Ch 2 Supply chain becomes a value ecosystem

Supply chain

the system through which an organization acquires raw material, produces products, and delivers the products and services to its customers.

Stages of a supply chain

suppliers --> manufacturers --> distributors/wholesalers --> retailers --> customers

Channels of distribution

Refers to the path a product takes from producer to the final consumer. (subset of supply chain)

Value Chain

The set of activities through which a product or service is created and delivered to customers.

primary components of Value chain

Inbound logistics include functions like receiving, warehousing, and managing inventory.

Operations include procedures for converting raw materials into a finished product.

Outbound logistics include activities to distribute a final product to a consumer.

Marketing and sales include strategies to enhance visibility and target appropriate customers—such as advertising, promotion, and pricing.

Service includes programs to maintain products and enhance the consumer experience, like customer service, maintenance, repairs, refunds, and exchange.

Support components of value chain

Procurement concerns how a company obtains raw materials.

Technological development is used at a firm's research and development (R&D) stage, like designing manufacturing techniques and automating processes.

Human resources (HR) management involves hiring and retaining employees who will fulfill the firm's business strategy and help design, market, and sell the product.

Infrastructure includes company systems and the composition of its management team, such as planning, accounting, finance, and quality control.

Difference between supply and value chain

Where the supply chain focuses on the operational side - the flow of materials and products,

a value chain prioritizes value-addition in products while creating and delivering products or services.(supply chain is subset of value chain)

Value ecosystem

an interconnected network of channels, technologies, partners, and data that work together to jointly create, deliver, and capture value for customers

difference between Value chain and Value ecosystem

A digital marketing value chain is a straight line of steps a company takes to build and sell a product, while a value ecosystem is a web of connected groups—like platforms, users, and partners—that create value together.

Virtual value chain

is the process of using information and digital technology to create

value, rather than only relying on physical activities.

Example: Dell physically makes and delivers computers, but it also collects information about customer orders and preferences. It uses that information to customize products, manage inventory, and make purchasing easier.

Otis Elevator Example of value chain

Creates value for both the business and customer (user) by having a REM + 24 hr monitoring system to identify problem before they occur and dispatch a repair person. This minimized elevator down time.

Remote monitoring also illustrates how value can be added by improving product performance and thereby improving customer service, and lowering customer cost

Otis promotes environmental sustainability through its Gen2® Elevator System

REM

Remote Elevator Monitoring system

a diagnostic system that monitors the performance of Otis elevators and other brands with which Otis has service contracts. It monitors both the usage level and individual systems within the elevator. The system schedules regular maintenance calls based on the level of usage. If it detects a problem, it reports the condition to a 24-hour communications center, which determines the severity of the problem, prioritizes service calls, and dispatches a repair person with the required tools and parts

Mckinseys concept of digitization

• Define the precise outcome to be achieved-E.g. Digitized mortgage application in banks.

• Create a seamless, end-to-end customer experience

• Build an in-house team that has the skills and commitment to advance the

digitization process over the long term.

• Move quickly-CRM.

• Do not follow the traditional roll-out process.

Essentials of a supply chain

1.Selecting and qualifying desired suppliers

2. Establishing and managing inbound logistics

3.Designing and managing internal logistics

4.Establishing and managing outbound logistics

5. Designing workflow in product-solution assembly

6.Running batch manufacturing

7. Acquiring, installing, and maintaining process technology

8.Order processing, pricing, billing, rebates, and terms

9.Managing (multiple) channels

10. Managing customer services such as installation and maintenance to enable product use

difference between physical and virtual value chain

Physical value chain:

Raw materials → Production → Distribution → Customer

• Virtual value chain:

Collect information → Organize information → Analyze it → Use/share it → Create value

Key factors for an integrated value chain (virtual value chain)

Information search costs- finding products

Transaction costs- completing the purchase

Fragmentation of the customer marketplace- customers are scattered across niches

Standardization of products- products look alike, competition increases

Bains Jenga model concept for virtual value chain

In order to create optimal value, a company must examine the entire supply chain, from initial production to final consumption, in order to understand where costs are incurred in the process

Dells direct model

A built to order model where instead of manufacturing and storing products for purchase, the company waits for the order/purchase to be made and then creates the product to the customers preferences

Benefits of a Integrated value system

Co creation of value

Resource Integration

Flexibility of roles

Ecosystem Strength

Service dominant logic (SDL)

The idea that service is the basis of all economic exchange, making all firms service

providers and all products essentially services. (a product is a means of providing a service to a customer)

model for companies to turn into an "As a service ecosystem".

Co-Creation

Innovation

Interdependence and dynamic roles

adaptive environments

governance

co-creation

bringing business entities or

businesses and their customers

together to create mutually

valuable outcomes

Platform

An organization that uses digital and other emerging technologies to create

value by facilitating connections between two or more groups of users

The platform economy

economic activity and commercial transactions facilitated by online digital infrastructure that connects independent groups of users, such as buyers, sellers, service providers, and clients

Electronic Data Interchange (EDI)

General term used to describe the digitization of business documents like orders & invoices between suppliers and customers

Entreprise Resource Planning (ERP)

a system that allows information to be shared between various departments across a company to manage operations

Radio Frequency Identification (RFID)

a wireless technology that uses radio waves to identify, track, and communicate information between a tag and a reader (reduces inventory time)

Software as a Service (SaaS)

Making software available on a usage fee basis instead of purchasing or licensing the

software itself

Cloud Computing

the practice of using a network of remote servers hosted on the Internet to store, manage, and process data, rather than a local server or a personal computer. (EX: Amazon web services)