Marketing 360 Final

Managing Supply Chain Risk lIncrease safety stocks also known as stockpiling and forward buying (stopgap alternative that can be costly) lIdentify backup suppliers and logistics services for emergency sourcing lDiversify the supply base geographically (exposes additional political, customs, and exchange rate risks) lUtilize a supply chain IT system - collect and share information lDevelop a formal risk management program (identifies potential disruptions)

"You can't improve what you aren't measuring." lPerformance measurement is the process of quantifying the efficiency and effectiveness of various activities. lFirms with best supply chains create hierarchies of precise performance measures at the execution level combined with a distillation of meaning at the strategic level. lFirms need to develop an entire system of meaningful performance measures to become and then remain competitive, particularly when managing supply chains is one of the imperatives. lThe importance of having both financial and nonfinancial performance measures has become evident.

Understanding End Customers Supply chains need to look at each segment of the market they serve & determine the needs of those customers. •Variety of products required •Quantity & delivery frequency needed •Sustainability level desired •Product quality desired Price of the products

Adjusting SC Member Capabilities •SC members audit their capabilities & partners' to determine consistency with needs of end customers & SC •Firms & their partners must continually reassess performance with respect to requirements •The best SC performers are more responsive to customer needs, quicker to anticipate changes in the markets, & control costs much better

Inventory Turnover Ratio

Cost of Revenue/Average Inventory

lInventory management models are generally classified by the nature and types of inventory being considered into two categories of models:

Dependent Demand: internal demand for parts based on the demand of the final product in which parts are used (e.g., subassemblies, components, and raw materials) Independent Demand: the demand for end products and has a demand pattern affected by trends, seasonal patterns, and general market conditions

Inventory Models

Fixed order quantity models determine amount to order assuming that demand, delivery time, and other parameters are deterministic. lTypes of fixed order quantity models: lEconomic Order Quantity (EOQ) Model lQuantity Discount or Price-Break Model lEconomic Manufacturing Quantity (EMQ) or Production Order Quantity (POQ) Model These models use fixed parameters to derive the optimum order quantity to minimize total inventory cost

Waste (Muda) Reduction: •Firms reduce costs and add value by eliminating waste from the productive system. •Waste encompasses wait times, inventories, material and people movement, processing steps, variability, any other non-value-adding activity. •Taiichi Ohno described the seven wastes as shown in Table 8.2 on the next slide.

Lean Supply Chain Relationships: •Suppliers and customers work to remove waste, reduce cost, improve quality and customer service. •Lean Thinking includes delivering smaller quantities, more frequently, to point of use at the focal firm. •Firms develop lean supply chain relationships with key customers. Mutual dependency and benefits occur among these partners. •Locate production or warehousing facilities close to key customers

Inventory Investment measurements include:

lAbsolute value of inventory (on the balance sheet) lCycle counting, or physically counting inventory on a periodic basis lInventory turnover or turnover ratio: how many times inventory "turns" in an accounting period with higher ratios being better

Inventory

§ Inventory can be one of the most expensive assets of an organization § Inventory may account for more than 10% of total revenue or total assets § Management must reduce inventory levels yet avoid stock outs and other problems § Effective inventory management is important to both manufacturers and service organizations § Excessive inventory is a sign of poor inventory management

Inventory Costs

•Direct costs- directly traceable to unit produced (e.g., labor) •Indirect costs- cannot be traced directly to the unit produced (overhead: maintenance, electric) •Fixed costs- independent of the output quantity (e.g, buildings, equipment, & plant security) •Variable costs- vary with output level (e.g., materials) •Order costs- direct variable costs for making an order. In mfg, setup costs are related to machine setups •Holding or carrying costs- incurred for holding inventory in storage

Primary functions of inventory are to -

- Buffer from uncertainty in the marketplace - Decouple dependencies in the supply chain (e.g., safety stock)

lThe ultimate goal in supply chain management is to create value for the services and goods provided to end customers, which, in turn, provides benefits to the firms in the supply chain network. lTo accomplish this, firms in the supply chain must integrate their process activities internally and then with their trading partners. lProcess integration means sharing information and coordinating resources to jointly manage a process or processes. lThe benefits of collaboration and information sharing between trading partners can be significant.

1.Identify Critical SC Trading Partners •Sell & deliver products to final customers •Identifying primary trading partners allows the firm to concentrate on managing links with these companies ● 2.Review & Establish SC Strategies for: •Parts purchased & suppliers •Manufacturing processes •Design of the products manufactured •Mode of transportation •Warranty & return services •Outsourcing Sustainability 3.Align SC Strategies w/Key SC Process Objectives Lambert et al. identified 8 key SC processes: 1.Customer relationship management 2.Customer service management 3.Demand management 4.Order fulfillment 5.Manufacturing flow management 6.Supplier relationship management 7.Product development & commercialization Returns management

Eight Key Supply Chain Business Processes 1.Customer Relationship Management •Tailoring product and service agreements to meet customer needs •Measuring customer profitability and firm's impact on customers •Monitor the impact of customer relationship management (CRM) efforts in terms of both the financial impact and customer satisfaction 2.Customer Service Management •Providing information to customers such as product availability, shipping dates and order status •Administering product and service agreements •Monitoring and reporting customer service performance

3.Demand Management •Balancing customer demand with the firm's output capacity •Forecasting demand and coordinating with production, purchasing and distribution •Increase the accuracy of forecasts •To track the success of various demand management activity implementations 4.Order Fulfillment •Meeting customer requirements by synchronizing the firm's marketing, production and distribution plans •Location of suppliers, production facilities and distribution centers •Modes of inbound and outbound transportation used •System used for entering, processing, communicating, picking, delivering and documenting customer orders

Third-Party Logistics (3PL) Services lProvide reliable and timely delivery lMove items into foreign locations effectively lFavored by small businesses lSome provide network optimization, light manufacturing, and other services lAllows firms to concentrate more on core competencies Demand is growing rapidly

3PL Supply Base Reduction Advantages lFirms can select and use only the best-performing 3PLs. lGive those 3PLs a bigger share of the firm's business. lResults in better levels of service and potentially lower prices. lLarger share of business given to each 3PL can be used as leverage when negotiating prices, shipping schedules, and associated services.

