Supply Chain Management Test 1

Goal setting

Where are we now? How are we going to "evolve" to get to where we want to go? 2 principles:Don't Punish Failure. Managers recognized that when people try new things and establish stretch goals, desired outcomes are not always achieved. The key is to "learn and go on." An oft-repeated question at Newmont was, "Did you learn something?" Don't Give Up. The Supply Department promoted the philosophy that, "We don't give up on people unless they give up on themselves." Experience showed that most people get on track and establish patterns of achievement and success. To help team members get on track, managers began meeting weekly with colleagues who were struggling. Of course, sometimes a worker decided that expectations were just too high and opted for other employment.

Facility Layout

Where you position equipment defines the flow of materials and the number of times you must handle each item. The ideal layout minimizes movement and handling, creating a simple and smooth flow of materials through the facility. Need to reevaluate over time

Forecasts

You use forecasts to determine capacity needs, plan production, refine workforce plans, and determine inventory levels. Almost always wrong, use historical data

Why are service operations important?

You want to enjoy a higher standard of living—now and in the future. Better living standards depend on gains in productivity as well as innovation. Future prosperity thus depends on how well we manage and improve service operations. Service operations are very different from—and, in many respects, more challenging to manage than—manufacturing operations.

Which of the following initiatives represents a true customer-success strategy?

a. At the customer, for the customer b. New ways of working together c. Six sigma at the customer d. The customer-driven kaizen burst e. Value-stream mapping f. All of the above g. Both a and c ***

Two types of touch points

acquisition, utilization

Why should you care about needing to learn how to effectively manage services?

b. Services are very different from manufacturing operations. c. Services productivity growth and innovation are critical to future prosperity.

What is the end goal for new product development?

b. To solve customers' problems profitably

Services cannot be shipped

because services cannot be shipped, you lose decision-making capability, location and timing are everything

What tools are beginning to give decision makers key insight into why customers behave the way they do?

big data and virtual reality

Breakeven

breakeven= fixed costs/(price per unit- variable cost per unit)

Operations and SPM

business function responsible for acquiring materials, transforming them into valuable outputs, and delivering these finished products to customers creating customer value

What three factors determine the market-bearing price?

c. What the competitors' offering look like, what customers expect, & how distinctive the product is

BCG Growth matrix strategy

categorizes products based on market share and growth rates. The four quadrants are labeled Dogs, Cash Cows, Question Marks and Stars.The balanced portfolio has: stars whose high share and high growth assure the future; cash cows that supply funds for that future growth; and question marks to be converted into stars. 1 The lifecycle of a hit product goes as follows: Begin as a question mark, grow into a star, mature into a cash cow, and decline into a dog. The lifecycle of an unsuccessful product is short circuited: Begin as a question mark and die as a dog.

Value Chain

coined by Michael Porter, managing collaboratively within the four walls of a firm,

4 benefits of a balanced scorecard

communicates top-managements vision, links behavior to strategy, promotes future capability development, imposes discipline

Globalization

companies worldwide depend on global resource and consumer markets for growth and profits. Consider, for example, that 95% of the potential consumers for American companies live outside the U.S. Global manufacturing and supply networks make it possible to reach these customers.

At what level does the target costing process take place?

component level

Value dimensions

cost, quality, delivery, innovation, agility

Going beyond satisfaction

create customer experiences that drive growth: Acquire new customers. Increase sales with existing customers.

Innovation is a ______________ ________________, involving all of the functions of your company.

cross-functional capability

Service delivery is hard to control

customers actively interact with the service-delivery process, making each experience unique. many services resist standardization, which results in service operations being labor intensive and economies of scale elusive

CRM Systems

data capture, data storage, data analytics and information display

Big Data

defined by the three v's: volume, variety, velocity

Bullwhip Effect

demonstrates how interdependence among members of a supply chain influence behavior and performance, as a company responds to changes in customer demand, the initial response is amplified as one moves up the chain

Core decisions

design decisions, control decisions

Design Decisions

determine where and how you deploy your assets, to create value over the long haul. they are resource-intensive, hard to change in the short-term and have a long-term impact on the firm's competitiveness ex. product design, process design, facility layout, facility location

Goal of cross-experienced manager

develop an appreciation for customers' needs and front-line workers' contributions gain a better perspective of what goes on in the different functional areas and how they work (or don't work) together to meet organizational goals learn the "language" spoken in each area (in preparation for future intra-organizational communication) build stronger, more collaborative relationships with colleagues across the company gain an understanding of how suppliers (both product and service) contribute to product development, production, and distribution

Six sigma

follows the dmaic structure: Define, Measure, Analyze, Improve, and Control

According to the BCG matrix, to be successful, a company should have a portfolio of products with different ____________and different ______________.

