Marketing Exam #2
Internal and External Drivers of Pricing (chapter 10 class notes)
1) Fit in the company mix (other 3 Ps (not price)) 2) Target costing—you come up with an ideal selling price and then make your cost match. A customer is willing to pay $5 for this product, tested with customers and they liked it, but said they wouldn't pay more than $5. Finding the best way to make a product for $4 to sell it for $5. 3) Demand for the product. 4) Elasticity of the product—if the price goes up, you still need it just as much as you need it as it goes down. Diabetes medicine, gas. The price can go up, and it may exceed our customers expectations, but it's a necessity. Can't find a substitute. 5) Economic considerations—cheaper products in recession. Marcroenvironment. If we're in a recession, we want to think of pricing things less expensive. Maybe a customers buying capacity has changed.
Stages of New Product Development (chapter 9)
1) Idea generation (brainstorm). 2) Idea screening (select and refine→small group of people. Ruling out ideas "costs too much money..." there's a way to take a bunch of the ideas out of the mix.) 3) Product concept development (put idea into consumer terms) .4) Concept testing (test with customers. if you don't test with customers, you might waste a lot of money because what if no one wants your product? People don't want to spend money testing, but sometimes not testing the product can be a lot more costly.) 5) Marketing strategy development (take what you learn from people you have interviewed; build a plan. You want to learn from the things people tell you and integrate it into your product.) 6) Business analysis (financial plan. You may have had a broad sense of what it may cost, but time to get real. not only how much is it going to cost, how much units will we sell in the first year, or in the first three years? Create a financial plan to be prepared for that. "yeah, we can sell the amount of units to breakeven, to cover the cost. But maybe we want more money to develop revenue." Only going to develop product if you think you can develop revenue/break even.") 7) Product development (if feasible). 8) Test marketing (in early stages→"how, how would you use this product, how much would you pay for it?") 9)Commercialization (popularize; raise awareness. This is where you start advertising, strategic planning with other companies for publicity.)
10 keys to SCM (chapter 12)
1. Clear understanding of existing systems costs and service levels. We can't know how we will do in the future if we don't know how we are doing right now. 2. Clear understanding of what is possible—benchmarking and best practices. Need to know existing cost before we can know what's possible. Benchmarking—comparing yourself to people in your industry who are the best. 3. Objective assessment of internal capabilities and outsourcing. Maybe there is someone in the world who can do it better than you for a lower cost. 4. Development of an integrated SCM strategy with links to suppliers' suppliers and customers. Everyone is on the same team. Everyone has the same goals. 5. The ability to manage change within and across organization People in the best place to know what is wrong are the people who are actually doing the job. 6. The ability of effectively manage business alliance. The people are your business partners, they are helping you get the job done. 7. Leading-edge information technology applications. 8. Clearly defined, measurable performance standards. "I want to do better in this way." This is something you can act on and see if you're doing better or worse. Cant be too general. "want to have a successful marketing campaign on the web." Well what does that mean? People will understand things in different ways. 9. A commitment to longer-term business relationships. Develop a whole new relationship with a whole new company all over again. If you just put the time in to retrain that person, a more efficient system than starting over with a new person all over again. 10. A change in the basic business philosophy from an adversarial to a cooperative model. "I didn't screw up, they did!"
Product Mix Pricing Strategies (chapter 11)
1. Product line pricing 2. optimal-product pricing 3. captive- product pricing 4. by-product pricing 5. product bundle pricing
Vertical Marketing System (VMS) (chapter 12 page 345)
A channel structure in which producers, wholesalers, and retailers act as a united system. one channel member owns the others, has contracts with them, or has so much power that they all cooperate.