The SCM Integration Model 4.Develop Internal Performance Measures for Key Processes •Performance should be continuously measured •Create a consistent emphasis on the overall supply chain strategy •Firm is able to track progress in each key processes. 5.Assess & Improve Internal Integration of Key SC Processes •Formation of cross-functional teams •Management support & resources •ERP system Develop an understanding of theinternal supply chain

6.Develop SC Performance Measures for Key Processes •Monitor links w/trading partners in key SCM processes. •Trading partners should monitor measures across member firms for each of the SC processes. 7.Assess & Improve External Process Integration & Performance •Build, maintain & strengthen relationships •Share knowledge management solutions, such as forecast information, new products, & expansion plans. •knowledge management solutions enable real-time collaboration and flow of information between supply chain partners

5.Manufacturing Flow Management •Determining manufacturing process requirements to enable the right mix of flexibility and velocity to satisfy demand •A good set of performance metrics to track the capability of the manufacturing flow process to satisfy demand 6.Supplier Relationship Management •Screening and selecting suppliers •Developing close working relationships with key suppliers •Negotiating product and service agreements •Managing suppliers •Monitoring supplier performance and improvement.

7.Product Development and Commercialization •Selecting new product ideas •Developing new products and getting them to market quickly and effectively •Assessing the success of each new product •Developing customer feedback mechanisms 8.Returns Management •Managing used product disposition, product recalls, and packaging requirements •Environmental compliance with substance disposal and recycling •Collecting returns data •Minimizing future returns

Deming's 14 Points 1.Create constancy of purpose to improve product and service. 2.Adopt the new philosophy. 3.Cease dependence on mass inspection. 4.End the practice of awarding business based on price alone. 5.Constantly improve the production and service system. 6.Institute training. 7.Adopt and institute leadership.

8.Drive out fear. 9.Break down barriers between departments. 10.Eliminate slogans, exhortations, and targets for the workforce. 11.Eliminate numerical quotas for workers and managers. 12.Remove barriers to pride of workmanship. 13.Encourage education and self-improvement for everyone. 14.Take action to accomplish the transformation.

Lack of Knowledge lTechnology has caught up with the vision, thus enabling collaboration and process integration across extended supply chains. lFirms spend significant time influencing and increasing the capabilities of themselves and their partners. lTraining of supply chain partner employees is known as collaborative education and can result in more successful supply chains and higher partner returns. lFor all organizations, successful SCM requires a regimen of ongoing training.

Activities Causing the Bullwhip Effect lForecasts and their corresponding orders can become amplified causing the bullwhip effect lVariations in demand lead to problems in lcapacity planning linventory control lworkforce and production scheduling lUltimately resulting in llower levels of customer service lgreater overall levels of safety stock higher total supply chain costs

Economic Order Quantity (EOQ) Model: lClassic independent demand inventory systems that provides many useful ordering decisions. lQuantitative decision model based on the trade-off between annual inventory holding costs and annual order costs. lSeeks to determine optimal order quantity. lOrder Cost is direct variable cost associated with placing an order, which is often called setup cost. lHolding Cost is cost incurred for holding inventory in storage, which is often called carrying cost.

Assumptions of the EOQ Model: lDemand is known and constant. lOrder lead time is known and constant. lReplenishment is instantaneous. lPrice is constant. lThe holding cost is known and constant. lOrder cost is known and constant. lStockouts are not allowed. ***** Look at Slide Photo for Model

lCustomer defection analysis ‒ finding methods to retain customers lCustomer churn reduction ‒ reducing customer defections (those that quit purchasing from the firm) lCustomer value or customer profitability determination ‒ calculating the customer lifetime value for firms lPersonalizing customer communications ‒ by understanding customer behaviors and preferences, firms customize communications lClickstream ‒ how a customer navigates a website lEvent-based marketing ‒ offer the right products and services to customers at just the right time

Automated Sales Force Tools lSales force automation (SFA) ‒ used for documenting field activities, communications with the home office, and retrieving sales history and other documents in the field lSales activity management system ‒ tool offering sales reps a guided sequence of sales activities lSales territory management system ‒ sales managers obtain information regarding each sales rep's activities (e.g., total sales per rep) lLead management system - allows sales reps to follow prescribed tactics when dealing with prospects to aid in closing the deal. lKnowledge management system (KMS) ‒ enables quick decision making, better customer service, and a better-equipped and happy sales staff.

Big Data Decision-Making

Big data broadly refers to collections of data sets too large and complex to be processed by traditional database management tools or data processing software applications. lInstead, massive parallel software applications running on hundreds, or thousands of servers simultaneously are required to store and process the data. lBig data technology helps process data in real time to take advantage of information captured by RFID.

Bullwhip Effect: Demand Forecast Updating Ways to avoid it: lMake actual demand data available to suppliers lUse the same forecasting techniques lVendor-managed inventory (VMI) lReduce the length of the supply chain lReduce the lead times from order to delivery

Bullwhip Effect: Order Batching lOrders are placed at varying indeterminate time intervals lAlso can occur when sales reps fill end-of-period sales quotas, or when buyers spend end-of-year budgets lSolutions lUse smaller order sizes lUse a freight forwarder to consolidate small shipments lUse automated order systems to order more frequently

Bullwhip Effect: Price Fluctuations lResult in significant forward buying activities for buyers, who "stock up" to take advantage of the low price. lEliminate price discounting among SC members. Many retailers have adopted everyday low prices (EDLP). lBuyers can negotiate with their own suppliers to offer EDLP.

Bullwhip Effect: Rationing and Shortage Gaming lRationing — occurs when demand exceeds a supplier's finished goods available, thus requiring the firm to fulfill partial orders to customers based on a set percentage of the order size lShortage gaming — when buyers figure out relationship between their orders and what is supplied, they inflate their orders lSolution: sellers should allocate short supplies based on the demand histories of their customers

SCOR model developed by the Supply Chain Council (now CSCMP) for SCM diagnostic benchmarking & process improvement (CHECK SLIDE) The SCOR model separates supply chain operations into 6 process categories - •Plan •Source •Make •Deliver •Return •Enable

Companies generally use SCOR-based benchmarking to: §Set reasonable performance goals based on the SCOR model §Calculate performance gaps against a global database §Develop company-specific roadmaps for supply chain competitive success

Small Batch Production Scheduling • •Drives down costs by: −Reducing purchased, WIP, and finished goods inventories −Making the firm more flexible to meet customer demand •Small production batches are accomplished with the use of kanbans •Kanbans generate demand for parts at all stages of production creating a pull system

Continuous Improvement •Kaizen: continuous approach to reduce process, delivery, and quality problems, such as machine breakdown problems, setup problems, and internal quality problems •Kaizen Blitz: rapid improvement event or workshop to find big improvements quickly Workforce Commitment •Managers must support lean production by providing subordinates with the skills, tools, time, and other necessary resources to identify problems and implement solutions

The Statistical Reorder Point lThe reorder point (ROP) is the lowest inventory level at which a new order must be placed to avoid a stockout. lSince the demand and delivery lead time tend to vary, safety stock is required. lIn-stock probability is commonly referred to as the service level.

