15 Feb Stakeholders, Future Supply Chains, Competitive Environment
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Transcript of 15 Feb Stakeholders, Future Supply Chains, Competitive Environment
SUPPLY CHAIN MANAGEMENT BA 244
Reminders • Finals: 22 Feb, Wednesday, 12:00 am to 9:20 pm
• LinkedIn Group: Presentation Grades for all groups
Article 6 and 7 • Supply chain sustainability: A risk management approach
• The relationship between green supply chain management and performance: A meta-analysis of empirical evidences in Asian emerging economies
STAKEHOLDERS OF A SUPPLY CHAIN FUNCTION
Stakeholders • Individuals or groups who depend on the organization to fulfill their own goals
and on whom, in turn, the organization depends (Johnson & Scholes)
Why important? • They may seek to influence the organization if they perceive that their interests
are threatened • There is strong public and regulatory pressure to be socially responsible
Internal, Connected, External or Secondary Stakeholders
Internal Stakeholders • Members of the organization
• e.g. Directors & Managers (Senior Management), Employees
Connected Stakeholders • Have direct legal, contractual, or commercial dealings with the organization
• e.g. shareholders / owners, bank financiers, customers, suppliers, distributors
External or Secondary Stakeholders • No direct contractual or commercial dealings, but have an interest in, or are
affected by, its activities
• e.g. government, regulatory bodies, professional bodies, pressure groups, local community
• “Walang natutulong ang mga rallyista” (?)
Corporate Social Responsibility
Corporate Social Responsibility • Commitment to systematic consideration of the environmental, social, and
cultural aspects of an organization’s operations
• Beyond legal obligations
• Objective is to create long-term business value and contribute to improving the social conditions of the people affected by our operations
Corporate Social Responsibility • Government policies e.g. waste management, air pollution acts • Government incentives e.g. subsidies on Solar PV by China, Malaysia, SG • Based on research, ‘Green’ can be profitable • Willingness to pay a premium for ‘Green’ goods and services
Corporate Social Responsibility • Modern Slavery is now more subtle
• e.g. minimum wages, immigrant workers’ passports, immigrant workers’ freedom to shift jobs
FUTURE SUPPLY CHAINS How else can you add value to the firm?
Future Supply Chains Supply chains of the future can be characterized by the three major traits:
1. They are Strategic (not Tactical)
2. They are Dynamic (not Static)
3. They are Customer-Driven
All for adding value to the firm, product, and service
SCM Methods to Add Value • Early Supplier Involvement (ESI)
• Ethical, Environmental, Sustainable Supply Chain
• Outsourcing
• Lean Supply Chain
• Agile Supply Chain
More SCM Methods to Add Value • Collaborative Planning, Forecasting, and Replenishment (CPFR)
• Shared Services in Supply Chain Management
• Supply Chain Network Design (SCND)
Collaborative Planning, Forecasting, and Replenishment (CPFR) • Combines the intelligence of multiple trading partners in the planning and
fulfillment of customer demand
• Helps reduce inventory and achieve efficiency in transport and logistics planning through aligning and sharing sales, and marketing best practice
• CPFR allows companies to exploit the knowledge of their suppliers and customers to make better forecasts
Collaborative Planning, Forecasting, and Replenishment (CPFR)
Collaborative Planning, Forecasting, and Replenishment (CPFR) • Collaboration is generally hard to achieve. CPFR requires a lot of initiative
• Collaborative technologies can be extremely expensive
• There might be trust issues in collaboration with external service providers, as CPFR can require exchanging of strategic and confidential information
Collaborative Planning, Forecasting, and Replenishment (CPFR) Case Studies: Walmart, Warner-Lambert, SAP
• In the mid-1990s, decided to plan and forecast how to replenish mouthwash Listerine in the market
• Service level of Warner-Lambert increased from 87% to 98% • Lead time for product release reduced from 21 to 11 days • Over the test period the Sales of the product went up by US$8.5m
Collaborative Planning, Forecasting, and Replenishment (CPFR) Case Studies: Superdrug ran a CPFR initiative with Johnson & Johnson
• Experienced 13% reduced stock on the collaborated product lines • Forecast accuracy for Superdrug increased by 21% and the warehouse