Franchise (chapter 13 page 379)
A contractual association between a manufacturer, wholesaler, or service organization (a franchisor) and independent businesspeople (franchises) who buy the right to own and operate on eor more units in the franchise system. Franchiser (business owner) gives franchisee (store operator) the rights to run (own and operate) one or more stores in a retail chain.—Dunkin Donuts • Popular with fast-food restaurants and health clubs • Franchisees must adhere to strict norms or can lose their business. • Usually won't let you price things too low. Like if you work at McDonalds and you sell hamburger for 10 cents. Why can't you do that? Because customers will then think that's what its worth. Destroy the value.
Product Concept (chapter 9 page 267)
A detailed version of the new-product idea stated in meaningful consumer terms. It is important to distinguish between a product idea, a product concept, and a product image. A product idea is an idea for a possible product that the company can see itself offering to the market. A product concept is a detailed version of the idea stated in meaningful consumer terms. A product image is the way consumers perceived an actual or potential product.
Supermarket
A large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of grocery and household products—Albertson's
Price Elasticity (chapter 10 page 304)
A measure of the sensitivity of demand to changes in price. A measure of the sensitivity to changes in price. Often measured with a demand curve. The higher the price, and lower the demand.
Value Delivery Network (chapter 12 page 341)
A network composed of the company, suppliers, distributers, and, ultimately, customers who partner with each other to improve the performance of the entire system in delivering customer value.
Discount stores
A retail operation that sells standard merchandise at lower prices by accepting lower margins and seller at higher volume—Target
Department stores
A retail store that caries a wide variety of product lines, each operated as a separate department managed by specialist buyers or merchandisers. (sells primary luxury items—may focus really well on like 5 things, apparel makeup shoes jewelry. Not as specialized as a specially sore, but not as broad as a discount store)—Macy's
Specialty stores
A retail store that carries a narrow product line with a deep assortment within that line. (A store that sells only one type of thing—Game Stop)
Marketing Channel (or distribution channel) (chapter 12 page 341)
A set of independent organizations that help make a product or service available for use or consumption by the consumer or business user.
Convenience stores
A small store, located near a residential area, that is open for long hours seven days a week and carries a limited line of high-turnover convenience goods. (sell very few products, but make a ton off of them. opposite of grocery store)—7-Eleven
Superstores
A store much larger than a regular supermarket that offers a large assortment of routinely purchased food products, nonfood items, and services. (hybrids and category killers)—Costco, Wal-Mart
Discount (page 318)
A straight reduction in price on purchases during a stated period of time or in larger quantities. price reduced during stated period or because you buy more. Helps in short-term, but in long term if people buy your stuff when its less expensive, I buy three toothpastes for the price of one, and they can make your sales spike, but don't rely on them.
Dynamic pricing (page 323)
Adjusting prices continually to most characteristics and needs of individual customers and situations)
Third-party Logistics (chapter 12 page 363)
An independent logistics provider that performs any or al of the functions required to get a client's product to market.
Value-added Pricing (chapter 10 page 293)
Attaching value-added features and services to differentiate a company's offers and charger higher prices. Opposite of cost-based pricing.
Fixed costs (overhead) (chapter 10 page 296)
Costs that do not vary with production or sales level. Stay same regardless of volume—overhead—office bills. If you turn on electricity, the bill would be the same regardless of how many people are in the room.
Variable Costs (chapter 10 page 296)
Costs that vary directly with the level of production. Change with volume—material and labor for shirt manufacturing—difference of $50 or $5000
Types of Retailers (chapter 13 pages 375-377)
Department stores, supermarket, convenience stores, superstores, discount stores, specialty stores
Market Strategy Development (chapter 9 page 268-269)
Designing an initial marketing strategy for a new product based on the product concept. The marketing strategy statement consists of three parts. The first part describes the target market; the planned value proposition; and the sales, market share, and profit goals for the first few years. The second part outlines the product's planned price, distribution, and marketing budget for the year. The third part described the planned long-run sales, profit goals, and marketing mix strategy.
Product Development (chapter 9 page 269)
Developing the product concept into a physical product to ensure that the product idea can be turned into a workable market offering.