Continuous Review System: lReality shows that stock records and actual quantity differ. lRequires continuous review of inventory to determine when to reorder. lCan be difficult to achieve and very expensive to implement. Periodic Review Inventory System: lReviews physical inventory at specific points in time, such as weekly or monthly. lRequires more safety stock than the continuous review system.

Quantity Discount or Price-Break Model (buy more than one of a product to qualify for a discount)**** lOne variation of the classic EOQ model lRelaxes the constant price assumption by allowing purchase quantity discounts lConsiders the trade-off between purchasing in larger quantities to take advantage of the price discount and the higher costs of holding inventory lDue to step-wise shape of total inventory cost curve, the optimal order quantity lies on either one of the feasible EOQs or at the price break point

Economic Manufacturing Quantity (EMQ) or Production Order Quantity (POQ) Model: lRelaxes the instantaneous replenishment assumption by allowing usage or partial delivery during production lEMQ model is especially appropriate for a manufacturing environment with simultaneous manufacture and consumption lInventory builds up gradually during the production period rather than at once as in the EOQ model

Reverse Logistics and the Environment lGreen reverse logistics programs - reduce environmental impact on landfills and deal with dangerous contaminants lReverse logistics can have a positive impact on the environment through: lrecycling lreusing materials and products lrefurbishing used products making use of reusable totes and pallets

Effective returns process can lCreate goodwill and enhance customers' perceptions of product quality. lReturns information can be used to determine root cause analyses and reduce future design errors. lReturns can still create value as original products, refurbished products, or repair parts.

CHECK SLIDE FOR THIS Example 14.1 (Continued) She has calculated the annual single-factor and total productivity values as: Labor productivity = 1,000 skis/10,800 hours = 0.093 skis/labor hour Material productivity = 1,000 skis/$18,000 = 0.056 skis/material $ Lease productivity = 1,000 skis/$24,000 = 0.042 skis/lease $ She calculates their total productivity by multiplying the labor hours by their average wage of $17 per hour, and finds: Total productivity = 1,000 skis/[10,800($17) + $18,000 + $24,000] = 0.0044 skis per dollar

Example 14.1 (Continued) The owner figures she can get some great improvements in productivity by finding a low-cost supplier, moving to a cheaper location and laying off six workers (reducing her workforce by 40 percent), making the new single-factor productivities: Labor productivity = 1,000 skis/10,800(.6) hours = 0.154 (a 66 percent increase) Material productivity = 1,000 skis/$12,000 = 0.083 (a 48 percent increase) Lease productivity = 1,000/$18,000 = 0.056 (a 33 percent increase) Example 14.1 (Continued) The new total productivity: Total productivity = 1,000 skis/[10,800($17)(.6) + $12,000 + $18,000] = 0.0071 skis per dollar (a whopping 61 percent increase!) Consequently, the owner decided to make the changes for the coming year. Unfortunately, they went out of business in six months due to poor-quality materials, a bad location and overworked, low-morale employees.

Global Logistics Intermediaries lCustoms Brokers - move goods through customs and handle documentation lInternational Freight Forwarders - move goods to and from foreign destination. Some use right-shoring which combines near-shore, far-shore and domestic opportunities into a single cost-driven approach lTrading Companies - put buyers and sellers together and handle export/import arrangements lNon-Vessel-Operating Common Carriers -operate like freight forwarders, but use scheduled ocean liners

Foreign Trade Zones (FTZ) lSecure sites in U.S. under supervision of U.S. Customs and Border Protection lOffer storage, exporting, manufacturing, assembly, repacking, testing, and repairing services The United States-Mexico-Canada Agreement (USMCA) lTrading accord that took effect in 2020 to replace the North American Free Trade Agreement (NAFTA). lAll duties and quantitative restrictions between the three countries were removed.

Global trade management systems (GTM) provide global visibility and standardization lNew opportunities to grow, expand, and help shippers manage regional and global trade agreements lGoals of GTM include: lautomating customs entry improving compliance with international trade regulations

Global Freight Security lTransportation across national boundaries introduces added complexity, particularly for security. lCustoms-Trade Partnership Against Terrorism program (C-TPAT) and its security program Free and Secure Trade program (FAST) to protect supply chains from terrorism. lGoal - to ensure the security of global supply chains in general and international trucking

How RFID automates the supply chain: lMaterials Management: goods automatically counted and logged as they enter supply warehouse lManufacturing: customer configurations encoded on tag can be incorporated automatically during the production process lDistribution Center: shipment leaving DC automatically updates ERP to trigger replenishment order and notify customer for delivery lRetail Store: reader placed on store shelf to trigger automatic replenishments when item reaches its reorder point. Can assist in cycle counting.

Global RFID Implementation and Challenges: lTagging strategies differ considerably by region. lConsumer-privacy issues and high implementation costs for hardware and tags deter American retailers from moving into item-level tagging. lChina is skeptical about sharing potentially confidential information with foreign businesses and lag in RFID technology use. lTag and RFID system costs are major impediments to faster adoption. lDifferences between radio frequencies in different parts of the world. lUHF signals are reflected by metal and absorbed by water.

80/20 rule or Pareto analysis: 80% of objective is achieved by 20% of tasks, with remaining 20% of objective achieved by 80% of tasks. ABC Inventory Control System determines which inventories should be counted and managed more closely than others

Groups inventory as A, B, and C Items: lA items are given the highest priority with larger safety stocks. Account for approximately 20% of the total items and about 80% of the total inventory cost. lB items account for the other about 40% of total items and 15% of total inventory cost. lC items have the lowest value and hence lowest priority. They account for the remaining 40% of total items and 5% of total inventory cost.