growth rates; market shares

Product life cycle

introduction: development and launch growth: early adopters and early majority begin to buy and use the product. to build momentum, you increase advertising and promote positive word of mouth maturity: sales continue to grow, but at a slower pace, two challenges are: the market becoming saturated (fewer customers entering the market) and competition is intensifying with low-cost rivals decline: efficient operations including global sourcing are needed to support a product with fading sales volume and profits

How to proactively scan

look everywhere- pay attention to goals, structures, measures and capabilities. track economic, legal, social and political conditions. use a variety of tools synthesize insights- data and trends communicate persuasively- swot chart avoid common pitfalls- fail to follow the process, involve the right people, dig deeply or collectively push the boundaries

Quality

nothing more or less than meeting customer expectations

Passive scanning

observing changes in the marketplace as they occur most managers respond in an informal and ad hoc manner. observers don't initiate analysis or lead to improved planning

Key points to the open systems view

open systems, resource access, empowered customers and how, not what

Total order performance

order winner, order qualifier, order loser- 3 rules Get into the Game. Almost always, cost and quality are the critical value dimensions. If you want to be taken seriously as a potential supplier, you have to offer high quality at low cost. However, high levels of parity often exist on these dimensions. Cost and quality thus tend to be order qualifiers. Differentiate Yourself. Harvard's Michael Porter made a vital observation: Sustained success requires that you offer distinctive value; that is, something special.17 If your cost and quality are good enough for customers to consider you as a supplier, you need to differentiate yourself in one of the other dimensions. Customers must view your delivery, agility, and/or innovation as an order winner. Avoid Disqualification. You must meet minimum requirements across all five value dimensions. Even if you rate well on cost, quality, and a differentiating characteristic, you could still disqualify yourself via unacceptable performance elsewhere. Your customers are keeping score. Having an order loser will make it impossible to earn enough points to win (or keep) a customer's business.

Productivity

outputs/inputs Order-picking Productivity. If your productivity improves at the expense of poorer accuracy or higher damage incidence, are you really better off? Customer Service Costs. If your costs of customer service decrease because you changed your returns policy—making it hard, if not impossible to return unwanted product—are customers more or less likely to be loyal? Return on Investment. If your ROI goes up because you skimp on needed investment, have you improved your firm's ability to win tomorrow's competitive battles?

2 Types of scanning

passive and proactive

The SCOR model

plan, source, make, deliver, return

As you look at a supply chain map, you can be confident you are looking at a winning supply chain if it depicts the right ______________ and the right _________________.

players; relationships

Profit

profit= required rate of return x (quantity(price-fixed) total of price - fixed costs

Proactive scanning

pursues these objectives: Detect important cultural, economic, legal, political, social, and technological events and trends. Help managers accurately and objectively understand the company's strengths and weaknesses. Identify and define potential opportunities and threats implied by identified events and trends. Promote an adaptable, forward-looking mind-set among managers and employees.

The target cost is simply the target ___________________ minus the target __________________

sales price; profit

Customer delight

satisfaction, delight, dissatisfaction, outrage and pain

The balanced scorecard was developed to help companies avoid the counterproductive decisions that emerged from too much emphasis on ______________ and ______________ measures.

short-term; financially oriented

Techniques for understanding customers

surveys, focus groups, expert panels, in-depth interviews, shadowing, ethnographic studies

Rotation program assignments

the assembly line, production control, purchasing, logistics, marketing, accounting, and finance.

Customer loyalty

three outcomes:Defection. When customers endure a bad experience, they defect. If you don't have an effective service recovery program, your company loses business quickly. By the way, social media amplifies this effect as customers tweet, Facebook, Instagram, or Snapchat about both remarkable and bad experiences. Indifference. Experiences that meet expectations deliver satisfaction. However, if rivals are just as good, indifference results. These experiences are an order qualifier not an order winner. Don't mistake convenience-driven customers for loyal customers. Loyalty. Only uniquely positive experiences motivate customers to be loyal.14

Data Storage

translation=A gigabyte is 1,024 megabytes A terabyte is equal to 1,024 gigabytes A petabyte is 1,024 terabytes An exabyte is 1,024 petabytes A zettabyte is 1,024 exabytes 90% was created in the last 2 years

How outstanding performance is measured

understanding + execution + behavior = winning results

Measurement motivates behavior

what gets measured gets done How and what you measure is more influential than almost anything else you do. Set the right strategy, hire the right people, provide the right training, and you still won't perform if your measures promote the wrong behaviors.

