Devising the Ideal Homework

MIS 535 Week 2 DQ 1 Strategic IT

 For companies to be sure that they are taking the right approach, they first must determine whether their products are functional or innovative. Most managers I’ve encountered already have a sense of which products have predictable and which have unpredictable demand: the unpredictable products are the ones generating all the supply headaches. 

For managers who aren’t sure or who would like to confirm their intuition, I offer guidelines for classifying products based on what I have found to be typical for each category. (See the table “Functional Versus Innovative Products: Differences in Demand.”) The next step is for managers to decide whether their company’s supply chain is physically efficient or responsive to the market. (See the table “Physically Efficient Versus Market-Responsive Supply Chains.”) Having determined the nature of their products and their supply chain’s priorities, managers can employ a matrix to formulate the ideal supply-chain strategy. The four cells of the matrix represent the four possible combinations of products and priorities. (See the exhibit “PA 584 Week 5 DQ 2 Strategic Planning”)

By using the matrix to plot the nature of the demand for each of their product families and its supply chain priorities, managers can discover whether the process the company uses for supplying products is well matched to the product type: an efficient process for functional products and a responsive process for innovative products. Companies that have either an innovative product with an efficient supply chain (upper right-hand cell) or a functional product with a responsive supply chain (lower left-hand cell) tend to be the ones with problems. For understandable reasons, it is rare for companies to be in the lower left-hand cell. Most companies that introduce functional products realize that they need efficient chains to supply them. If the products remain functional over time, the companies typically have the good sense to stick with efficient chains. But, for reasons I will explore shortly, companies often find themselves in the upper right-hand cell. The reason a position in this cell doesn’t make sense is simple: for any company with innovative products, the rewards from investments in improving supply chain responsiveness are usually much greater than the rewards from in-vestments in improving the chain’s efficiency.

 BUSN 319 Week 1 DQ 2 Strategic Marketing Process

For every dollar such a company invests in increasing its supply chain’s responsiveness, it usually will reap a decrease of more than a dollar in the cost of stockouts and forced markdowns on excess inveninventory that result from mismatches between supply and demand. Consider a typical innovative product with a contribution margin of 40% and an average stockout rate of 25%.1

 The lost contribution to profit and overhead resulting from stockouts alone is huge: 40% 325% = 10% of sales–an amount that usually exceeds profits before BSOP 334 Week 6 Lab Strategic Capacity Planning and CRP Logic. Consequently, the economic gain from reducing stockouts and excess inventory is so great that intelligent investments in supply chain responsiveness will always pay for themselves – a fact that progressive companies have discovered.

Compaq, for example, decided to continue producing certain high-variety, short-life-cycle circuits in-house rather than outsource them to a low-cost Asian country, because local production gave the company increased flexibility and shorter lead times. BUS 499 WK 2 Assignment 1 – Strategic Management and Strategic Competitiveness, a leading Japanese apparel manufacturer, produces its basic styles in low-cost Chinese plants but keeps production of high-fashion styles in Japan, where the advantage of being able to respond quickly to emerging fashion trends more than offsets the disadvantage of high labor costs. That logic doesn’t apply to functional GM588 Week 4: Strategic Focus for Excellence in Quality Management – Discussion 2.

 A contribution margin of 10% and an average stockout rate of 1% mean lost contribution to profit and overhead of only .1% of sales–a negligible cost that doesn’t warrant the significant investments required to improve responsiveness. Getting Out of the Upper Right-Hand Cell The rate of new-product introductions has skyrocketed in many industries, fueled both by an increase in the number of competitors and by the efforts of existing competitors to protect or increase profit margins. As a result, many companies have turned or tried to turn traditionally functional products into innovative products. But they have continued to focus on physical efficiency in the processes for supplying those products. This phenomenon explains why one finds so many broken supply chains – or unresponsive chains trying to supply innovative products – in industries such as automobiles, MGT 498 Week 5 Assignment Strategic Plan Paper and Presentation, and consumer packaged goods. The automobile industry is one classic example. Several years ago, I was involved in a study to measure the impact that the variety of options available to consumers had on productivity at a Big Three auto plant.

 As the study began, I tried to understand variety from the customer’s perspective by visiting a dealer near my home in the Philadelphia area and “shopping” for the car model produced in the plant we were to study. From sales literature provided by the dealer, I determined that when one took into account all the choices for color, interior features, ASHFORD MGT 450 Entire Course (Strategic Planning for Organizations), and other options, the company was actually offering 20 million versions of the car. But because ordering a car with the desired options entailed an eight-week wait for delivery, more than 90% of customers bought their cars off the lot. The dealer told me that he had 2 versions of the car model on his lot and that if neither matched my ideal specifications, he might be able to get my choice from another dealer in the ASHFORD BUS 640 Week 6 DQ 1 Game Theory and Strategic Behavior. 