Lean Layouts: •Primary objective is to reduce wasted movements of workers, customers and/or WIP inventories, while achieving smooth product (or customer) flow through the facility. •Move people and materials when and where needed, ASAP. •Lean layouts are very visual (lines of visibility are unobstructed) with operators at one processing center able to monitor work at another. •Manufacturing cells −Process similar parts or components saving duplication of equipment and labor −Are often U-shaped to facilitate easier operator and material movements

Inventory and Setup Time Reduction: • •Excess inventory is a waste. •Reducing inventory levels causes production problems. •Once problems are detected, they can be solved. •The result is a smoother running organization with less inventory investment. •Reduce purchase order quantities and production lot sizes.

Lack of SC Visibility lInformation visibility is particularly important in global supply chains and is frequently cited as a common process integration problem. lTime updating data causes higher inventory cost and longer response times lVisibility into inventory allows firms improve performance lThis is becoming easier with use of cloud-based communication platforms lRFID technology promises to add real-time information visibility to supply chains

Lack of Trust - Successful process integration between trading partners requires trust and trust is earned over time. Collaboration and trust are based on: lStart small - begin collaborating on a small scale lLook inward - establish trust internally first lGather 'round and meet face-to-face lGo for the win-win - optimize business for all SC members lDo not give away the store - some information should remain proprietary lJust do it - simply start sharing information

In the 1990s, supply chain management (SCM) goals are concerned with achieving process integration, low cost, and high levels of quality and responsiveness throughout the supply chain. Also, SCM emerged as a strategy combining several practices in use: •Quick response (QR) for speed and flexibility in textile •Efficient Consumer Response (ECR) for speed and flexibility in grocery •Just-in-Time (JIT): continuous reduction of waste •Keiretsu Relationships: cooperative partnership arrangements Philosophies and practices known as Lean Production (or Lean Manufacturing) or simply Lean Thinking came to America from Japan.

Lean Production an operating philosophy of waste reduction and value enhancement that was originally created as the Toyota Production System (TPS) by key Toyota executives −Early versions were based on Ford assembly plants and U.S. supermarket distribution systems. −Mr. Taiichi Ohno was a key developer of lean at Toyota. Key concepts incorporated in TPS are: •Muda: waste in all aspects of production (e.g., labor, inventories, space, time, and processing) •Kanban: signal card in production to start production at a work center •Statistical process control (SPC) as part of the TQM efforts •Poka-yoke: error or mistake-proofing in processes

As warehouse centralization increases: lSafety stocks and average inventory levels decrease. lDelivery lead times and late deliveries increase. lCustomer service levels provided by the warehouses' suppliers increase. lStockouts decrease. lOutbound transportation costs increase. lInbound transportation costs decrease.

Lean Warehousing: As SCM capabilities improve, items move more quickly, resulting in developing the following leaner capabilities. lGreater emphasis on crossdocking lReduced lot sizes and shipping quantities lA commitment to customers and service quality lIncreased automation lIncreased assembly operations lA tendency to be green

Juran's Contributions Quality Trilogy •Quality Planning: Identify internal/external customers and their needs, develop products that satisfy those needs. Managers set goals, priorities, and compare results. •Quality Control: Determine what to control, establish standards of performance, measure performance, interpret the difference, and take action. •Quality Improvement: Show need for improvement, identify projects for improvement, implement remedies, and provide control to maintain improvement.

Malcolm Baldrige National Quality Award Objectives •Stimulate firms to improve •Recognize firms for quality achievements •Establish guidelines so organizations can evaluate their improvement •Provide guidance to others Five Key Areas Evaluated 1.Product and process outcomes 2.Customer outcomes 3.Workforce outcomes 4.Leadership and governance outcomes Financial and market outcomes

Call centers ‒ can categorize calls, determine average resolution time, forecast future demand, and improve the overall productivity of the staff, increasing customer satisfaction levels lHave existed for many years, with some organizations using them effectively to satisfy and keep customers loyal, while others see them as a necessary cost of doing business and viewed them as a drain on profits lVirtual queuing allows callers to request a callback from an agent without losing their place in the phone queue lViewed as a source of revenue ‒ staff are expected to pursue cross-sell and up-sell opportunities lOutsourcing to offshore company really exploded starting in the late 1990s

Measuring Customer Satisfaction lCustomers are frequently given opportunities to provide feedback about a product, service, or organization. lCustomers communicate through feedback cards or surveys which can be personalized to specific customer segments. lWebsite surveys in some cases don't ask the questions that customers want to answer. lTalking with and listening to customers, and then acting based on what customers are saying lets them know the firm is completely engaged.

Radio Frequency Identification (RFID): tracks individual unit of goods without requiring direct line of sight to read a tag while information on the tag is updatable. RFID components: lTag: computer chip and an antenna for wireless communication lReader: handheld or fixed-position RFID device that reads the tags lCommunication network: connects the readers to transmit inventory information to the enterprise information system lRFID software: manages the collection, synchronization, and communication of the data with warehouse management, ERP and supply chain planning systems, and stores the information in a database

Near Field Communication (NFC): secure form of data exchange between an NFC tag & Android-powered devices RFID standards: lElectronic product code (EPC) standard, developed by the EPCglobal, Inc. lClasses 0, 1 and 2 are passive RFID tags that do not store power on the tags lClasses 3 and 4 are active RFID tags that contain a power source to boost their range lClass 5 tags communicate with other class 5 tags and devices lApproved as ISO 18000-6C

Mode and 3PL Selection lFirms use a mix of quantitative and qualitative factors to evaluate and select the most desirable transportation modes and 3PL services available for the various markets. lThe most common technique is weighted factor analysis. lWith today's competitive business climate, partnering with a 3PL (creating strategic logistics alliances) is very important.