availability by 1.6% • The lines that were subject to CPFR saw Present Stock On Hand levels
reduced by 23% compared to the product lines that were not exposed to CPFR which increased by 11.8%
Shared Services in Supply Chain Management • "A shared service is a collaborative strategy in which a subset of existing
business functions are concentrated into a new, semi-autonomous business unit that has a management structure designed to promote efficiency, value generation, cost savings, and improved service for internal customers of the parent organization” (Bergeron, 2003)
Shared Services in Supply Chain Management • VS. Centralized Organization – the corporate office dictates procedures across
organizational functions and controls resources. In a shared services organization resources from the different fields are shared but the control over resources remains in those fields
• VS. Outsourcing – In a shared services, some activities previously located in head office are retained within the firm but aggregated into a new central unit acting as a vendor to internal customers
Shared Services and BPO Functions • IT Support Services • Customer Contact (Call) Centers • Healthcare Information Management
(Medical Transcription) Knowledge Process Outsourcing • Animation and Graphics • Engineering Design • Software Development • Game Development • Marketing and Sales
• Legal • Accounting and Finance • Human Resources • Logistics • Procurement
BPO Benefits • Aggregates demand for economies of scale
• Standardizes processes
BPO Benefits • SAVINGS STRATEGY
• Savings from Offshore BPO Operations: 18% to 26% net savings • Savings from IT Outsourcing: 20% to 27% net savings (Securities Industry
News, 2004) • Savings from Offshore Operations in a 5-year span: 20% to 50% (Vowler,
2003)
• GROWTH STRATEGY • 73% of respondents state that offshore activities support their companies’
growth strategies (Lewin & Peeters, 2006) • Operations could be expanded to 24 hours per day
BPO Benefits • From 2002 to 2008, outsourcing created in the US an additional 20 million
jobs, compared to the quantity of jobs outsourced offshore (Babcock, 2004)
• BPOs allow more challenging employment in home countries, which could be seen as a promotion to higher-skilled ranks within the company (Bank Technology News, 2004)
• Startups: Engineering and marketing staff was employed from Emerging Economies like India by up to 40% of technology startups (Curry, 2005)
Emerging Economies • Low labor cost and large talent pool
Figure 1. Average Wage per Month in 2011 (US$) from PWC (2013)
Big Mac Index
Business Process Outsourcing and Shared Services Annual Increase
• India: 10.2% for 2013 service export revenues
• Philippines: 19% for 2013 service export revenues (vs. GDP growth?)
• China: 32.5% for 2009 outsourcing segment (9.5% for service sector)
Examples of BPOs • Accenture, Inc. • Canon Business Process Services Philippines, Inc. • IBM Business Services
Examples of Shared Services • British, Canadian, Australian Embassies • ABS-CBN Shared Service Center (ROHQ) • AIG Shared Services – Business Processing Inc. • ANZ Global Services and Operations • Chevron Holdings Inc. • Maersk Global Service Centres (Philippines) Ltd. • Shell Shared Services (Asia) B.V.
Supply Chain Network Design (SCND) • Also known as ‘Strategic Supply Chain Planning’
• Determines logistics infrastructure over an extended planning horizon • Aims at finding the best possible supply chain configuration so that all
operations can be performed in an efficient way
• e.g. Number, type, location of plants and warehouses
Supply Chain Network Design (SCND) • Three planning levels depending on the time horizon: strategic, tactical, and
operational
• SCND can be costly; Companies should consider budget constraints and define the investment that can be made during each period
Supply Chain Network Design (SCND) Case Studies: Chrysler
• Under the new SCND in 1989, suppliers are pre-selected based on their capabilities and are responsible for design, prototype, and production parts
• Reduction in new product development costs by 20%-40% or around US$1b • Profits per vehicle increased from an average of US$250 in 1980s to $2,110 in
1998
THE COMPETITIVE ENVIRONMENT
The Competitive Environment • Supply chains impact significantly on quality, price, and supply
• Effective Supply Chains achieve Competitive Advantage
• How to analyze?