Channel Conflict (chapter 12 page 344)
Disagreements among marketing channel members on goals, roles, and rewards—who should do what and for what rewards.
Price Adjustment Strategies (chapter 11 page 318-323)
Discount, Allowance, Segmented pricing, Psychological pricing, Reference pricing, Promotional pricing, Dynamic pricing
Idea Screening (chapter 9 page 265)
Idea-reducing strategy. Screening new-product ideas to spot good ideas and drop poor ones as soon as possible.
Commercialization (chapter 9 page 271)
Introducing a new product into the market. Test marketing gives management the information needed to make a final decision about whether to launch the new product. If the company goes ahead with commercialization, it will face high costs.
Crowdsourcing (chapter 9 page 265)
Inviting broad communities of people—customers, employees, independent scientist and researchers, and even the public at large—into the new-product innovation process. Tapping into a breadth of sources—both inside and outside the company—can produce unexpected and powerful new ideas.
Good-value Pricing (chapter 10 page 292)
Offering just the right combination of quality and good service at a fair price.
Business Analysis (chapter 9 page 269)
One management has decided on its product concept and marketing strategy, it can evaluate the business attractiveness of the proposal. Business analysis involves a review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the company's objectives. If they do, the product can move to the product development stage.
Price ceiling/ price floor
Price ceiling→highest you can make money off of. Price floor→The lowest you can sell and still cover your cost. Don't want to price above customers expectations, but not too low that we don't make any money. In part based on the customers expectation (price ceiling), in part companies cost (price floor). Don't want to price more than people are expecting to pay, but don't want to cost lower than the price floor/how much it costs to make the product. When would you price above price ceiling? More demand than there is supply, or a really exclusive thing. "only 500 of this special iphone" if we have a very limited. Special edition of things. Skim only the people at the top who are willing to pay more money. May be able to make much more money from a small group of people early on. (chapter 10 class notes)
Reference prices (page 319)
Prices that buyers carry in their minds and refer to when they look at a given product.
Psychological pricing (page 319)
Pricing that considers the psychology of prices and not simply the economics; the price is used to say something about the product. A CD that has a small sticker that says $15.99 that's kind of cut off but a big pink sticker that says $11.88. First of all, .88 feels so much less than .99. Makes $11.88 seem so much more like $11 than $12. Big pink sticker makes me feel like I'm getting a deal. Old plain white sticker with $15.99 makes me feel like I'm getting a deal, and like no one wants to spend that kind of money on a CD.
Allowance (page 318)
Promotional money paid by manufacturers to retailers in return for an agreement feature the manufacturer's products in some way. Company pays for featured positioning. If Lays potato chips have a good, seen positioning where everyone can see it, the company and the retailer collaborate and put it in a prime spot. Maybe you're making less money per bag, but you're probably selling much more.
Segmented Pricing (page 318)
Selling a product or service at two or more prices, where the difference in prices is not based on differences in cost. Two or more prices for product—not based on cost. Student discount, senior discount. It doesn't cost more for a 30 year old to see a movie than an 80 year old to see a movie, but 80 year old gets a discount. Customer segment, product form, location pricing, etc.
Market-skimming Pricing (price skimming) (chapter 11 page 314)
Setting a high price for a new product to skim maximum revenues layer by layer from the segments wiling to pay the high price; the company makes fewer but more profitable sales. High initial prices, skim off of the top. Super high-end technology. People who are willing to pay top dollar, skimming those people off of the top. Want to take elite off the top. HDTV. APPLE—when first introduced iPhone, initial price was as much as $599 per phone. Only customers who wanted to sleek new phone purchased. Six months later, costs $399 for 8GB and $499 for 16GB to attract new buyers. Within the year, price dropped $199 and $299, and now you can find a 8GB for $49. Apple skimmed the maximum amount of revenue from the various segments of the market.
Market penetration pricing (chapter 11 page 315)
Setting a low price for a new product in order to attract a large number of buyers and a large market share. The high sales volume results in falling costs, allowing companies to cut their prices even further. Low cost gets you in quickly with many customers. Want to get everyone, more customers.