Other Transportation Intermediaries: (may not own any significant logistics capital assets) are beneficial providers for small companies with limited logistics expertise, and in some cases, large ones with great logistics needs. lFreight forwarder - consolidate LTL shipments into FTL lFreight, transportation, or logistic brokers bring shippers and carriers together lShippers' associations - nonprofit cooperatives arrange for members' shipping lIntermodal marketing companies - purchase blocks of rail capacity and sell it to shippers

Developing World Class Performance Measures (CHECK SLIDE) •Identify the firm's strategic objectives. •Develop an understanding of each functional area's set of requirements for achieving the strategic objectives. •Design and document performance measures for each functional area that adequately track each required capability. •Assure the compatibility and strategic focus of the performance measures to be used. •Implement the new performance monitoring system. •Identify internal and external trends likely to affect firm and functional area performance over time. •Periodically re-evaluate the firm's performance measurement system as these trends and other environmental changes occur

Performance measurement systems must - •Link SC trading partners to achieve breakthrough performance in satisfying the end users •Overlay the entire supply chain to assure that all contribute to supply chain strategy In a successful chain, members jointly agree on a SC performance measurement system

Continuous Review System: l(s, Q) continuous review policy: Orders the same quantity, Q, when physical inventory reaches the reorder point, s l(s, S) continuous review policy: When current inventory reaches or falls below the reorder point, s, sufficient units are ordered to bring the inventory up to a pre-determined level, S.

Periodic Review Inventory System: l(nQ, s, R) periodic review policy: If at the time of inventory review, the physical inventory is equal to or less than the reorder point, s, the quantity, nQ, is ordered to bring the inventory up to the level between s and (s + Q). l(S, R) periodic review policy: At each review time, enough is ordered to bring the inventory up to a pre-determined maximum inventory level, S. l(s, S, R) policy: If at the time of inventory review, the physical inventory is equal to or less than the reorder point, s, enough is ordered to bring the inventory level up to the maximum inventory level, S.

The Importance and Types of Warehouses lSupport purchasing, production, and distribution activities lConsolidation warehouses collect large numbers of LTL shipments nearby for transport in TL or CL quantities long distances lPrivate warehouses are owned by the firm storing its own goods lPublic warehouses are owned by for profit orgs and contract out or lease a wide range of light manufacturing, warehousing, and distribution services lCold chains: temperature-controlled transportation, transfers, and warehousing

Private Warehouses - Advantages lReduces the purchasing and transportation cost lOffers greater control of service lProvides better workforce utilization lTake advantage of cheaper sources of supply or labor lCan generate income and tax advantages through leasing of excess capacity and/or asset depreciation - Disadvantages lFinancial risk and loss of flexibility lBinds firms to locations that may not prove optimal lInsurance companies do not like insuring goods in private warehouses

Logistics is necessary to: lMove goods from suppliers to buyers lMove finished goods to the customer lMove work-in-process materials within a firm lReturn or recycle goods lStore items along the way in supply chains.

Products have little value to the customer until they are moved to the customer's point of consumption. Logistics provides: lTime utility: customers get goods delivered at precisely the right time, not earlier and not later. lPlace utility: customers get things delivered to their desired locations.

Public Warehouse Services lBreakbulk - large quantity shipments are broken down and items are combined into specific customer orders, then shipped out lRepackaging - after breakbulk, items repackaged for specific orders lAssembly - provide final assembly and create customized final goods lIncoming and outgoing quality inspections lMaterial handling, equipment maintenance, and documentation services lShort and long-term storage Used in conjunction with cold chain services

Risk Pooling and Warehouse Location lAs the number of warehouses increases, the system becomes more decentralized. Responsiveness and delivery service increase. lWarehousing operating and inventory costs increase. Trade-off between costs and customer service must be considered. lRisk pooling describes the relationship between the number of warehouses, inventory, and customer service; it is estimated by the square-root rule.

8.Extend Process Integration to 2nd Tier SC Partners •Integrate process to 2nd-tier partners & beyond •Radio-frequency identification (RFID) tag- relays product's location as it moves through the supply chain. Passive RFID tags don't contain internal power. Active RFID tags use battery power & are very expensive. 9.Reevaluate the Integration Model Annually •Trading partners should revisit the integration model annually for changes within supply chains (ex. new suppliers entering market, foreign markets opening). Assess the impact of changes on integration efforts.

Silo Mentality: "I win, you lose" lExamples are using the cheapest suppliers, ignoring customers, and assigning few resources to new product and service design. lInternally, the silo mentality might be found between personnel of different departments. lFirm must strive to align supply chain goals and their own goals and incentives. lPerformance reviews should include the ability of their department to integrate processes internally and externally and meet SC goals. lManagers must educate suppliers and customers regarding the overall impact of their actions on the SC

Lean green practices: •Reduce waste •Reduce the cost of environmental management •Lead to improved environmental performance •Increase the possibility that firms will adopt more advanced environmental management systems

Six Sigma •Near quality perfection (the statistical likelihood of non-defects 99.99966% of the time) •Or 3.4 defects/million observations •Pioneered by Motorola in 1987 •A statistics-based decision-making framework designed to make significant quality improvements in value-adding processes

Check slides for training levels and DMAIC improvement cycle •Flow Diagrams: annotated boxes representing the process actions and ovals representing waiting, connected by arrows to show the flow of products or customers. •Check Sheets: tally frequencies for specific problems. •Pareto Charts: for presenting data in an organized fashion, indicating process problems from most to least severe. •Cause-and-Effect Diagrams (Fishbone or Ishikawa diagrams): used to aid in brainstorming and isolating the causes of a problem.

Statistical Process Control (SPC) •Allows firms to: −visually monitor process performance. −compare the performance to desired levels or standards. −take corrective action. •Firms: −gather process performance data. −create control charts to monitor process variability. −then collect sample measurements of the process over time and plot on charts.

Step 1. Creating the CRM plan lA solid plan for a CRM project is crucial both as an aid to purchasing and implementing CRM apps, and to obtain executive approval and funding for the project. lThe plan should include: lObjectives of the CRM program lCRM's fit with corporate strategy lNew applications to be purchased lIntegration or replacement of existing methods or CRM legacy systems lRequirements for Costs and time frame for implementation

Step 2. Involve CRM users from the outset lIn order to get acceptance of a new CRM initiative, employee involvement and support is required. lCreate a project team with members from all affected organizational areas. lThe team should be heavily involved in evaluating and selecting the CRM applications, and then implementing and integrating the apps in each department.. lDuring implementation, closely monitoring system performance will keep users convinced of the value of the initiative and keep everyone committed to its success.