STEEPLE (or PEST or PESTLE) ANALYSIS
• To analyze external macro environment or supply market factors
• Socio-cultural, Technological, Economic, Environmental, Political, Legal, Ethical
• Examples of STEEPLE factors which impact supply chains:
STEEPLE (or PEST or PESTLE) ANALYSIS • Socio-cultural – age, gender, etc. affecting demand • Technological – ICT developments supporting SCM • Economic – stability of markets, inflation rates, wages • Environmental (or Ecological) – risks from weather, availability of natural resources
• Political – government policies, political risk • Legal – laws affecting commercial contracts, employment rights, workplace health & safety
• Ethical – labor standards, sustainable sourcing
MICHAEL E. PORTER • Bishop William Lawrence University Professor
• Institute for Strategy & Competitiveness, Harvard Business School
PORTER’S FIVE FORCES
Competitive rivalry
within the industry
Threats from New Entrants
Buyers’ bargaining
power
Threats from
Substitutes
Suppliers’ bargaining
power
PORTER’S FIVE FORCES • New Entrants
• Expands supply • Substitutes
• Buyers can switch, limiting price rises • Buyers
• Can force down prices, bargain better quality
• Suppliers • Raise prices
• Competitive Rivalry • From collusion to price wars
Competitive rivalry
within the industry
Threats from New Entrants
Buyers’ bargaining
power
Threats from
Substitutes
Suppliers’ bargaining
power
SWOT ANALYSIS
STRENGTHS WEAKNESSES
OPPORTUNITIES THREATS
INTERNAL
EXTERNAL
• Used to assess the resources of an organization, function, or supply chain to cope with and capitalize on factors in its environment
Generic Sources of Competitive Advantage
Focus or
FOCUS STRATEGIES • Serve the needs of a particular competitive segment, customer segment, or industry segment • a particular buyer group (such as youths or senior citizens) • a different geographic market (such as MM, Luzon, VisMin)
Generic Sources of Competitive Advantage
COST LEADERSHIP STRATEGY
• No-frills, standardized products for typical customers • Focuses on efficiency so costs are lower than competitors’ costs
Risks: • Loss of competitive advantage to newer technologies • Ability of competitors to imitate the cost leader’s competitive advantage
FIVE BUSINESS-LEVEL STRATEGIES
DIFFERENTIATION STRATEGY • Products that have valued features • Sold at a premium price • The less similarity to competitors’ products, along as many dimensions as possible, the more buffered a firm is from competition
Risks • Firms cannot sufficiently differentiate a product to create value for which customers will pay a premium price
• Counterfeiters offer a cheap “knockoff” of a differentiated good or service
FIVE BUSINESS-LEVEL STRATEGIES
Generic Sources of Competitive Advantage
INTEGRATED COST LEADERSHIP & DIFFERENTIATION STRATEGY
• provide relatively low cost products with valued differentiated features
Risks • a firm produces products that lack sufficient low cost or differentiation
The Competitive Environment • STEEPLE • Porter’s Five Forces
• SWOT
• Porter’s Generic Sources of Competitive Advantage
End…of BA 244
Summary of Life Lessons • Supply Chain Management Concepts • Appreciation of Journal Articles and Research • Insights from Industry Practitioners
• How to Prioritize using Pareto Analysis • Negotiation • Collectivist and Individualist Cultures • Developed and Emerging Economies • Importation • Contracts • Ethics • Adding Value and the Competitive Environment • Collaborative Working and Relationships
Reminders • Finals: 22 Feb, Wednesday, 12:00 am to 9:20 pm
• LinkedIn Group: Presentation Grades for all groups