Sequential vs. concurrent NPD

when projects are tossed from one person to the next, costs go up and product launch is delayed. functional perspectives are typically a curse. when sequential is out-of-date and out-of-touch: ideas, plans, specifications, request for quotations, pricing structure, product profitability

What happens as competitiveness improves?

your company can capture market share, increase scale economies, improve profitability, and invest in future capabilities. Cost improvements can drive a powerful cycle of competitiveness.

3 categories of ABC classification

"A" Customers: Strategic key accounts—the most important 5-10% of your customers—typically make up a huge share of sales, profits, and growth. You do everything possible to make sure their experiences are remarkable. "B" Customers: Other key accounts that receive very high levels of service. "C" Customers: The remaining 80% of your customers. You provide them high levels of standardized service.

10 great management lies

1. Employees are our most valuable asset 2. I have an open-door policy 3. You could earn more money under the new plan 4. We're reorganizing to better serve our customers 5. The future is bright 6. We reward risk takers 7. Performance will be rewarded 8. We don't shoot the messenger 9. Training is a high priority 10. I haven't heard any rumors 11. We'll review your performance in six months 12. Our people are the best 13.Your input is important to us

Anatomy of a Supply Chain

1. You begin with the "focal firm"—that is, the company in the middle. 2. Suppliers are on the left and customers on the right. 3. Suppliers and customers are organized in columns, called "tiers," which are numbered in sequence moving away from the focal firm. 4. Demand information flows from right to left; that is, from the end customer all the way up the chain to raw materials. 5. Purchased goods and services flow the opposite direction—from upstream suppliers, through the focal firm, to downstream customers. 6. Money flows from right to left; that is, from the end customer all the way up the chain to the raw material suppliers? *suppliers' suppliers to customers' customers

Scheduling

1. aggregate planning: what needs to be produced and when you need knowledge regarding your production capacity, a demand forecast, and cost data for different resources 2. scheduling: Low-volume Job Shop. multiple jobs might be waiting to be processed at a workstation, you sequence jobs based on customer demand and production efficiencies. High-volume Assembly. define product routing when you design your assembly line. You will mix products based on customer demand. Project Management. In one-of-a-kind projects such as the construction of an apartment complex, you use project-planning tools to schedule resources and activities. *how you schedule will determine your costs and ability to deliver what the customers want when they want it

Core elements of an effective NPD process

1. get deep insight into customers needs 2. conceptualize and develop a product 3. verify financial viability 4. invest in next-generation of customer-pleasing products

Developing the balanced scorecard

1. what are our goals? - environmental scan (SWOT), best-in-class benchmarks, customer feedback 2. what skills do we need? 3. what metrics do we need? - industry standards, best-in-class benchmarks, customer feedback

Data's darkside

2 problems: Looking Backward. Past buying behavior does not always predict future behavior. In today's mobile society, situations and lifestyles change quickly, transforming today's nuisance customer into tomorrow's preferred customer (or vice versa). Looking Beyond the Mark. Don't forget, low levels of shopping activity may reflect more on your company's service offering than on the quality or profitability of a customer.

Which of the following companies made the advertising tagline, "Everyday low price," famous?

A & P

ABC classification

ABC classification relies on the Pareto principle. Also called the 80/20 rule, the Pareto principle observes that 80% of your sales are driven by your most important 20% of customers.

Moments of truth

Acquisition touch points Refers to the process of learning about a product and making the decision to buy it. occur as customers learn about and make purchase decisions. Utilization touch points, by contrast, occur as you travel; that is, as you check in, board the flight, and pick up your luggage on arrival.

Teams in modern organizations

Advisory Councils Senior-level steering committees, customer advisory boards, and supplier councils provide feedback, expedite communication, and garner commitment for key initiatives. Capital Equipment Capital equipment teams design and acquire needed equipment, defining necessary specifications, selecting suppliers, conducting negotiations, and installing and maintaining equipment. Commodity Commodity teams develop the expertise and relationships to assure an uninterrupted flow of high-quality, low-cost materials to the operating system. Customer Relationship Dedicated customer teams work to meet the needs of specific customer, resolving problems and designing tailored services. Information Systems Information systems teams design and implement the systems needed to collect and analyze information managers need to make great decisions. Problem Solving Task forces are put together to solve specific problems (e.g., reduce costs, improve quality, or shorten cycle times), implement new technologies, or drive the adoption of strategic initiatives. Product Development Product development teams ideate, design, and develop new products; that i.e., they reduce the time needed to bring a product from concept to market. Supplier Development Supplier development teams help suppliers upgrade process engineering, manufacturing, and quality capabilities. Value Analysis Value analysis teams study a product or process to determine how to produce the product at a lower cost or with improved quality.

Open Systems

All businesses, including yours, compete to survive in an open system. Each change in the environment—e.g., a new rival starts up or a new technology emerges—impacts your strategy and your ability to compete. To prosper, you need to recognize opportunities and threats, be quick to respond, and create more value than your rivals.

