital information asymmetries.
- Control of the offering (e.g. recommendation systems) based upon individual behavior (e.g. through tracking)
- Establishment of an electronic market, with the intention of promoting information asymmetries through market power (e.g. Amazon with its pricing requirements for traders).
Describe the assessment criteria Market transparency cost
"In economic theory, market transparency refers to a situation in which supply and demand by market participants are manageable and in which they have all the information necessary for the transaction at their disposal. (Leimeister, 2015, p. 351)
Transparency is generally higher in electronic markets than in traditional ones.
- Easier access to information (e.g. via search engines)
- Higher quality of information through it being current (e.g. regarding product quality, availability, daily prices)
- Anonymity of the parties (especially the buyers) in the initial phase of the transaction
Transparency promotes trust, especially in Consumer-to-Consumer (C2C) marketplaces:
- ebay or Ricardo as "trustee" for the initiation and agreement phase
- PayPal as "bank" for payment processing in the settlement phase
Describe the assessment criteria Trust cost
“Trust is the willingness of the trust-giver to become vulnerable by expecting a confidant to perform certain actions that are relevant to the trust-giver, regardless of whether the confidant can be monitored or controlled.” (Leimeister, 2015, p. 354)
Trust is an important factor in electronic markets, because...
- the parties often do not know each other and are only connected via the Internet
- there is a risk that transactions will fail
Measures to promote trust
- Recessions (e.g. reviews) of products by buyers
- Mutual assessments (e.g. rating) of the parties involved
- Trustee function of the marketplace (e.g. money-back guarantee)
Define CRM
Definition «Customer Relationship Management» (CRM)
«Customer Relationship Management means the planning, control and monitoring of all measures aimed at current and potential market partners with the aim of "intensifying customer relations". (Werner, 2017, p. 159) The goals are ongoing control and increasing factors such as: :
- customer satisfaction
- customer loyalty
- customer acquisition
CRM brings about a change from pure transaction marketing to real relationship marketing
What are components of CRM?
Information – What?: Building a customer relationship through information:
- contain high degree of substance related to the customer
- direct contribution to solving a customer problem
Interaction – How?: Customer centricity
- Establish exchange processes with the customer, e.g. offering communities and discussion forums
Integration – with what?: Measuring customer relationship
- Affiliate marketing (customers recruit customers), bonus programs (revenue sharing)
- Inclusion in the provision of services, e.g. tracking & tracing of deliveries and services
Individualization - specialization and comparison:
- From Mass Consumption to Mass Customization: Product and Service Configurators
- Personalized recommendations (Recommender Systems)
What are the two basic procedures of personalized recommendations?
Digression: Personalized Recommendations (Recommender Systems)
Two basic procedures:
- Content-based filtering
- Recommendation of similar offerings based upon the offering just considered
- Up-selling (recommend offerings with higher margins)
- Collaborative filtering
- Recommendation of offerings based on similar customer behavior
- Cross-selling (recommend products that match your buying behavior)
What are strategic targets of CRM?
Profitability
- Focus less on "Share-of-Market" (bind as many customers of a market segment as possible) but more on "Share-of-Wallet" (improve the buying intensity of a selected customer)
Differentiation
- understand the customers as a strongly differentiated unit
- from mass-produced products to real custom-made products (Mass Customization)
Permanence
- Less extensive new customer acquisition
- more long-term maintenance of existing customer relationships
Define Mass Customization
"Mass customization means a customer-specific mass production of goods for a large sales market. The products must meet the different needs of customers. The costs should roughly correspond to those of mass production of standardized products. (Werner, 2017, p. 165)
Approaches to Mass Customization
- No "individual production at any price!"
- balanced combination of...
- continuous mass production
- One-off batch production
What are prerequisites for Mass Customization?
- Large quatitities: Achieve “Economies of Scale”
- Standardized service modules (or components) as a basis (modular principle)
- Customization: providing the customer with a particularly high benefit
- Individual fulfillment of customer requests, customer-specific specification of performance
- Communication, configuration, design, pricing or in after-sales
- Price and target market:
- Sales price comparable with standard product
- Target market not too small, market potential must be available
- Number of variants:
- Do not simply create many and similar products for customers to choose from
- Customers should be able to configure a service that is specifically tailored to them
Describe Soft- & Hard-Customization
Soft-Customization
- Self-customization: configuration or finishing by the customer
- Service customization: Add individual secondary services to a standard product
- Individual finishing at the PoS: Standardized technical basic product that is configured according to the customer's wishes
- E.g.
