DB320 - Exam 1

Which fo the following is NOT true of market segmentation?

A market segment is made up of a group of sellers that react dissimilarly when subjected to the same marketing stimuli.

Distributors have grown in their value and influence in the economy for the following reasons: 1) the rise in e-commerce has increased the business to business (B2B) service demands from customers 2) an increase in distributors' direct market knowledge, including the ability to individualize customer strategies 3) in this current environment, manufacturers have a difficult time being competitive with price, product and promotion alone

All three are correct.

*Manufacturers sell their products to independent distributors who then take the responsibility of marketing and selling their products in the marketplace.

B2B marketing to organizational customers

What does the term "break bulk" mean?

Breaking down a high volume quantity to process smaller orders

Demand order variabilities are amplified as they move up the supply chain; suppliers at the end of the chain have dramatic swings in demand from a sudden surge in high demand, leading to overtime costs, to a sudden drop in demand, leading to excess inventory costs, sometimes requiring lay-offs and going out of business; sometimes it is due to a lack of information sharing across the supply chain; ex: if an OEM places a higher than usual order, the Tier 1 supplier may interpret that as demand increasing, and it may request more of its supplier. This lack of understanding may cause an unnecessary increase in production through the supply chain. Then suppliers are left with excess inventory if the increased deamnd doesn't continue

Bullwhip effect

Is referred to as Business-to-Business or B2B; > 50% of all bus. school graduates join firms that compete directly in the business market; the dollar volume of the business market significantly exceeds that of the consumer market (wholesale distribution is a $7 Trillion industry & 50% of the GDP)

Business market

Commerical firms (private businesses); Institutions (hosptials, schools); Governments (federal, state, local) is the largest category

Business market customers

Refers to the value of a supplier's current and future offerings from a particular distributor versus other local distributors

Channel Equity

This forecasting approach incorporates inputs form multiple functional areas within the company and partners in the supply chain, such as key customers and manufacturers; it is information- and time-intensive; all parties that influence the sales forecast have direct input into the demand estimation process; a staff member is usually assigned to gather, organize & interpret the information; due to the comprehensive nature of the data collected, the CPFR approach usually generates a very accurate forecast

Collaborative Planning, Forecasting & Replenishment

Includes all transactions except those directed at personal use or personal consumption

Consumer market

Monitor for false positive input, "what they think you want to hear"

Customer Survey

Solicits the input of experts who submit their input & rationale; answers from all experts are summarized and circulated; opportunity to re-evaluate & resubmit recommendation; reduces the bias of groupthink; eliminates the influence of strong personalities & group dynamics

Delphi method

The Manufacturer can manage the full process itself; Full Commission Manufacturers' Representatives/Selling Agents; Broker

Distributor alternatives

Maximize inventory turnover; maximize margins

Distributor's goals

A business entity between a manufacturer and the consumer; for example, Walmart is the intermediary between the manufacturers of all the products sold at Walmart and you, the consumer

Distributors

Why do distributors need effective supplier partnerships and strategic alliances?

Distributors know that strategic supplier relationships will create value for all participants and that selecting the right suppliers are vital to ensuring distributor profitability.

*Manufacturers sell their products to independent distributors who then take the responsibility of marketing and selling their products in the marketplace.

Distributors within a Supply Chain

It is important to compare the forecasts of different quantitative models with the actual sales to determine which model fits the data most closely

Estimating Forecasting Error

The Multi-Attribute (or Weighted-Criteria) Evaluation System: 1. Select the key dimensions of performance mutually acceptable to both distributor and suppleir 2. Assign importance weights to each of the dimensions 3. Collect supplier performance data (0-100) 4. Multiply performance data by importance weight and sum overall score 5. Classify vendors based on their overall score: unacceptable, conditional, certified, & preferred 6. Audit and perform ongoing certification review

Evaluating Suppliers

Many forecasting software programs incorporate this function; a flexible model which can closely follow data trends or smooth out unexplained patterns; a fraction is applied to the most recent demand (a number between 0 and 1); this fraction is called a "smoothing constant" or "alpha"; the greater the alpha towards 1, the more responsible the forecast to demand changes

Exponential Smoothing

Trust; personal relationships; shared vision and goals; commitment; information sharing; culture of managing change; culture of continuous improvement; talent-based on technology-based capabilities; performance metrics

Factors for successful B2B partnerships

A distributor should not pass on customer or market information to the manufacturer because it would give away the value the distributor offers and make the manufacturer more likely to conduct the distribution themselves.

False

Hiring a distributor with a high-performing sales force and established channels of distribution can be valuable for a manufacturer but can lead to higher costs for the end-user or consumer.