Customer-Value-Based Pricing (chapter 10 page 291)
Setting price based on buyers' perceptions of value rather than on the seller's cost. Based on buyers' perception of value, not seller's cost. Two types of examples: 1) Good Value: Quality and service at a good price—think good enough! This value is good enough→kind of like a WalMart value. 2) Value Adding Pricing: Attaching value-added features and services to differentiate and charge higher prices. Panera→looks for ways to add more value. Not subway, but not fine dining. Fancifies a sandwich looks for a way to add more value.
Cost-based Pricing (chapter 10 page 295)
Setting prices bases on the costs of producing, distributing, and selling the products plus a fair rate of return for effort and risk. Cost-based pricing is the opposite: cost of producing, selling, distributing product plus a little bit for effort and risk. Respect your market and your market place position.
Pricing Objectives (pricing for...) (chapter 10 class notes)
Survival→at risk of going out of business, so you may want to change your business so you can stay in business a little longer. Profit maximization→pricing higher, trying to make more money Market share→pricing to increase market share. Trying to get more market share by dropping prices. McDonalds. Leadership→dominant company in an industry, and your price may set the price standard. The head/main company in the field. Sets standard. Customer retention→cable company, phone service provider. Giving you a discount (she pays her bills on time...)giving you benefits (cheaper HBO) instead of changing to new shiny things. Verizon selling iPhone for $100, so they get you, but then like a 4-year contract so they have you for four years. If they put that money to get new customers, probably would be better. Market protection→going to price to protect our market share. Pricing not too low, but aggressively low to make sure none of our competitors come in and steal our customers. Pricing to protect your market.
Promotional Pricing (page 321)
Temporarily pricing products below the list price, and sometimes even below cost, to increase short-run sales. Temporarily reducing prices to spur short-run sales. Manufacturers/stores/firms sometimes offer discounts, special-event pricing, limited-time offers, flash sales, sometimes cash rebates, low-interest financing, longer warranties, free maintenance, to reduce the "price."
Concept Testing (chapter 9 page 268)
Testing new-product concepts with a group of target consumers to find out if the concepts have strong consumer appeal.
Price (chapter 10 page 291)
The amount of money charged for a product or service, or the sum of the values that customers exchange for the benefits of having or using the product or service. How much you pay for something. Company and customer perspective all at once. o Context is important→what time of the day or night are you shopping for your ticket. How many times have you looked at the ticket. Customer elements. What kind of info exists in our records about you?-->customer info. What kind of day? What type of device are you looking on? (iPad vs. PC). How full is the plane? You want to fly a full plane. You want every flight you have to be full. Advertising (TV ads, Travelosity, Orbitz→going to sell a chunk of your tickets to these, but kind of bad because those websites take a chunk of the profit for themselves. This will ensure you have a full flight, a day into the announcement of the flight.)
Product Lifecycle (PLC) (chapter 9 page 273-277)
The course of a product's ales and profits over its lifetime. Has 5 different stages. 1) Product development—Idea becomes investment; Small sales, little profit. Look for investors. 2) Introduction—The PLC stage in which a new product is first distributed and made available for purchase. Slow growth; heavy expenses are as awareness increases. Use marketing. 3) Growth—The PLC stage in which a product's sales start climbing quickly. Rapid acceptance and increasing profit. If it's a good product, if your product has good marketing. 4) Maturity—The PLC stage in which a product's sales growth slows or levels off. Sales slow or stabilize; profitability plateaus. Your product isn't making as much money as it used to. Like the iPhone, everyone who has one gets one, and then sales flatten out. You can't keep growing. 5) Decline—The PLC stage in which a product's sales fade away. Sales fall; profits drop. Product rationalized
Disintermediation (chapter 12 page 348)
The cutting out of marketing channel intermediaries by product or service producers or the displacement of traditional resellers by radical new types of intermediaries.