Step 3. Select the right application and provider lFind an appropriate application and determine the how much customization will be required to get the job done. lThis can be accomplished several ways including: lvisiting a CRM-oriented tradeshow lusing a CRM consulting firm lsearching CRM or business publications lusing the knowledge of internal IT personnel who already know the market lsearching the many CRM supplier directories and websites

Step 3. Select the right application and provider (continued) It is recommended to compare the following software characteristics: lIntegration and connection requirements lProcessing and performance requirements lSecurity requirements lReporting requirements lUsability requirements lFunction-enabling features lPerformance capabilities

Step 4. Integrate Existing CRM Applications lIn most firms, CRM is a collection of various applications implemented over time, not just one single product. lOne of the biggest mistakes is departments implementing CRM without communicating their actions to other departments. lCustomer contact mechanisms need to be coordinated so that every CRM app user in the firm knows about all contact activity for each customer. lOne centralized database or data warehouse contains all customer information. lBig data analytics ‒ analyzing large volumes of data to make quick decisions

Step 5. Establish Performance Measures lMeasures linked to CRM program objectives (and customers) allow managers to monitor the progression of their system in meeting objectives. lServes to keep everyone excited and informed about the benefits of a well-designed program, and will identify any implementation or usage problems as they occur, allowing causes to be found and solutions to be implemented quickly. lMeasures should concentrate on areas deemed strategically important, such as program productivity, new customers added, or sales generated from the program. lMetrics should be transparent and easy to measure. lAt the user level, tactical metrics should be developed and tracked.

Seven Deadly Sins of CRM Failure lViewing CRM primarily from a technology perspective lLack of customer-centric vision lNot understanding the concept of a customer's lifetime value lInsufficient top management support lNot re-engineering business processes lUnderestimating the challenges in integrating various sources of data Underestimating the challenge in effecting change

Successful CRM programs lAre both simple and complex lInvolves training users and treating customers right, to make them feel valued lAlso means finding affordable ways to identify customers and their needs, and then designing customer contact strategies geared toward creating customer satisfaction and loyalty lDoing these things right will produce bottom line results.

Supply Chain Performance Measures §Total SCM costs are the costs to process orders; purchase & manage inventories; & information systems §SC cash to cash cycle time is the avg. # of days between paying for materials & getting paid by SC partners §SC production flexibility is the avg. time required to provide an unplanned 20% increase in production §SC delivery performance is the avg. % of orders filled by requested delivery date

Supply Chain Performance Measures (continued) §SC perfect order fulfillment performance is theaverage % of orders that arrive on time, complete, & undamaged. §Supply chain e-business performance is the avg. % of electronic orders received for all SC members. §Supply Chain Environmental Performance is the % of SC w/ISO 14000 partners, avg. % env. goals met, avg. # of policies adopted to reduce greenhouse gas emissions, or avg. % of carbon footprints offset

The Five Modes of Transportation Rail Carriers: compete most favorably when the distance is long, and the shipments are heavy or bulky lRelatively slow and inflexible service lRailroads have purchased motor carriers to offer point-to-point pickup and delivery service known as trailer-on-flatcar (TOFC) service. lUse real-time location systems (RTLs) via Wi-Fi enabled RFID tags for tracking rail cars and their assets in real time. lOne trend is use of high-speed trains which range in the U.S. from 85 to 120 miles per hour.

The Five Modes of Transportation Air Carriers: expensive relative to other modes, but also very fast lAccount for a small portion of total freight hauled lCannot carry extremely heavy or bulky cargo lFor light, high-value goods that need to travel long distances quickly lLimited in terms of geographic coverage lAbout half of the goods transported by air are carried by freight-only airlines, like FedEx.

Legal Forms of Transportation For-hire transportation service companies are classified legally as either: lCommon carriers: offer transportation services to all shippers at published rates between designated locations without discrimination. lContract carriers: not bound to serve the general public, but rather serve specific customers under contractual agreements, lExempt carriers: exempt from regulation of services and rates if they transport certain goods or customers. lPrivate carriers: not subject to economic regulation and typically transports goods for the company owning the carrier.

The Five Modes of Transportation Motor Carriers (trucks) - most flexible mode of transportation lAccount for 70 percent of all freight tonnage moved in the U.S. lCompetes with rail and air for short-to-medium hauls lOften classified as less-than-truckload (LTL) and truck-load (TL) carriers lGeneral freight carriers carry most of the goods shipped in the U.S. and include common carriers. lSpecialized carriers transport liquid petroleum, agricultural commodities, building materials, and other specialized items.

The Five Modes of Transportation Water Carriers: very inexpensive, but also slow and inflexible. Includes inland waterway, lake, coastal and intercoastal ocean, and global deep-sea. lInland waterway transportation is used for heavy, bulky, low-value materials (e.g., coal, grain). lDevelopment in deep-sea transportation and use of supertankers and containerships have made water transportation cheaper and more desirable. lCompetes with rail and pipeline carriers. Water carriers have paired with trucks for door-to-door delivery.

The Five Modes of Transportation Pipeline Carriers: very specialized with respect to the goods they can carry lLittle maintenance needed once pipeline is running lMaterials hauled in a liquid or gaseous state lTransported items include water, oil, gasoline, natural gas and coal slurry (pulverize coal in small particles suspended in water) lLatest controversial pipeline is the proposed Keystone XL pipeline from Canada to Nebraska

Reverse Logistics or Returns Management is the backwards flow of goods from customers in the supply chain as returned items. lReturns have been increasing because of growth of online shopping, direct-to-store shipments, and direct-to-home shipments. lRetail returns range from 6% to 10% of sales. lOnline retail returns range from 20% to 30% of sales. lReturns can have direct negative impact on the environment, customer service, a firm's reputation, and profitability. l3PL companies can provide product lifecycle or reverse logistics services.