False

often selected the suppliers, the channel members, manufactures or builds the product, and interfaces with the final consumer; may contract with independent distributors to maket the product for them; if very dominant in the market, a distributor may be it; is like the conductor for the orchestra. it oversees the full process on behalf of the various members

Focal Firm

Which of the following describes the value a distributor adds for a manufacturer?

Gather market information Make sales contacts Hold inventory

Is a series of international standards for environmental management; firms must produce cost savings by conserving materials and reducing water & energy use; add'l cost savings can come from reduced fines, legal fees, insurance fees & workers' comp

ISO 14000

ISO certified companies must adhere to the following 8 principles of quality: customer focus, leadership, involvement of people, process approach, systems approach to management, continual improvement, factual approach to decision-making, mutually beneficial supplier relationships

ISO 9000

Why is forecasting important?

Impacts a number of operational issues such as: lowers inventories, reduced stock-outs, smoother production plans, reduced costs, and improved customer service; improved forecasts benefit all trading partners in the supply chain

Which of the following is NOT true regarding the measurement of manufacturer performance?

In using the multi-attribute model for suppliers evaluation, the distributor should not communicate the assessment factors to the supplier in an attempt to keep the supplier on its toes.

Developing successful business partnerships is vital to the long-term success of any business. Which of the following is a factor that can put a strain on developing successful business partnerships?

Increased transaction costs (or the cost of doing business with each other). Fewer obstacles if switched to a different supplier Changes in personnel Better pricing or product quality offered by a competitor

Which of the following is true of estimating forecasts and forecasting error?

It is important to estimate forecasts with historical data. It is important to estimate forecasts using a variety of models. It is important to compare each forecast to actual sales to determine which model fits the data more closely. It is important to compare forecasting accuracy across several time periods.

Most managers prefer their own judgment; objective data can be evaluated - consumer price index, historical sales data, etc.

Jury of Executive Opinion

Which of the following describes the value of a distributor for the customer?

Making the product available to purchase Enabling purchases of varying size and sometimes from a variety of manufacturers Providing product information and technical support if needed Facilitating returns or exchanges if needed

Expand market research; enhance brand value; minimize cots to serve

Manufacturer's goals

How is supply chain management different than the manufacturing process?

Manufacturing is the production of a product. Supply chain management is managing the process from raw material and production to the point of sale to a consumer.

Estimate of maximum demand over time; based on total number of potential users and purchase price; US Census and US Census of Manufacturers are market sources

Market Potential

The process of dividing a market into meaningful, relatively similar and identifiable segments or groups

Market Segmentation

A group of present or potential customers that react similarly when subjected to the same marketing stimuli

Market Segments

produces results in a % form, such as "our forecast was off by 3%"; reveals the difference between actual sales and forecasted sales; can be expressed per time period and overall; the lower the forecasting percentage error, the better the forecasting model fits the data; the model with the lowest forecasting error should be chosen to predict future sales

Mean Absolute Percentage Error (MAPE)

Assumption that future sales will be an average of past sales; to smooth fluctuations, the number of periods averaged can be increased

Moving Averages

Evaluates and certifies supplier; suppliers rated between 0 and 100, with 100 being a perfect score; attirbutes are assigned a weighting based on relevance; attributes must be agreed upon by both distributor & supplier in advance; unacceptable (x50): supplier needs immediate corrective action or may be dropped from the product line; condition (50-70): supplier needs add'l work in some areas; may be a candidate for replacement; certified (70-90): supplier meets performance standards; preferred (90-100): supplier exceeds performance standards

Multi Attribute Model

Purchase industrial products to build into other products, such as an automobile manufacturer who buys steel, glass, tires, etc. from suppliers to build a car; sell their newly created product(s) to other businesses or the consumer market

Original Equipment Manufacturers (OEMs)

Share information in real time across the supply chain; focal firm could collect forecasting data across the supply chain for all to see; electronic data interchange (EDI) is a method of exchanging data in real time; collaborative planning, forecasting and replenishment (CPFR) goes one step further to include joint planning

Practices to avoid the Bullwhip Effect

Subjective assessment; uses informed judgements; important when limited quantitative date is available; important when customer knowledge is particularly strong; usually includes executive judgments, sales force projections, surveys & market tests; bias can be a limitation; can be expensive to obtain whether purchasing or generating in-house

Qualitative Sales Forecasting

Uses objective data only; incorporates "time series techniques" to predict future sales trends

Quantitative Sales Forecasting

___ is an example of a quantitative forecasting technique.

Regression analysis

Used to streamline processes & enhance communication; share these 5 features: visibility, automation, integration, collaboration, optimization; automating supplier activities can lead to significant cost savings & allows distributors to focus on value-added activities such as collaborative planning

SRM software

Favored when strong salesperson to customer knowledge exists; each salesperson assesses their territory and the info rolls up; sales force more likely to achieve sales quota when they participate

Sales Force Composite

Maximum portion of the total industry demand that a company can capture in a given time period; assumes optimal conditions; requires through customer knowledge

Sales Forecast

Enhances manufacture-distributor collaboration, execution & performance monitoring

Supplier Relationship Management

___ is a set of capabilities that enhances manufacturer-distributor collaboration and performance monitoring, in order to streamline processes and enhance communication between buyers and sellers.