When I got home, I checked the phone book and found ten dealers in the area. Assuming each of them also had 2 versions of the car in stock, I was choosing from a selection of at most 20 versions of a car that could be made in 20 million. In other words, the auto distribution channel is a kind of hourglass with the dealer at the neck. At the top of the glass, plants, which introduce innovations in color and technology every year, can provide an almost infinite variety of options.

At the bottom, a multitude of customers with diverse tastes could benefit from that variety but are unable to because of dealers’ practices at the neck of the glass. The computer industry of 20 years ago shows that a company can supply an innovative product with an unresponsive process if the market allows it a long lead time for delivery. In my first job after college, I worked in an IBM sales office helping to market the System/360 mainframe. I was shocked to learn that IBM was then quoting a 14-month lead time for this hot STR 581 Week 4 Individual Strategic Choice and Evaluation Paper.

I asked how I could possibly tell a customer to wait that long. The answer was that if a customer really wanted a 360, it would wait, and that if I couldn’t persuade it to wait, there must be something seriously lacking in my sales skills. That answer was actually correct: lead times of one to two years were then the norm. This meant that computer manufacturers had plenty of time to organize their supplies around physical efficiency. Now PCs and workstations have replaced mainframes as the dominant technology, and the acceptable lead time has dropped to ASHFORD HCA 421 Week 2 DQ 1 Strategic External Assessment Industry and Competition.

Yet because the industry has largely retained its emphasis on a physically efficient supply chain, most computer companies find themselves firmly positioned in the upper right-hand cell of the GBM 489 COMPLETE COURSE (Strategic Topics in Global Business Management).

That mismatch has engendered a kind of schizophrenia in the way computer companies view their supply chains. They cling to measures of physical efficiency such as plant capacity utilization and inventory turns because those measures are familiar from their mainframe days. Yet the marketplace keeps pulling them toward measures of responsiveness such as product availability. How does a company in the upper right-hand cell overcome its schizophrenia? Either by moving to the left on the matrix and making its products functional or by moving down the matrix and making its supply chain responsive. The correct direction depends on whether the product is sufficiently innovative to generate enough additional profit to cover the cost of making the supply chain responsive. A sure sign that a company needs to move to the left is if it has a product line characterized by frequent introductions of new offerings, great variety, and low profit margins. BIS 375 Week 4 Individual Assignment E-Commerce Strategic Matrix is a good example. A few years ago, I was to give a presentation to a food industry group. I decided that a good way to demonstrate the dysfunctional level of variety that exists in many grocery categories would be to buy one of each type of toothpaste made by a particular manufacturer and present the collection to my audience.

When I went to my local supermarket to buy my samples, I found that 28 varieties were available. A few months later, when I mentioned this discovery to a senior vice president of a com peting manufacturer, he acknowledged that his company also had 28 types of MMPBL 590 Week 6 Assignment Final Strategic Plan Critique – one to match each of the rival’s offerings. Does the world need 28 kinds of toothpaste from each manufacturer?

HRM 498 Week 3 Strategic HRM Plan, Part II Strategic Plan and Environmental Analysis Report, which has been simplifying many of its product lines and pricing, is coming to the conclusion that the answer is no. Toothpaste is a product category in which a move to the left – from innovative to functional – makes sense. In other cases when a company has an unresponsive supply chain for innovative products, the right solution is to make some of the products functional and to create a responsive supply chain for the remaining innovative products. 

The automobile industry is a good example. Many suggestions have been made for fixing the problems with the auto distribution channel I have described here, but they all miss the mark because they propose applying just one solution. This approach overlooks the fact that some cars, such as the Ford Fairmont, are inherently functional, while others, such as the STR 581 Week 5 Individual Assignment Implementation, Strategic Controls, and Contingency Plans (driven in the James Bond movie Golden Eye), are innovative.

 A lean, efficient distribution channel is exactly right for functional cars but totally inappropriate for innovative cars, which require inventory buffers to absorb uncertainty in demand. The most efficient place to put buffers is in parts, but doing so directly contradicts the just-in-time system that automakers have so vigorously adopted in the last decade. The just-in-time system has slashed parts inventories in plants (where holding inventory is relatively cheap) to a few hours, while stocks of cars at dealers (where holding inventory is expensive) have grown to around MGT 448 Week 3 Learning Team Assignment Country Risk and Strategic Planning Analysis Paper.

Strategic Human Resources Activities Matrix

 Cost reduction is familiar territory, and most companies have been at it for years. Nevertheless, there are some new twists to this old game. As companies have aggressively pursued cost cutting over the years, they have begun to reach the point of diminishing returns within their organization’s own boundaries and now believe that better coordination across corporate boundaries – with suppliers and distributors – presents the greatest opportunities. Happily, the growing acceptance of this view has coincided with the emergence of electronic networks that facilitate closer coordination. Campbell Soup has shown how this new game should be played. 

