15 feb stakeholders, future supply chains, competitive environment
TRANSCRIPT
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SUPPLY CHAIN MANAGEMENT BA 244
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Reminders • Finals: 22 Feb, Wednesday, 12:00 am to 9:20 pm
• LinkedIn Group: Presentation Grades for all groups
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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
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STAKEHOLDERS OF A SUPPLY CHAIN FUNCTION
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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
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Internal Stakeholders • Members of the organization
• e.g. Directors & Managers (Senior Management), Employees
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Connected Stakeholders • Have direct legal, contractual, or commercial dealings with the organization
• e.g. shareholders / owners, bank financiers, customers, suppliers, distributors
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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” (?)
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Corporate Social Responsibility
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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
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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
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Corporate Social Responsibility • Modern Slavery is now more subtle
• e.g. minimum wages, immigrant workers’ passports, immigrant workers’ freedom to shift jobs
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FUTURE SUPPLY CHAINS How else can you add value to the firm?
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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
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SCM Methods to Add Value • Early Supplier Involvement (ESI)
• Ethical, Environmental, Sustainable Supply Chain
• Outsourcing
• Lean Supply Chain
• Agile Supply Chain
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More SCM Methods to Add Value • Collaborative Planning, Forecasting, and Replenishment (CPFR)
• Shared Services in Supply Chain Management
• Supply Chain Network Design (SCND)
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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
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Collaborative Planning, Forecasting, and Replenishment (CPFR)
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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
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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
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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%
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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)
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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
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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
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BPO Benefits • Aggregates demand for economies of scale
• Standardizes processes
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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
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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)
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Emerging Economies • Low labor cost and large talent pool
Figure 1. Average Wage per Month in 2011 (US$) from PWC (2013)
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Big Mac Index
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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)
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Examples of BPOs • Accenture, Inc. • Canon Business Process Services Philippines, Inc. • IBM Business Services
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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.
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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
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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
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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
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THE COMPETITIVE ENVIRONMENT
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The Competitive Environment • Supply chains impact significantly on quality, price, and supply
• Effective Supply Chains achieve Competitive Advantage
• How to analyze?
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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:
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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
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MICHAEL E. PORTER • Bishop William Lawrence University Professor
• Institute for Strategy & Competitiveness, Harvard Business School
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PORTER’S FIVE FORCES
Competitive rivalry
within the industry
Threats from New Entrants
Buyers’ bargaining
power
Threats from
Substitutes
Suppliers’ bargaining
power
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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
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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
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Generic Sources of Competitive Advantage
Focus or
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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)
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Generic Sources of Competitive Advantage
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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
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FIVE BUSINESS-LEVEL STRATEGIES
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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
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FIVE BUSINESS-LEVEL STRATEGIES
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Generic Sources of Competitive Advantage
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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
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The Competitive Environment • STEEPLE • Porter’s Five Forces
• SWOT
• Porter’s Generic Sources of Competitive Advantage
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End…of BA 244
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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
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Reminders • Finals: 22 Feb, Wednesday, 12:00 am to 9:20 pm
• LinkedIn Group: Presentation Grades for all groups