Supplier relationship management

Organizations involved in the process of making a product or service avaliable for consumption, beginning with the raw material extraction; for example, all the activities required to make peanut butter from all the raw materials to the point it is in a jar on the shelf for the consumer; includes companies that move the products, such as shipping, railroading, trucking companies, as well as any warehouses where the products are stored

Supply Chain

Which of the following is true of market segmentation?

The business market consists of 3 broad sectors. There are many segments and identifiable groups within the broader sectors. Each segment has a unique need and a unique marketing strategy.

Which of the following is true regarding the measurement of manufacturer performance?

The multi-attribute model of performance evaluation is a quantitative model for assessing supplier performance. Managers from both sides (i.e., manufacturer/distributor) should meet periodically to examine the outcome of these assessments an make plans for improvement. ISO 9000 and ISO 14000 are two internationally adopted standards to indicate assurance of quality and environmentally friendly processes, respectively.

Companies that are direct suppliers to OEMs, such as a tire manufacturer

Tier 1 Suppliers

Companies that provide product to Tier 1 Suppliers, such as the company who produces the rubber for the tire

Tier 2 Suppliers

Provide product to Tier 2 Suppliers

Tier 3 Suppliers

A supplier to a Tier One supplier is called a ___.

Tier Two supplier

Which of the following is an objective of CPFR?

To develop collaborative arrangements. To reduce surprises in the supply chain. To synchronize timing and quantity of physical product flow. To create joint forecasting and order planning.

Which of the following is an objective of demand forecasting in a supply chain?

To ensure that suppliers can produce and deliver the right quantities at the right time and at the right cost. To allow suppliers to find ways to better match supply and demand to achieve optimal levels of cost, quality, and customer service. To enable suppliers to better compete with other supply chains. To minimize the "bullwhip effect" and the impact it ahs on a supply chain.

Which of the following is NOT an objective of CPFR?

To generate promotions that serve as disturbances in the supply chain.

A "business to business" example is the selling of medical suppliers to a hospital.

True

Hiring a distributor allows a manufacturer to focus on efficiencies in production and innovation while depending on the distributor for market knowledge, customer knowledge, and customer service expertise.

True

Jury of Executive Opinion; Delphi method; Sales Force Composite; Customer Survey

Types of Qualitative Sales Forecasting

Moving Averages; Weighted Moving Average; Exponential Smoothing

Types of Quantitative Forecasting

Distributors have grown in their influence and power in the Supply Chain due to: (1) the explosion of e-commerce giving consumers more choice with higher expectations that are hard to meet, ie service, shipping (2) manufacturers having a hard time managing price, product & promotion elements and customer service (3) a distributor's greater expertise with direct market and customer knowledge

Value of Distributors add to a Supply Chain

Distributors are critically important to the US economy and they create value in four basic ways: (1) contributing to contactual efficiency (2) minimizing channel uncertainty (3) facilitating routinization (4) simplifying assortment: categorization and breaking bulk

Value of Distributors to the economy

A distributor can develop an expertise in customer service: explaining product specifications & how to use, etc., returning or exchanging product as needed, in some cases, repairing the product and providing warranty services, ongoing technical assistance and training; distributors can create a powerful competitive advantage for the manufacturer if the sales, marketing, and customer service areas are strong and dependable; when comparable products are available to a customer, the tie-breaker is frequently the sales relationship (trust) and service provided (dependability)

Value of a Distributor to a Customer

Hold inventory; provide Market Coverage; gather Market information; make Sales Contacts; Process orders; provide Customer Support, ongoing Customer Service

Value of a Dsitributor to a Manufacturer

Adds a weighting for time periods, for ex. a higher weighting to the most recent; appropriate when more recent demand is more predictive of future sales; allows the system to react more quickly to changes in sales

Weighted Moving Average

Failure rates of business partnerships have been reported as high as 60 percent. In order for business partnerships to be successful, which of the following must be true?

When members of two companies are linked through common interest and degrees of decision-making authority, the partnership stands a higher chance of long-term success.

Failure rates are as high as 60%; slow payback results; poor communication; over-optimism; lack of shared benefits; lack of commitment to relationship; misunderstanding of operating principles; cultural mismatches; lack of effective relationship experience

Why partnerships fail