Facility Location

As you evaluate potential locations, you will probably focus extensively on labor costs or resource proximity. Almost every company does. However, you really need to take a broader, total-cost focus and consider all of the following: The cost of land, construction, and energy Tax rate Transportation rates and availability Labor availability and productivity Materials cost The location of customers and competitors Lifestyle considerations.

Expectations for customer satisfaction

At the cognitive level, your mind processes information—e.g., advertising and memories—for each experience, creating a learned expectation.3 At the affective level, emotions drive the process, leading to a "gut" reaction to what you are experiencing.

3 foundation behaviors for empowerment

Coaching Goal Setting Measuring

Types of benchmarking

Competitive Benchmarking. Evaluating the best practices of a rival is perhaps the most relevant approach. However, rivals that do something incredibly well may be unwilling to give you permission to come in and get an intimate look at how they do business. Exceptions do, however, exist. For example, General Motors and Ford learned a great deal about lean operations from their fiercest Japanese rivals, including Toyota. Remember, if you don't ask, the answer is no. Non-competitive Benchmarking. Sometimes your best learning opportunity is found in another industry. The classic example of non-competitive benchmarking involved Xerox's quest to improve its distribution system. Xerox's choice of a benchmark company was the catalog retailer L.L. Bean, an expert at pleasing customers by getting them product fast—and at acceptable costs. Internal Benchmarking. Some large, global companies make it a point to look for and disseminate best practices found within their own operating network. Johnson and Johnson, for example, operates in 60 different countries, giving it numerous opportunities to find and disseminate best practice. 1

Benchmarking pitfalls to avoid

Complacency I: Live in the Past. Your company's attitude determines how well benchmarking drives learning. Two Japanese rivals illustrates this point. Dominant Player. At the industry leader company, senior decision makers didn't see value in comparing themselves to anyone. After all, they were the best. Newcomer. An upstart rival constantly, and aggressively, sought better ways to manage key processes. Result. What happened? The industry "leader" suffered stagnant sales and a growing expenses-to-sales ratio. The "inquisitive upstart" benchmarked aggressively to improve customer service and SC productivity, achieving double digit sales growth and higher profit margins. You can't afford to forget the old saying: Attitude not aptitude determines altitude. Complacency II: Ignorance is Bliss. Consider the following. In a study of logistical competencies, managers were asked to evaluate their performance vis-à-vis leading industry competitors along 32 different capabilities.2 Firms that didn't benchmark professed to be the best on 15 of the 32 capabilities. Limited benchmarkers considered themselves to be the best on another 15 of the 32 capabilities. Extensive benchmarkers claimed to be the best on only two capabilities. What do these findings mean? Managers who actively benchmark know their own limitations. For non-benchmarkers, "ignorance is bliss"! Complacency III: Always in 2nd Place. High-performing SC companies tend to be active benchmarkers.3 Benchmarking, however, won't enable you to become the world's best at anything. The essence of benchmarking, after all, is copying best practice, not creating best practice.

Control Decisions

Control decisions are the day-to-day decisions you make that define how you make things. Your focus is to have the materials you need, move them efficiently through the production process, and assure that your transformation processes deliver exceptional quality. Forecasting, inventory control, scheduling, quality control

Four distinct measurement dimensions of the balanced scorecard

Customer Expectations, Operational Excellence, Future Capability Development, and Financial Performance

Tools for obtaining deep customer insight

Customer Surveys Surveys poll customers to identify their level of satisfaction/dissatisfaction with existing products and to discover their express and hidden needs and expectations for new products. Focus Groups Bring a number of customers (usually 4 to 14) together with a moderator to discuss their experiences, needs, and expectations regarding a new product concept. Expert Panels Rely on a group of experts to gain insight into product characteristics and viability. Usually used when specialized or technical insight/ opinion is needed. In-depth Interviews One to one discussions designed to identify the underlying motives regarding the interviewee's attitudes and behaviors. Observational Approaches Shadowing Researcher accompanies (i.e., shadows) users to observe how they use a product or service in a real-life, day-to-day setting. Ethnography Market research that involves "living" the life of the customer to understand the consumer in terms of cultural trends, lifestyle factors, attitudes and how social context influences product selection and usage. Sales and Customer Support Feedback Cadence Calls with Sales Team A systematic approach of talking with members of the sales team on a regularly scheduled basis to identify what is working, what needs to be addressed, and opportunities for future products. Digital Tools Customer Profiling The use of "big data" to develop a detailed description of an individual customer's shopping behaviors. The description may contain demographic, geographic, or psychographic characteristics. Analysis seeks to identify "hidden" patterns that hold true across a segment of customers. Crowdsourcing The outsourcing of idea generation to individuals (e.g., customers, suppliers, employees, general public) who might have good, insightful ideas—usually via the Internet. Social Network Analysis An attempt to analyze comments (or other content) found on dedicated websites to identify important product trends or customer pain points that might lead to new product ideas. Customer Immersion Labs Simulations The use of technology (e.g., virtual reality) to act out or mimic an actual or probable real life event or situation to find a cause of a past occurrence (such as an accident) or to forecast future outcomes. Simulations can show how a customer will interact and use future product designs.

