Studied by 5 people
UARK
Omni channel
a term used in ecommerce and retail to describe a business
strategy that aims to provide a seamless shopping experience across all
channels, including in store, mobile, and online
3rd Party Logistics Provider(3PL)
companies that outsource a business's
logistics operations, such as warehousing, fulfillment, and packaging.
Model
the design of your plan
Brick and Mortar
physical buildings where retailers sell goods
Milk Run
multiple stops delivering or picking up product at different
locations. Typically store locations
Major Drivers for Updating a Network Design
Changes to Global Trade Patterns
Changing Customer Expectations
Shifting customer or supply locations
Change in corporate ownership
Cost Pressures
Competitive Capabilities
Competitive Capabilities
Does your DC location create value or detract value?
Change in corporate ownership
Shifting customer or supply locations
Corporate merger, too many DCs
Cost Pressures
Chasing cheap labor, avoiding tariffs, etc
Changing Customer Expectations
Omni channel impacts
Changes to Global Trade Patterns
Bad infrastructure, lack of trade balance, etc
Major Decision Factors for DC Locations
• Transportation Infrastructure
• How close are you to your customers?
• Quality of life
• Tax and Industrial Development Incentives
• Supplier network proximity
• Land and Utility costs
• Availability of IT infrastructure
• Executive preferences
Customer Fulfillment Models
• Integrated Fulfillment
• Store Fulfillment
• Flow-Through Fulfillment
• Direct Store Delivery
(DSD)
• Pool Distribution
• Dedicated Fulfillment
Integrated Fulfillment
retail DC
TL, LTL or Parcel
store or consumer
• Retailer has both “bricks and mortar” and online sales
• They fulfill both sales channels from same network
• Easy start-up, can have product size/quantity availability issues,
can compete for same inventory.
Store Fulfillment
retail store
delivery or pickup
consumer
Online order is sent to the nearest store for customer pick-up or
delivery(could be parcel or local courier, etc)
• Conflicts between store and online inventory. Requires real time inventory
visibility at the store. Requires space at the store. Can be a stop gap to stand
up proper online fulfillment network
dedicated fulfilment
fulfilment center or distribution center
parcel or LATL, TL
consumer or store
Retailer operates two separate networks for “bricks and mortar”
and online sales.
• Solves integrated model issues, but creates more inventory and
more DCs. Allows ability to offer much more in online DCs
pool distribution
distribution center
LTL, TL
third party
source
Retailers that don’t have the density to create daily full truck loads for stores
will “pool” several stores, typically at a 3PL to do deliver several stores each
day with LTL size deliveries…aka “milk runs”
direct store delivery (DSD)
supplier DC
LTL
store
Retailer requires supplier/vendor to deliver product from their DCs
to the retail stores directly.
• This eliminates inventory and allows the supplier/vendor to “mix”
product and have control over stock outs.
flow through fulfillment
retail DC
TL, LTL, Parcel
store
delivery or pick up
consumer
Similar to store fulfillment, but the online orders are
picked/packed at the DC and sent to the store on normal delivery
truck for pick-up or delivery for customer.
• Major drawback is longer processing time/time to get to customer
Transactional
typically based just on price, not strategic. Ex transactional
buying
Capital goods
goods/equipment purchased to produce consumer goods. Ex
manufacturing equipment to produce consumer goods
Consumer goods
the end/finished product to be sold to consumers
RFI
Request for information
RFQ
Request for quote
RFP
Request for proposal
The “Market”
the available supply of or potential demand of specific goods
or services
Purchasing
Largely transactional activity
• Managing a firm’s acquisition procedures and standards
• Facilitated by the placement & processing of a PO
• Often follows formal sourcing process
Procurement
Range of processes related to an organization’s need to procure (buy) goods &
services
• Examples of activities – supplier selection, price negotiation, contract
management, supplier performance management
Strategic Sourcing
Broader processes than procurement
• Align with organizational and supply chain goals and objectives
• Cross-disciplinary collaboration
What Makes Strategic Sourcing Unique?