- Self-individualization -> smartphones
- Service customization: gift wrapping of purchased products
- Individual finish at the PoS -> glasses with corrective lenses
- Color mixer at DIY
Hard-Customization
- Customized finishing: Customization during the final production stages
- Customized prefabrication: Customization during early production stages (complex)
- Modular construction principle: frequently used, standardized components are combined into customer-specific modules
- Mass production of unique products: entire supply chain aligned to customer requirements, handling via standardized processes
- E.g.
- Customized finishing -> auto-making
- Customize prefabrication -> tailor made clothing
- Modular construction principle -> modular furniture
- Mass production of unique specimens - > jewellery
How could the following products be configured? Bags or backpacks, tea or coffee, bicycles and e-bikes What kind of soft customization or hard customization could be used?
Bags or backpacks:
- Hard: customized finishing: individual fabrics and colours
- Soft: individual finishing at the PoS: engraving of a name tag, attaching initials
Tea or coffee:
- Hard: Customized finishing: Individual blends of teas and coffees
- Soft: self-individualization: preparation according to preferences, milk, sugar
Bicycles and e-bikes
- Hard: customized finishing: frame colour
- Soft: Individual finishing at the PoS: Adjust to the body mass
Which aspect is the focus on the sales side of supply chain management?
The company's customers are always in focus, because products and services are created for them.
Which supplier-demand relationships can be distinguished in the supply chain strategy?
C = Consumer
B = Business
A = Administration
- C2C
- Internet classified adds market
- C2B
- Job exchanges with advertisement for jobseekers
- C2A
- Tax processing for private individuals
- B2C
- Sale of health insurance cover
- B2B
- Procurement of office supplies by companies
- B2A
- Tax processing for companies
- A2C
- Settlement of benefits
- A2B
- Delivery of tax assessment notice
- A2A
- Transaction between public institutions
What is the goal of"Efficient Consumer Response"?
Try to increase response time by linking logistics and marketing through intensive information exchange between different levels to reduce delivery and storage times.
Which methods are often used with "Efficient Consumer Response"?
Efficient methods for Data exchange
- Networked information systems
- Data exchange via e.g EDI across all stages of supply chain
Efficient methods of logistics
- Vendor managed inventory
- Cross docking
- Synchronized production
Efficient methods for marketing
- Assortment management
- Sales promotion
- Product launch
What is an electronic marketplace? Which characteristics can be used to describe it?
An electronic marketplace is a platform where goods and services can be exchanged.
Characteristics are
- Market participants ( 1:1, 1:n, n:m)
- Delimitation of goods (horizontal-/ vertical marketplace)
- Functionality ( supplier, product catalogues, complete transaction processing)
- Interest orientation (demand-side, supply-side, neutral marketplace)
- Barriers to entry (open, closed)
- Pricing (static / dynamic)
- Revenues (direct, indirect)
- Offerings (trade, communication and cooperation, information, entertainment)
How can the efficiency of an electronic marketplace be assessed?
There are four assessment criteria's:
- Information asymmetries
- Which party has the more relevant information
- transaction cost
- transparency
- All information about the transaction are accessible and manageable for market participants.
- trust. E.g. reviews of products/ money back guarantee
What is Customer Relationship Management? What are the goals of this concept?
CRM is an approach to manage and analyse a company's interaction with its past, current and potential customers. The goal is to control and increase customer - satisfaction, loyalty and acquisition.
What is Mass Customization? What are the prerequisites and what characteristics are there?
Mass customization means a customer-specific mass production of goods for a large sales market. Prerequisites necessary to provide mass customization.
- large quantities, standardized service modules (or component) = modular principle
- customization, fulfil individual requests to provide high benefit
- price needs to be comparable with standard product and target market must not be too small -> there must be more potential
- number of variant. Do not create many similar products but let the customer configure, and tailer the offer to their wishing.
There are two characteristics. Soft-customization and hard-customization.
- Soft-customization: customer can configure or finish product by themselves, add secondary services to standard offering. E.g. gift wrapping
- Hard-customization. Customize at some point in the production stage. Modular construction principle or mass production of unique products. E.g. modular furniture or unique specimens jewellery.
What is «Quick Response» in the retail market? What does that have to do with EDI?
For not seen product demand the supply chain need to react quickly to customer demand. A fast supply chain is key but important. They fasten by using local distributer, or faster supply ways and restock every two weeks to better forecast demand.
Electronic data interchange keeps track of products and works best if all steps in the supply chain uses the same system. The EDI gives an overview over the supply chain. So when a customer checks out an item with the barcode, not only the price is shown but the product is automatically booked from stock and if stock is low it is automatically reordered.