Benchmarking process

Define Your Goal. You begin by asking, "What practice/process are you benchmarking?" Document BIC Practice. You follow up, asking, "Who does it the best?" Once you identify a BIC exemplar, you document the company's practice/process at strategic and operational levels. Then you compare the BIC practices with your own, specifying any and all differences. Develop an Implementation Strategy. Finally, you ask, "How can we adopt best practices to improve your firm's own process and performance?"

3 outcomes of the level of satisfaction

Dissatisfaction. Experiences that don't meet expectations evoke discontent. Bad experiences invite complaints. Satisfaction. Experiences that meet expectations deliver satisfaction. Delight. Experiences that exceed expectations achieve delight and lead to repeat business.

Functions of value-creating roles

Executive management defines company strategy and allocates resources to achieve it. Research and development (R&D) is responsible for new product design. Supply management coordinates the upstream supply base, finding the right suppliers and building the right relationships with them. Operations transforms the inputs acquired from suppliers into more highly valued products. Logistics moves and stores materials so they are available when and where they are needed. Marketing manages the upstream relationships with customers, identifying their needs and communicating to them how the company can meet those needs. Human resources designs the systems used to hire, train, and develop the company's employees. Accounting maintains business records that provide information needed to control operations. Finance acquires and controls the capital required to operate the business. Information technology builds and maintains the systems needed to capture and communicate information among decision makers.

T/F Although service industries account for about 80% of jobs in the U.S. economy, they only represent about 40% of the U.S. GDP.

F

T/F Consistent repeat business is a clear and unambiguous signal that a customer is loyal.

F

T/F Henry Ford invented the assembly line

F

T/F How much you spend on R&D determines success.

F

T/F If you deliver to promise, exceed industry standards, and meet customers' a priori expectations, you will definitely impress the customer and entice repeat purchase.

F

T/F The industrial revolution marked the beginning of good operations and management processes

F

T/F To really execute a customer satisfaction strategy, you need to find out how customers both perceive and measure your firm's performance.

F

T/F When it comes to data capture, bricks-and-mortar stores like Walmart have a distinct advantage over their online rivals.

F

Team composition

Finance. Financial analysts are commonly invovled. Their job is to evaluate the ROI implications of design decisions. Purchasing. Purchasing managers also play a key role on an NPD team now that many companies invite suppliers to participate in early stages of NPD. This practice is called early supplier involvement (ESI). Why invite suppliers? Suppliers bring key materials and technical expertise to concept evaluation. If you were to walk into the engineering design center at John Deere, you would find that seven of ten engineers actually worked for suppliers.1 Co-location at Deere's design center keeps all engineering talent on the same page, ensures the best ideas make it into each new product, and improves relationships. Logistics. At many companies, logistics is the newest function to be invited to the NPD process. Logisticians help determine how changes in design will impact packaging and shipping costs.

Quality Control

Fitness for use Conformance to specifications Meeting customer expectations *meeting customer expectations *no amount of inspection can make a bad product a good one *measurement is difficult because quality is viewed from the customers satisfaction level

Four types of utilities

Form utility is the primary responsibility of purchasing and operations managers who acquire inputs and transform them into products or services of greater customer value. Possession utility falls within marketing's domain and consists of efforts to communicate (i.e., promote) a product's value and then facilitate the exchange process. Time utility emerges from effective management of all value-added processes that influence when a product is available for purchase. Place utility is primarily the charge of supply chain managers who assure that products and services are where customers expect to find them—when they are needed.1

Value gaps

Gap 1: Knowledge Gaps often exist between customers' real expectations and your perceptions of those expectations. You need to accurately assess what customers really want. Gap 2: Translation or Specification Gaps emerge when you focus too intently on industry standards or internal capabilities that are not aligned with customers' real needs. Gap 3: Performance Gaps emerge when you fail to execute to customer expectations—e.g., the customer expects 98% on-time delivery, but you only deliver 95% of shipments on time. Gap 4: Communication Gaps emerge when you overpromise and under deliver. These gaps sour a relationship quickly. Gap 5: Perception Gaps arise when customer metrics don't capture actual performance. Sometimes, customers treat you as if, "You are only as good as your last performance." Gap 6: Satisfaction or Service Quality Gaps occur when the customer's perception of service and expectations are not aligned.