Consolidate and leverage
purchasing power
• Emphasis on value (effectiveness)
• Deeper, more meaningful supplier
relationships
• Attention directed to process
improvement
• Enhanced teamwork and
professionalism
Strategic Sourcing Core Principles
assess total value
develop individual sourcing strategies
evaluate internal requirements
focus on supplier economics
drive continuous improvement
assess total value
Emphasis beyond acquisition cost, evaluating total cost
of ownership and the value of the supplier relationship
Develop individual sourcing strategies
Individual spend categories need
customized sourcing strategies
Evaluate internal requirements
Requirements and specifications
thoroughly assessed and rationalized as part of the sourcing process
Focus on supplier economics
Suppliers’ economics understood before
identifying buying tactics (e.g. volume leveraging, price unbundling, price
adjustment mechanisms)
Drive continuous improvemen
Strategic sourcing initiatives as subset of
continuous improvement process for procurement and sourcing
organizations
Three Types of Purchasing Activity
maintenance, repair, operations (MRO)
capital goods
rebuy (standard, modified)
pros of electronic procurement
Lower operating costs (reduce paperwork & sourcing time, improve
control over inventory & spending)
• Improve procurement and sourcing efficiency (find new supply
sources, improve communications, improve personnel use, lower cycle
times)
• Reduce procurement prices
• Improve communications
• Easier access to more suppliers
cons of electronic procurement
• Cyber-security
• Lack of face-to-face contact between the buyer and seller
• Technology-related concerns (lack of standard protocols, system
reliability, time & money investment)
pricing is typically
a group or team inside a company
Importance of Pricing
• Align with positioning for target customers
• Align with Marketing
• Target what customers are willing & able to pay (what the Market
will bear)
• Supports organizational goals
• Enables adequate income to cover costs and make a profit
Price Sources
commodity markets
price lists
price quotations
negotiation
Preparation Techniques
1. Familiarize your team with the supplier’s company
2. Discover the supplier’s agenda
3. Profile the supplier’s negotiating team personnel
4. Review the supplier’s performance history
5. Select & prepare your negotiation team
6. Rehearse non-verbal signals
7. Develop & complete a strategy worksheet
Negotiation Strategy Types
competing (transactional)
collaborating (strategic)
compromising
avoiding
accommodating
Competing (transactional)
Enjoy negotiating, like to “win,” not relationally focused
Collaborating (strategic)
Enjoy solving tough problems in creative ways, committed to the best solution
for all involved
Compromising
Seek to close the deal by “closing the gap,” like to achieve closure as quickly as
possible
Avoiding
Defer and dodge confrontation
Accommodating
Derive satisfaction from solving other peoples’ problems, may weigh a
relationship more heavily than what they want out of a negotiation
Fixed costs
an expense that does not change regardless of production increases or
decreases
Variable costs
a cost that changes in proportion to production or sales
Machine flexibility
a production machine capable of producing a variety of products
without significant downtime between product runs
Offshoring
the practice of moving production or service operations oversees with the
intention of reducing the cost of doing business
KPIs
Key Performance Indicators. Can be interchangeably used with the term
“metrics.”
Volume vs Variety in Production Process Decisions
Economies of Scale
• Higher-volume production with lower cost per
unit of output
• Suitable in situations where production
processes have high fixed costs and equipment.
Economies of Scope
• Low-volume production with flexible capabilities
of producing a wide variety of products
• Important in markets characterized by changing
customer demand
Responsiveness vs Efficiency in Production Facility
Decisions
Centralized vs. Regional
• Centralized production facilities provide operating cost and
inventory efficiencies.
• Regional production facilities allow companies to be closer
to customers and more responsive.
Large vs. Small
• Larger facilities with excess capacity provide the flexibility to
respond to demand spikes.
• Smaller facilities that are better utilized are more cost
efficient
types of assembly processes
make to stock (MTS) I Make to order (MTO)-
assemble to order (ATO)> build to order (BTO)> Engineer to order (ETO)
Which Type of Assembly Process to Use?
Level of customization
Cost of finished goods
Order fulfillment speed
Process complexity
Example products
Make to stock (MTS)
Level of customization: none
Cost of finished goods: low
Order fulfillment speed: immediate
Example products: commodities, toilet paper, canned soup, pharmaceuticals
Assemble to Order (ATO)
Level of customization: limited
Cost of finished goods: moderate
Order fulfillment speed: days, weeks
Example products: personal computers, automobiles
Build to Order (BTO)
Level of customization: moderate
Cost of finished goods: high
Order fulfillment speed: weeks, months
Example products: computer servers, private
Engineer to Order (ETO)
Level of customization: total
Cost of finished goods: very high
Order fulfillment speed: months, years
Example products: stadium, jumbo Tron, nuclear power plant
Make (in-house)
Internal production processes are more directly visible.
• Internal processes are easier to control from a quality
standpoint
buy (outsource)
• Lower product costs
• Free-up resources for other, more strategic needs
BUT
• More difficult to maintain visibility and synchronize
activities.
• More difficult to control over quality, intellectual property
rights, and customer relationships
what is the difference between make vs. buy
in-house and outsource