In 1991, the company launched the continuous-replenishment program with its most progressive retailers. The program works as follows: STR 581 Week 6 Individual Assignment Strategic Plan and Presentation. Every morning, retailers electronically inform the company of their demand for all Campbell products and of the level of inventories in their distribution centers. Campbell uses that information to forecast future demand and to determine which products require replenishment based on upper and lower inventory limits previously established with each retailer. Trucks leave the Campbell shipping plant that afternoon and arrive at the retailers’ distribution centers with the required replenishments the same day. The program cut the inventories of four participating retailers from about four to two weeks of supply. The company achieved this improvement because it slashed the delivery lead time and because it knows the inventories of all retailers and hence can deploy supplies of each product where they are needed the HRM 498 Week 2 Strategic HRM Plan, Part I Company Overview. 

Pursuing continuous replenishment made Campbell aware of the negative impact that the overuse of price promotions can have on physical efficiency. Every January, for example, there was a big spike in shipments of Chicken Noodle Soup because of deep discounts that Campbell was offering. Retailers responded to the price cut by stocking up, in some cases buying a year’s supply – a practice the industry calls forward buying. Nobody won on the deal. Retailers had to pay to carry the year’s supply, and the shipment bulge added cost throughout the Campbell system. For example, chicken-boning plants had to go on overtime starting in October to meet the bulge. (See the graph “How Campbell’s Price Promotions Disrupted Its Supply System.”) 

Recognizing the problem, Campbell required its retail customers on the continuous-replenishment program to waive the option of forward buying at a discounted price. A retailer that promotes Campbell products in its stores by offering a discounted price to consumers has two options: it can pay Campbell an “everyday low price” equal to the average price that a retailer receiving the promotional deals would pay or it can receive a discount on orders resulting from genuine increases in sales to consumers. The Campbell example offers some valuable lessons. Because soup is a functional product with pricesensitive demand, Campbell was correct to pursue physical efficiency. MMPBL 510 Week 1 Individual Assignment Strategic Program Management Worksheet – or the in-stock availability of Campbell products at a retailer’s distribution center – did increase marginally, from 98.5% to 99.2%.

 But the big gain for the supply chain was in increased operating efficiency, through the reduction in retailers’ inventories. Most retailers figure that the cost of carrying the inventory of a given product for a year equals at least 25% of what they paid for the product. A two-week inventory reduction represents a cost savings equal to nearly 1% of sales. Since the average retailer’s profits equal about 2% of sales, this savings is enough to increase profits by 50%. Because the retailer makes more money on Campbell products delivered through continuous replenishment, it has an incentive to carry a broader line of them and to give them more shelf space. For that reason, MGT 448 Week 3 Learning Team Assignment Country Risk and Strategic Planning Analysis Paper after it had introduced the program, sales of its products grew twice as fast through participating retailers as they did through other retailers. Understandably, supermarket chains love programs such as Campbell’s. Wegmans Food Markets, with stores in upstate New York, has even augmented its accounting system so that it can measure and reward suppliers whose products cost the least to stock and sell. There is also an important principle about the supply of functional products lurking in the “everyday low price” feature of Campbell’s program. Consumers of functional products offer companies predictable demand in exchange for a good product and a reasonable price. The challenge is to avoid actions that would destroy the inherent simplicity of this relationship. Many companies go astray because they get hooked on overusing price promotions. 

They start by using price incentives to pull demand forward in time to meet a quarterly revenue target. 

But pulling demand forward helps only once. The next quarter, a company has to pull demand forward again just to fill the hole created by the first incentive. The result is an addiction to incentives that turns simple, predictable demand into a chaotic series of spikes that only add to cost. Finally, the Campbell story illustrates a different way for supply chain partners to interact in the pursuit of higher profits. Functional products such as groceries are usually highly price-sensitive, and negotiations along the supply chain can be HRM 498 Week 5 Strategic HRM Plan, Part IV Final Report.

 If a company can get its supplier to cut its price by a penny and its customer to accept a one-cent price increase, those concessions can have a huge impact on the company’s profits. In this competitive model of supply chain relations, costs in the chain are assumed to be fixed, and the manufacturer and the retailer compete through price negotiations for a bigger share of the fixed profit pie. In contrast, Campbell’s continuous-replenishment program embodies a model in which the manufacturer and the retailer cooperate to cut costs throughout the chain, thereby increasing the size of the pie. 

The HRM 498 All Week 4 Assignments – Strategic HRM Plan, Part III Evaluation and Assessment Memo model can be powerful, but it does have pitfalls. Too often, companies reason that there never can be too many ways to make money, and they decide to play the cooperative and competitive games at the same time. But that tactic doesn’t work, because the two approaches require diametrically different behavior. For example, consider information sharing. If you are my supplier and we are negotiating over price, the last thing you want to do is fully share with me information about your costs. But that is what we both must do if we want to reduce supply chain costs by assigning each task to whichever of us can perform it most cheaply.