Information and competition It changes industry structure and alter the rules of competition It...
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![Page 1: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.](https://reader035.fdocuments.us/reader035/viewer/2022062720/56649f0c5503460f94c2008a/html5/thumbnails/1.jpg)
Information and competition
• It changes industry structure and alter the rules of competition
• It creates competitive advantage by giving companies new ways to
outperform their rivals
• It spawns whole new businesses, often from within a company’s
existing operations
---Michael Porter and Victor Millar, HBR
1985
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Determinants of industry attractiveness
• Threat of new entrants
• Threat of substitute products or services
• Bargaining power of suppliers
• Bargaining power of buyers
• Rivalry among existing competitors
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The concept of “value chain”
• Highlights the role of information technology in competition
• The value a company creates is measured by the amount buyers are willing to pay for a product or service.– Profitable: the value created >the cost of performing
the value activities
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• To gain competitive advantage (do either)
– Perform the value activities at lower costs
– Perform them in a way that lead to differentiation
and a premium price (more value)
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Value activities
• Firm infrastructure• HRM• Technology development• Procurement• Inbound logistics• Operations• Outbound logistics• Marketing and sales• services
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The value system
• Supplier value chain (upstream value)
• Firm value chain (firm value)
• Channel value chain (downstream value)
• Buyer value chain (downstream value)
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How information changes the value chain?
• Each activity has two parts:– Physical component (all physical tasks required to
perform the activity)– Information-processing component ( steps required
to capture, manipulate, and channel the data needed to perform the activity)
– Which is moving faster?
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Old supply chain model
• Buy raw materials
• Make finished products
• Move goods to market
• Sell through retailers
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New SC model (demand chain)
• Sell customized products
• Move to delivery based on consumption
• Make only those products for which there is known
demand
• Buy raw materials in line with accurate production
requirements
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Key issues
• Do not wait for customers placing orders or forecast
– Information to sense the change in demand
– Information allows companies to respond to the
change
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Information distortion in SC
• The Bullwhip effect
• The cause of the effect
• The Beer Game………
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Importance of Information
• Forecasting is everything……..
• Who should do the forecast?
• Uncertainty is evil, …
• How to reduce it?
• Lead time, another devil
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Information integration
• Everybody in the SC has his/her own objectives
– Usually conflicting to one another’s
• We need a SC that will balance all the members’ needs.
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The trade-offs
• Lot size-inventory
• Inventory-transportation
• Lead time-transportation
• Cost-customer service
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What about E-Commerce?
What is E-Commerce (or eCommerce)?
Where is it going next?
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Order fulfillment
• Challenges:– Provide dealers (B2B) and consumers (B2C) to
purchase goods– Improve order fulfillment efficiency
• Benefits:– Reduce overhead for order processing– Reduction in turnaround time– Improved customer service
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eCommerce enabled SCM benefits
• Reduction in
– Supply costs
– Transaction/system costs
– Inventory costs
– Transportation costs
– Lead time
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eCommerce enabled SCM benefits
• Increase in:
– Responsiveness to customer and market demands
– Quality of service
– Ability to track customer behavior and buying
patterns
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Components of SC information
• Demand planning
• Procurement/purchasing
• Capacity planning
• Inventory tracking
• Market information collection and analysis
• Transportation planning
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Technology
• To respond to demand changes– QR– ECR– Flexible manufacturing systems (FMS)– EOS– CRP
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Technologies
• To sense the change in demand– POS– VMI– EDI– Information transparency– Centralized information collection