New product development (chapter 9 page 262)
The development of original products, product improvements, product modifications, and new products through the firm's own product development efforts. How do companies innovate, or develop new products? • A firm can obtain new products in two ways. One way is through acquisition—by buying a whole new company, patent, or a license to product someone else's product. The other is through the firm's own new-product development efforts. • New products are important to both customers and the marketers who sell them. They bring new solutions and variety to customers' lives, and they are a key source of growth for companies. In today's fast-changing environment, many companies rely on new products for the majority of their growth. (Example of Apple iPhone/iPad page 263) • New products face tough odds. Each year, US companies lose an estimated $260 billion on failed new products. o Although an idea may be good, the company may overestimate market size. Actual product may be poorly designed. Incorrectly positioned, launched at the wrong time, priced too high, poorly advertised. o Companies face a problem: they must develop new products, but the odds weigh heavily against success. To create successful new products, a company must understand its consumers, markets, and competitors and develop products that deliver superior value to customers. • Customer survey's asking what the customers want. Test products (food) with customer (dunkin and starbucks). In-depth interviews with customer's. Using marketing information system→secondary information. Can go "meta" on your industry. Nike works directly with the athletes to make it marketable. Nike jumps from sport to sport to sport to grow →they did an analysis with each sport and see which one each one. Michael Jordan (celeb endorsements) • New Product Development Approaches—1) Customer-centered (most popular. Used to be brand-centered approach, but not anymore) Fix customer problems/Create satisfying customer experiences. 2) Team-based—All hands on deck approach. Many departments overlap and come together to develop and launch product quickly.
Test Market (chapter 9 page 270)
The stage of new-product development in which he product and its proposed marketing program are tested in realistic market settings. If the product passes both the concept test and the product test, the next step is test marketing.
Total Costs (chapter 10 page 296)
The sum of the fixed and variable costs for any given level of production. The sum of fixed and variable costs.
The Supply Chain (chapter 12)
The supply chain encompasses all of those activities associated with moving goods from the raw material stage through to the end user. SUPPLY CHAIN—Everything that's involved in the creation and delivery, and maybe even return, in the process. Includes customer, retailers, people who make the clothes, people who deliver the clothes. • ...and back to the company, if needed... • you never really hear of people of returning a coffee to Starbucks • customer returning something to the company, and the company returning it again. • LL bean takes back anything you buy from them at any time. • A retailer will buy from different manufactures. Different manufactures will have different rules.
Idea generation (chapter 9 page 263)
The systematic search for new-product ideas. New-product development starts with idea generation. A company typically generates hundreds, even thousands, of ideas to find a few good ones. Major sources of new-product ideas include internal sources and external sources such as customers, competitors, distributors and suppliers, and other. Purpose of idea generation is to create a large number of ideas.
• Product Line Pricing (page 316)
o Establishes steps between products in a line when appropriate (example men's suits). First tier is for new suit buyers who never bought a suit before. Middle line for men where he has been working in a job for a few years and he has a suit. Third tier—wants to reflect in the way he dresses. Same basic prices in different ways to different can sty with your brand. Setting the price steps between various products in a product line based on cost differences between the products, customer evaluations of different features, and competitors' prices. Setting prices across the entire product line.
• Captive-Product Pricing (page 317)
o For products that might be used along with something else (example printer cartridges, replacement razor cartridges) One is super cheap, one is super expensive. Setting a price for products that must be used along with a main product, such as blades for a razor and games for a video-game console. Pricing products that must be used with the main product. Finding the right balance between the main product and captive product prices can be tricky.
• By-Product Pricing (page 317)
o Getting rid of what you don't need profitably to bring down cost of core product (Crasions). Sometimes the things we throw away as trash are more profitable. Taking the garbage of what you make and turning into a product. Setting a price for by-products in order to make the main product's price more competitive. Pricing low-value by-products to get rid of or make money on them.