Seven rights of empowerment

Get the right people on the team Communicate the right expectations Provide the right training Measure the right things Reward the right behavior Support with the right resources Give them the right opportunity (i.e., get out of the way).

Process Design

How you should make things Your goal in work design is to increase process efficiency and worker motivation. Poorly designed jobs—comprised of tedious, narrowly defined tasks—alienate workers, reduce productivity, and stifle learning. To remedy this, you may emphasize job enlargement, job enrichment, and employee involvement programs.

3 measurement mantras in a great measurement system

If you can't measure it, you can't manage it. What gets measured gets done. Measure twice; cut once.

Steps to creating an agile, responsive culture

Make agility a priority throughout the firm and across supply chain relationships. Map processes to make them visible and to identify agility enabling activities or decisions. Use your map to initiate risk-mitigation discussions and identify operating alternatives. Use information systems to monitor operations, link to customers, promote proactive environmental scanning, and share information on a real-time basis across the network. Cross-train workers and organize work in multifunctional teams. Design performance measures to value agility. Build learning loops into every process throughout the organization.

Why is supply chain management suddenly becoming a hot trend?

Managers increasingly recognize that operations and supply chain management is the value creation engine of every organization. Creating more customer value than your rivals is the only way to win tough competitive battles for the heart and mind of the customer. Competition is getting even tougher. As McKinsey consultant Kenichi Ohmae emphasized, you need a stong team to compete: "Companies are just beginning to learn what nations have always known: in a complex, uncertain world filled with dangerous opponents, it is best not to go it alone."

Facts about product lifestyles

Nineteen of 20 pharmaceuticals that reach clinical trial fail—never making it to launch! 2 Thirty thousand new consumer products are launched each year. Ninety-five percent fail! 3 According to Nielsen Global New Products report, half of new products fail to attain year one's sales performance in year two. The "vast majority" vanish from the market within the first three years. And, it doesn't matter where in the world you operate, two out of three products will fail! 4 Only 3% of new consumer packaged goods reach the threshold of a highly successful launch: $50 million first-year sales. 5

Darwin's Law

Only the adaptable survive." The global market is constantly changing; for example, new rivals and new technologies emerge. And customer expectations are always evolving. The only way to keep your operations competitive is to constantly scan the environment, identify change drivers, and adopt (or develop) best practices.

Services can't be inventoried

Option #1: You can build for peak demand and live with excess capacity in off-peak hours—an expensive option. Option #2: You can build for average demand and lose sales during peak times—a brand-damaging option. Option #3: You can try to change consumer behavior to match demand to capacity—a great strategy if you can make it work.

8 factors customers use to judge quality

Performance—refers to a product's operating characteristics. Features—are the unique characteristics that distinguish a product from rivals' products. Reliability—defines the user's ability to count on the product not to fail. Conformance—is how well a product conforms to design specifications. Durability—refers to a product's life expectancy (also, mean time between failure). Serviceability—is the speed and ease of repair when problems occur. Aesthetics—are perceptions of fit and finish (also, artistic value). Perceived quality—refers to a product or brand's quality reputation.

Customer service strategies downsides

Performing to the Common Denominator. Managers are always asking, "Would better service really be worth the extra costs and provide a strong ROI?" The emphasis on keeping short-term costs down leads to the lowest service levels required to remain competitive. You will qualify for many orders that you won't win. Doing the Wrong Things. Because service strategies are operational and inward looking, you really don't know how customers perceive your service levels. Hitting industry standards is not the same as providing the service customers want. Remember: Customers don't give you credit for industry-leading performance if it is in the wrong areas. Simply put, if your service strategy loses line of sight to customer expectations, you create service gaps. You are wasting resources excelling at something customer don't value!2

5 phases of the NPD process

Phase 1: Screening/Scoping. During screening/scoping, you ask two simple questions. First, does the product really fit your product strategy? Second, will the product meet the competitive test? That is, will it offer customers something that existing (or expected) products don't? Phase 2: Business Case Analysis. During business case analysis (BCA), you assess the product's market potential. You ask, "Do expected sales, growth, and profit justify the investment?" Performing a BCA is often tedious. But you need to weed out as many money-losing ideas as possible at this stage. Your costs go up dramatically in Phase 3: Development. Phase 3: Development. During development, you move from digital modeling to physical prototypes; that is, working models of your product. As your product comes to life, you get a better sense of how it will really work in the hands of your customers. You will also be able to better assess what it will really cost to produce and deliver to market. Phase 4: Test and Validate. During testing, you make final product tweaks and introduce the product to your customer—often in a test market. This is your final opportunity to make a go/no-go decision before making the major investments required to launch the product. Phase 5: Launch. During launch, you develop and execute marketing, production, and distribution plans. The goal: Generate and fill demand. You finally get to find out what kind of an ROI all of your hard work will deliver!