The Impact of Reverse Logistics on the Supply Chain can impact how consumers view a brand Problems include: lImpact how consumers view a brand lInability of the system to handle returns lLack of worker training in reverse logistics procedures lLittle or no identification on returned packages lInadequate inspection and testing of returns lPossible placement of damaged returned products into sales stocks

Official definition of logistics: "The process of planning, implementing, and controlling procedures for the efficient and effective transportation and storage of goods including services, and related information from the point of origin to the point of consumption for the purpose of conforming to customer requirements." Council of Supply Chain Management Professionals

The Objective of Transportation lMaximize value by correctly communicating the firm's service needs to for-hire transportation providers. lServices and prices are negotiated such that the transportation provider's delivery costs are covered while allowing them an acceptable profit contribution. lEnsure the desired services are performed effectively. Satisfy customer requirements while minimizing costs and making a reasonable profit

Environmental sustainability •Addressing the need for protecting the environment & reducing greenhouse gas emissions as well business & consumer needs Green supply chain management (GSCM) •Sharing of environmental responsibility along the SC such that sound environmental practices predominate, & adverse global environmental effects are minimized. Carbon footprint •Supply chains evaluate design configurations and various options for reducing total carbon emissions

The balanced scorecard Kaplan & Norton created BSC to align an organization's performance measures with its strategic plan & goals. The BSC framework consists of four perspectives - •Financial perspective •Internal business process perspective •Customer perspective •Learning & growth perspective Also referred to as scorecarding Web-Based Scorecards & Dashboards •Web-based software applications used to design scorecards, which also link via the Web to a firm's enterprise software system. •Provide managers a way to see real-time progress toward organizational milestones & help to ensure that decisions remain in sync with the firm's overall strategies.

Step 6. Training for CRM Users lProvide and require training for all of the initial users. lProvide ongoing training as applications are added and as other personnel begin to see the benefits of the CRM system. lTraining can also help convince key users, such as sales, call center, and marketing personnel of the benefits and uses of CRM applications. lTraining is one area crucial to CRM program success. lUnfortunately, a survey showed 43% of respondents stating their user training "needed improvement." lPersonal gains need to be shown to the users to ensure CRM program success.

The top trends in CRM for 2021 and beyond are: lThe customer experience lEngaging with customers is today more important than ever, making the customer experience an important brand differentiator. lIt is one of the top priorities for 65% of executives according to 2020 Forbes and Salesforce research. lUse of artificial intelligence lToday, AI is experiencing major growth within CRM. lMarketers using AI jumped from 29% in 2018 to 84% in 2020. lOne biggest benefit is its capacity to take over tedious, time-consuming manual tasks.

The Five Modes of Transportation Intermodal transportation: the use of combinations of the various modes of transportation modes for one shipment that can make movement of goods cheaper, quicker, and more secure. lMost common: trailer-on-flatcar (TOFC) service, and container-on-flatcar (COFC), also called piggy-back service lThe same containers can be placed on board containerships and freight airliners. lROROs, or roll-on-roll-off containerships truck trailers, allow truck trailers or other cargo to be directly driven on and off the ship into secured in below-deck garages without the use of cranes.

Transportation Pricing lCost-of-service pricing: prices based on fixed and variable costs of transportation of the carrier lValue-of-service pricing: transportation providers price based on the highest levels the market will bear lNegotiated pricing: prices fall somewhere between above two levels lTerms of Sale: lFOB (free on board) destination: supplier is legal owner of the product until it safely reaches its destination. lFOB origin pricing: goods are legal responsibility of buyer at supplier's finished goods pickup location

Transportation Pricing Rate Categories Line haul rates: charges for moving goods to a nonlocal destination, that further classified as: lClass rates: published annually by National Motor Freight Traffic Association (NMFTA) lException rates: rates are lower than NMFC class rates that are generally established on an account-by-account basis. lCommodity rates: apply to minimum quantities of products shipped between two specified locations lMiscellaneous rates: contract rates negotiated between two parties and shipments containing a variety of products

Transportation Security lAviation and Transportation Security Act (2001) created Transportation Security Administration (TSA) to oversee security at 430 US airports. lDepartment of Homeland Security (DHS) (2002) created to coordinate and unify national homeland security efforts. l100% of air cargo prescreened as mandated by the Improving America's Security Act of 2007. lTransportation Worker Identification Credential (TWIC) became mandatory for all port workers in 2009. lPrePass: prequalified U.S. motor carriers bypass state inspection and weigh stations at highway speeds, using automated vehicle ID tech.

Traditional Performance Measures: Don't always work work b/c •Traditional cost-based information does not reflect the underlying performance of an organization's productive systems; costs & profits can be hidden or manipulated •Decisions to maximize current stock prices do not necessarily reflect that the firm is performing well •Financial performance measures, while important, cannot adequately capture a firm's ability to excel in these areas Use of Organization Costs, Revenue, & Profitability Measures Problems associated with using costs & profits to gauge performance - •Uncontrollable environmental forces (e.g., windfall profits that occur when prices rise due to supply interruptions) •Accurate attribution of cost, revenue, or profit contributions to the various functional or business units Use of Performance Standards & Variances Establishing standards for comparison purposes can be troublesome •Employees & managers do whatever it takes to reach the goal •Shoddy work & "Cooking" the books

Use of Performance Standards & Variances (Continued) Performance variance - the difference between the standard & actual performance •Managers can be pressured to find ways to make up these variances, resulting in poor decisions •Standards can reinforce the idea of functional silos (departments only concerned with what is going on in their department) Productivity & Utilization Measures These measures are useful but have the same problems as revenues, costs, & profits •Productivity decisions may actually increase costs & reduce quality •Tendency to continue producing & adding to inventory to keep machines & people busy •Less time is spent doing preventive maintenance & training for greater performance & profits in future •Traditional measures favor the short-term

SPC terms definition: •Natural variations: expected and random (can't control). •Assignable variations have a specific cause (can control). •Variable data is continuous (e.g., weight, length, time). •Attribute data indicates some attribute such as color, satisfaction, or beauty (yes/no, good/bad).

Variable Control Charts (2 types): •x-bar chart tracks central tendency of sample means •R-chart tracks sample ranges (largest minus smallest in sample) Steps: 1.Gather data when the process is in control. 2.Calculate the mean and the range for each sample. 3.Calculate the overall mean and average range of all the samples. Use the x-means to calculate the upper and lower control limits. 4.Use the means and control limits to construct x-bar and R control charts. 5.Collect samples over time and plot. Check slides for attribute data control charts

Logistics software apps can be added to ERP software suite of applications, as the firm's needs and the users' level of experience dictates. Three popular ones are: Transportation management systems (TMS) - used to find carriers, select the best mix of transportation services and pricing, better manage transportation contracts, rank transport option, clear customs, track fuel usage, track carrier performance. lProvides real-time location tracking lUses technologies such as barcode scanners, RFID tags, the Internet, and GPS devices

Warehouse management systems (WMS) track and control flow of goods from receiving dock to outbound shipment Goals of WMS include: lreducing distribution center labor costs lstreamlining the flow of goods lmanaging distribution center capacity lreducing paperwork managing the crossdocking process

Transportation Regulation and Deregulation lPro: Regulation assures adequate transportation service throughout the country, while protecting consumers in terms of monopoly pricing, safety, and liability. lCon: Deregulation encourages competition and allows prices to adjust as supply, demand, and negotiations dictate. lAnti-trust, safety, and security laws already in place provide protection. lToday, the U.S. transportation industry remains essentially deregulated. lNew calls in recent years for industry re-regulation have emerged due to transportation bankruptcies and consolidation.