• Product Bundle Pricing (page 317)
o Sell several products together at reduced rates. Maybe someone's loyal to your toothpaste but not your mouthwash or toothbrush, offer at a discounted priced so people may purchase. Combining several products and offering the bundle at a reduced price. Pricing bundles of products sold together. Fast food restaurants, burger fries and drink "combo price."
• Optimal-Product Pricing (page 316)
o The pricing of optional or accessory products along with a main product. Pricing optional or accessorily products sold with the main product. Selling accessories along with the core—think cars
The Supply Chain is... (chapter 12)
• Basically made up of the value-delivery network. o Company, suppliers, distributers, and customers who "partner" to better the system o Palm o "I bought this LL Bean backpack but the supplier is JanSport. The zipper doesn't work, I would like to return it." And LL Bean says "the zippers aren't good. Warehouse, make them better"
SCM Dynamics Continues... (chapter 12)
• Expansion of IT application in the field of SCM • Continue pressure from the financial markets to cut costs and focus on "core competencies." You can't do everything best, so focus on the things you do do best. • Growing sophistication of managers in the field of SCM. The more your technology system can make decision for you, the less you can screw up your market by you making a bad decision and predicting trends. Someone needs to figure out a technological solution for technologies to talk to one another. • Continuation of the global movement toward consolidation through mergers and acquisitions. • Shorter product life cycles—ongoing pressures to develop and launch new products. You're not going to make something for $300 that you'll only wear once, you're going to make something for $40 and then the customer will buy more. Less well-made clothes that are so much cheaper. You don't want to wear the same thing forever, so you can throw it out after a while and not having spending too much money on it. Zara, Forever 21, H&M.
Roadblocks to SCM (chapter 12)
• Institutional inertia "if it isn't broke, don't fix it." Mountain man. Things are going pretty well right now, don't rock the boat. • Fear of change • Potential loss of control/power. If we don't do as much as we can ourselves, we have to have new relationships and invest in those relationships and trust them. • Poor data on existing costs and service levels. You might be able to do 15% better, but you haven't written down where you are now, so you have no idea. • The cost of related restructuring. "we could save money in 5 years, but we would have to pay more right now, and I don't have that kind of money." • The need to re-define performance metrics and reward system. • The cost of upgrading related IT systems. Everyone is going to have to be upgraded and your systems will have to communicate. Will be a huge time-saver in the future, but we don't have the $400,000 right now to put into this. • Difficulties encountered in moving from an adversarial business model to a collaborative business model. • The complexities added by mergers and acquisitions. If your company turns into a global company because they are bought by a bigger company. • The short-term financial focus of many companies and their investors. • Reluctance of supply chain "partners" to buy into the new model. • Lots of talking and relatively limited action. Companies always talk a big game. All talk, no action. "we're going to make this company better than ever before!"
Drivers of Change in SCM... (chapter 12)
• Intense competition in many industries. The growth of ecommerce. Knowing that there are a lot of people offering in a lot of different ways, we have to get it done the first time, • The globalization of sourcing (Where do we get the product from?), manufacturing, and sales • The expansion of E-Commerce. Now you want everything you want instantaneously. It's difficult for stores. • The growing importance of speed as a competitive variable. If you can get products in front of customers quicker, it may be what beats everything else. The best supply chain may put you in the lead. Supply chain is exactly where you could be competitive. • Increased CEO/CFO recognition of SCM not only as a significant cost generator, but also as a possible source of a marketplace differentiation. • Growing acceptance of the concept of outsourcing and the expansion of the third-party logistics industry. Companies can't do everything themselves. We're going to have different people driving trucks, flying planes, these people are third party logistics.