Four strategies for reducing costs

Process Improvement. The key to improving productivity is to promote learning.2 By minimizing work rules, increasing training, you can empower workers to find better ways to do things. Automation. Technology makes process redesign possible.3 Many manual tasks have been automated. New technologies such as additive manufacturing (i.e., 3D printing) will continue to enable process redesign.4 You must constantly ask, "Can technology help us do this job in a better way?" Offshoring. Improved logistics have reduced the total landed costs and delivery reliability of products made in distant lands. You can take advantage by locating manufacturing facilities in far-flung countries with low-cost inputs.5 Outsourcing. Sometimes another member of the supply chain can do a specific activity better than you can. When this happens, you can move from make to buy, outsourcing that activity to a supply chain partner so that your firm can focus on what it does best.

3 ways measurement creates understanding

Progress Toward Goals. Measurement tells you how much progress you are making toward your goals. Partner Expectations. Measurement tracks customer expectations and satisfaction levels as well as supplier capabilities. Sources of Problems. Measurement helps you identify why things aren't working so you can root out the causes of failures, enabling more effective problem solving.

How to determine if a firm is positioned to compete and win?

Right Players. Members of the supply chain team are very good at what they do. Right Relationships. Members of the team work together to effectively eliminate waste and increase value co-creation.

Resource orhestration

Select Team Members. Knowing what value you need to create, you identify the right players—those with key resources and capabilities—to be members of your value-added team. Assign Team Roles. Knowing each player's skills, you assign each team member the right roles and responsibilities to maximize value creation and customers' positive perceptions. Build Team Cohesion. Having the right players does not mean they will play well together. You need to cultivate chemistry to build the right relationships among team members

3 Realities of a service setting

Services are consumed as they are produced. Services cannot be inventoried. Because customers are involved, each instance of service delivery is unique.

Bullwhip Effect Part 2

Small changes in retail-level demand get magnified as they ripple through the supply chain like a bullwhip. Bullwhip-related costs can be as high as 12-25% for each member of the supply chain. You can reduce the bullwhip effect by sharing point-of-sale information immediately and simultaneously with all members of the chain and developing collaborative forecasts with supply chain partners.

Secrets of high-leverage innovators

Spending. How much money you spend on R&D does NOT determine success. How you spend it does. The remaining points focus on the how! Strategy. Based on its innovation strategy, your company might be a Need Seeker, Market Reader, or Technology Driver. Need Seekers go straight to customers to generate ideas. Market Readers are fast followers—they monitor the market and incrementally improve the cool ideas. Technology Drivers rely on their technological expertise to drive both incremental and breakthrough innovations. Alignment between strategy and practice is critical. Deep Customer Insight. You have to know what your customers want—even if they can't articulate their needs. Deep customer insight helps you make the key trade-offs inherent in bringing new products to market. End-to-End Process. Innovation is a cross-functional capability, involving all of the functions in your company. Visibility. You need real visibility into what is going on throughout the NPD process. Digital Tools. Big data and digital reality are beginning to give decision makers key insight into why customers behave the way they do.

3 step process of productivity measurement changes

Step #1: Recognize When you see a change in a productivity measure, treat it as a red flag that just went up. Step #2: Go and Find Out What Happened Ask, "Why did productivity change?" Answering this question will involve a little detective work. You will want to talk to the people who do the work. You may want to observe how they do the work. And, you will dig into the data, asking, "What does this really mean?" You are performing a root-cause analysis. Step #3: Take Action Once you truly understand what is going on, you can take action. One of two courses of action is likely, depending on whether you discovered "good" or "bad" productivity growth. Good Productivity Growth. If the order-picking process has improved because of better training, more clearly marked racks, or the use of radio frequency technology, you are excited about the progress. Your next steps are to document the performance improvements, determine what changed, and make sure the changes are adopted elsewhere. Bad Productivity Growth. If the so-called better results come from counterproductive behaviors, you need to take corrective action. You will have to show people why what they are doing to "improve" their performance is counterproductive.