Warehousing lEnables firms to store purchases, WIP, and finished goods, as well as perform breakbulk and assembly activities. lProvides faster and more frequent deliveries, which can result in better customer service. Crossdocking lWarehouses are not used to store inventory, but rather to receive bulk shipments, break down, repackage, and distribute components to a manufacturing location or retail center. lIs more accurately described as a distribution center.

"Finding a new customer costs five times as much as keeping an old customer" lCRM means focusing on customer requirements, then delivering products and services in a manner resulting in high levels of customer satisfaction. lCRM refers to automated transaction and communication applications—a suite of software modules or a portion of the larger enterprise resource planning system. lCRM must still include talking to customers, understanding their behavior and their requirements, and then building a system to satisfy those requirements.

l"The infrastructure that enables the delineation of and increase in customer value, and the correct means by which to motivate valuable customers to remain loyal—indeed to buy again." l"...helps the firm focus on its relationships with individual people - including customers, service users, colleagues, or suppliers - throughout the firm's lifecycle with them, including finding new customers, winning their business, and providing support and additional services throughout the relationship." l"...a core business strategy for managing and optimizing all customer interactions across an organization's traditional and electronic interfaces." CRM is building and maintaining profitable, long-term customer relationships

lSegmenting Customers ‒ grouping customers to create specialized communications about products lTarget marketing efforts - addressing specific customer segments avoids becoming a nuisance to the wrong customers lRelationship marketing or permission marketing ‒ customers select the type and time of communication (opting-in or opting-out) lMobile marketing ‒ placing advertising messages on mobile phones lQR codes ‒ using the camera function on a smartphone and downloading a QR code reader app enables scanning the code on a product to learn more. lFacebook, LinkedIn, and Instagram allow companies to create their own customized webpages that potential consumers can choose to visit.

lCross selling - occurs when customers are sold additional goods as the result of an initial purchase (e.g., e-mails from Amazon.com describing other books the customer might like). lIf it is successful, customers perceive this as individualized attention, and it results in more satisfied and loyal customers. lPredicting Customer Behaviors ‒ by understanding customers' current purchasing behaviors, future behaviors can be predicted. lAlong with determining what customers might purchase next, another desirable CRM activity is customer defection analysis.

The top trends in CRM for 2021 and beyond are:

lMobile CRM lFor field sales reps, mobility has long been a key requirement for CRM. lThe COVID-19 pandemic emphasized the need to utilize mobility, meaning accessibility from anywhere, anyplace, and anytime. lUse of social media lIt has become a focal point for CRM due to the impact of COVID-19. lWith in-person communications and experiences stopping in 2020, digital channels became the go-to for everything. lDigital platforms offer safety, speed, and convenience. lAble to connect in real time & build brand equity where users spend time.

Four broad categories of inventories:

lRaw materials: unprocessed purchase inputs lWork-in-process (WIP): partially processed materials not yet ready for sale lFinished goods: completed products ready for shipment lMaintenance, repair, and operating (MRO): materials and supplies used in producing products (e.g., solvents, cutting tools)

35% of trucks on the road today are driving empty

lReduction of empty miles decrease carbon emissions by ensuring trucks move when full. lHorizontal collaboration is the process of two or more companies cooperating at the same level on a certain market activity to realize benefits they could not achieve independently. lSmartWay certification program reduces transportation emissions. lCoalition for Responsible Transportation (CRT) works with U.S. ports to implement clean truck programs. lEurope's 3PLs and ports are leading the way by introducing a number ofgreen management initiatives.

Managing Customer Service Capabilities lWhat does customer service really mean? lThe "Seven Rs Rule": The right : product, quantity, condition, place, time, customer, cost lPerformance measures are often designed around satisfying the seven Rs. These kinds of services can come at a cost. lPerfect order: when the seven Rs are all satisfied.

•Customer Service Elements •Pretransaction elements - precede the sale (e.g., customer service policies, the mission statement, org. structure, & system flexibility) Posttransaction elements - occur after the sale & include warranty repair capabilities, complaint resolution, product returns, & operating •Transaction elements - occur during the sale & include the order lead time, the order processing capabilities & the distribution system accuracy

There are 4 different types or categories of inventory

•Imagine you are a car manufacturer....Let's imagine this BMW.. •What types of inventory do you think the BMW plant is holding? •Raw materials: Aluminum, Steel, Leather, plastics, wires, tires •Work in Process: Dashboard, Frame, Seats, power train •Finished Good: Finished car •MRO: Nuts, bolts, drill bits, lubricants, welding rods

Lean Six Sigma (or Lean Six) •Describes the melding of lean production and Six Sigma quality practices. •Both use: −High quality input materials, WIP, and finished goods −Continuous Improvement (Kaizen) •Lean and Six Sigma use complementary tool sets and are not competing philosophies

•Process integration & communication lead to fewer negative chain reactions along the supply chain, such as greater levels of safety stock, lost time, and less productivity • •Six Sigma is an enterprise and supply chain-wide philosophy that emphasizes a commitment toward excellence and encompasses suppliers, employees, and customers

Lean Production emphasizes: •Reduction of waste •Continuous improvement •Synchronization and integration of material flows within the organization, eventually including first-tier suppliers and customers The Elements of Lean: •Waste Elimination •Lean Supply Chain Relationships •Lean Layouts •Inventory and Setup Time Reduction •Small Batch Production Scheduling •Continuous Improvement Workforce Empowerment

•Supply chain management (SCM) seeks to incorporate Leanelements along entire supply chains using: −cross-training, −satisfying internal customer demand −quickly moving products or people through the production system −communicating demand forecasts and production schedules up the supply chain −optimizing inventory levels along the supply chain