Supply Chain Management (SCM) (chapter 12 page 357)
• Managing upstream and downstream value-added flow of materials, final goods, and related information among suppliers, the company, resellers, and final consumers. o Maximize profits o Minimize costs
Future of Retailing (chapter 13)
• New retail forms shorten lifecycles-don't have to wait for things as longer. If you go to a store and they don't have the product you want, you can go to another store OR order online. • Non-store retailing growing o Click-only retail o Online retail is still less than 10% of overall retail sales. o Retail convergence o Retail stores as hangouts—Whole Foods, you can go do your weekly shopping and then eat a meal with your friend right after. If we get you to spend more time in the store, our retail will go up. o Rise of mega-retailers—not only retailers that have superstores, but retailers who have many superstores. o Importance of retail technology—right place, right time. Sophisticated store level databases
Decisions Retailers Make (chapter 13)
• Product assortment • Level of customer service(is your level of customer service either "oh its in isle 8" or "my son loves that toy, let me tell you more") • Pricing • Promotion (I carry all of these things, but I will be promoting these things. Connected to product assortment) • Place: Location, location, location
What are the keys for good Supply Chain Management? (chapter 12)
• Strong managers in each link in the change. Cohesive group of people. Strong managers. • Having a good IT system and making sure everything functions together. Making good investments to make sure everything functions together • Inventory management. To make sure things can go to customers fast and to make sure customers can send back quick if needed. • Communication between all parts of the chain. Communication needs to exist. • Knowing your system, knowing what your capabilities are • Having good customer relationships. Different levels on the supply chain. • Educating each individual end of the chain. • People feel better about change if you include them in the chain. • Evaluating customer service more. • Letting everyone see "what we're trying to do here"—seeing the big picture
Using SCM Functions to Create Competitive Differentiation (chapter 12)
• The Dell model—build it to order. Custom design. What does this do for the supply chain? Every order is slightly different. Complicates. You can design your own computer, and everyone wants different kinds. Just-in-time model. • LL Bean—after sales service. "if at any point you want to return this, you can." People may be unhappy with their product, and they may be too lazy to return it to the store. People can return things and they'll have a positive view of the store. Good customer-store relationship. You may also buy more if you know you can return them, and you may end up buying more and not return it. And when people go to return something, people may browse around. • HP—reverse logistics. Ink cartridges. What happens when you're done with ink cartridges? You can go and return them. HP reuses empty ink cartridges, so customers think they're being eco-friendly, but they're just cutting their costs and not having to make new ink cartridges. • Widespread use of the third-party logistics to support global expansion. • Retailers—pre-shipment consolidation in China. Inexpensive labor in parts of the world, so when the product gets here, we can spend more money. • Many companies—offshore call centers. India. They probably have a night-shift and a day-shift, so there is someone available all the time. Sometimes the labor isn't well train. Heavy accents. People get frustrated.
Supply Chain Functions (chapter 12)
• Transportation—"how are we going to get the product to the customer or to the store?" Cut cost for profit. • Warehouse • Inventory management—Driven by IT System; want a really good inventory management system. (Stock keeping units—Barcode at Wal-Mart—this is an inventory management system at Wal-Mart. You need to have the right materials. You need the best inventory management to know what people are ordering in what color. You knowing where you can get your stuff where it needs to be when the customer wants it.) • Purchasing—What does your market like? • Order processing—"somebody ordered this t-shirt and this book...how do we put it in the same box?" now there's a robot doing it. • Order fulfillment • Forecasting—trying to determine trends based on past activities. • Product scheduling—try to predict and forecast if there are newer products that will be popular • Material handling—travel from the supplier to the other manufactures • Industrial packaging—A company that sells you many product—Gillet razors. If they have like 200 product, all on the same pallet. • Selection and operation of SCM IT system— Your computer system needs to react with your customers immediately. Send a message to the retailer immediately "you're going to need more sizes of these shirts immediately." • Develop of SCM performance metrics and control systems. You're going to need something that tells you if you're doing well or badly and how to get better. • Development of customer service standards—what are your customer service standards? How about online chat (24/7 service) • Reverse logistics—Returns are complicated, its nice when the company makes it easier for the customer.