Target costing process

Step 1: Identify Product Characteristics Product characteristics define the product; that is, both what it should do for the customer and how it will do it. Step 2: Establish Target Sales Price The sales price is determined by "what the market will bear." This market-bearing price is determined by three factors. Competitors' Offerings. What do competitors' offerings look like? Customer Expectations. What do customers expect? Let's make a key point here: The Internet has increased pricing pressure. For example, customers can visit Best Buy, check out the products they are interested in, and then go home and look for a lower-priced equivalent on line. This practice is called showrooming. Similarly, you can download a manufacturer's invoice price from Edmunds.com before going to an auto dealership to negotiate the price of the new car you want to buy. Distinctiveness. How distinctive is your product? Few companies offer a distinct-enough product to possess pricing power; that is, to be able to set their own price. Even Apple had to bring out a low-cost iPhone to stay competitive! Step 3: Compute Target Cost The target cost is simply the target sales price minus the target profit (i.e., how much you need to make from each product sold). Step 4: Perform Cost Breakdown The cost breakdown is where target-costing's rigor first comes into play. At this point in the analysis, you need to identify all of the components that make up your product. For a product as simple as a watch, you would want to consider the band, the case, the dial assembly, the timing mechanisms, the battery, et cetera. For a car, the component list is much longer. Step 5: Engage in Target Costing Process The target costing process takes place at the component level. Each component team goes back to the proverbial "drawing board" and asks a series of questions: If we changed the design, could we reduce the costs? If we changed the materials, could we reduce the costs? If we changed specifications, could we reduce the costs? If we work with suppliers to help them build better skills, could we reduce the costs? What other cost trade-offs could we evaluate to take costs out of the product/process? Step 6: Make Decision: Launch or Kill Product If the target costing process is successful, you can proceed to launch. If not, it may be time to kill—or radically redesign—the product.

T/F An open systems view reiterates that companies operate in a dynamic, ever-changing environment, requiring managers to constantly adapt in order to remain competitive.

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T/F By helping colleagues across your firm better understand customer needs, motivating them to work together to execute the company's strategy, you can help your company design better processes and make more competitive products

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T/F Customers make purchase decisions based on the value they expect to obtain.

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T/F Few companies offer a distinctive enough product to possess pricing power.

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T/F If you have accurate, relevant, and timely information for every value-added activity, you will be able to make good decisions and deliver outstanding value. Sloppy measures, by contrast, guarantee poor performance and ticked off customers.

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T/F If your company builds a more cohesive and competitive team, you win. Working together to co-create great customer value

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T/F To help your company not just survive but thrive in tomorrow's competitive marketplace, you need to adopt the mindset and develop the toolkit of an active scanner.

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Types of data analytics

Targeted Promotions. Tesco began mailing beer coupons to shoppers who bought diapers. Why? Analysis revealed that new fathers who are stuck at home tending the baby drank more beer.6 Rohwedder, C. 2006. "No 1 Retailer in Britain Uses 'Clubcard' to Thwart Wal-Mart." Wall Street Journal (June 6): A1. On the Web, analytics make it possible for retailers to tailor their websites to show different visitors different products—and different prices. Product Selection. Kroger started stocking hard-to-find brands like Alpen breakfast cereal to increase loyalty among high-margin demographics. Why Alpen? Health-conscious customers who purchase Alpen tend to fill their carts with a range of high-margin products. New Product Development. Kroger introduced three-quarter-gallon milk cartons because they fit the needs of today's smaller families better than traditional half or whole gallon options.8 Pricing. Tesco lowered prices on 300 items to keep price-sensitive customers from being tempted to comparison shop at low-price rivals like Walmart's Asda.9

Inventory Control

The economic order quantity balances the cost of setting up production with the cost of storing goods. Larger production runs yield lower unit costs, but increase your holding costs. Your goal is often to reduce inventories. You don't want too much or too little

Measurement drives execution

The first two measurement mantras help you determine what to measure. The third motto—"Measure twice, Cut once"—guides how you measure.If you have accurate, relevant, and timely information for every value-added activity, you will be able to make good decisions and deliver outstanding value. Sloppy measures, by contrast, guarantee poor performance and ticked off customers.

Value propositions

They shape customer expectations. They communicate what your company must do to earn a customer's business.

Customer satisfaction strategies

They want to learn about customer needs. They also want to convince customers they are committed to fulfilling those needs.

Cross-trained worker

Toyota achieves outstanding productivity, high quality, consistently satisfied customers, and unbeatable profitability year after year. job enlargement, empowerment and accountability

Lean Six Sigma

Toyota energized a paradigm shift, demonstrating that if you build the right manufacturing environment, your people can come up with the ideas needed to continuously find and eliminate waste. Lean Six Sigma made it possible to produce high-quality products at low costs, quashing the belief that a tradeoff always exists between quality and costs.

Traditional market research

What are their expectations? How satisfied were they with the experience? What new products would they like to see?

Product Design

What should you make? you need to identify and develop products that meet customers' unmet needs. To produce these products efficiently—i.e., at a competitive cost—you need to consider product and process design at the same time