IDIS 340 TAMU Exam1

MRP

Materials, Requirements, Planning

ERP

Enterprise, Resource, Planning

VMI

Vendor Managed inventory

Vendor managed inventory

Managing the inventory at the customers location

Supply Chain

Supplier to manufacturer to distributor to customer

Marketing Channel

directly from the manufacturer to the customer

Mind Share

Manufacturer wants the distributor to show their product first

COGS

Cost of Goods Sold

Gross Margin

sale price - COGS

EBITDA

Earnings Before Interest Tax Depreciation and amortization (gross margin - expenses)

Inventory Stratification

Taking the items you sell the most of and then set parameters for them

A items

most sold

B items

second most sold

C items

least sold

SPI

Supplier Performance Index

Customer Stratification

Sectioning customers into different categories based on specific characteristics (eg: age, geographical location)

Manufacturers _____ ____ _______ based on their product and service ________.

choose their markets; offerings

Manufacturers make a _________ in production equipment that is highly inflexable.

substantial investment

Manufacturers need a ___ ____ that can reach and support their chosen customers and help the manufacturer to ___ ___ ___ ___ ___.

distribution channel; efficiently control their production investments

"______ ______" of distributors is important

mind share

Manufacturers main concern

market share

market share

having as much product as possible out there

Distributors Primary Concern

Profitability: sales operations

Contractors

someone who comes in and works on a specific job

- difficult to forecast

- smaller customer

- sometimes difficult to do business with

- most complex customers to serve

OEM

original equipment manufacturers

- supplies raw materials and components to production lines

- need the right inventory and good forecasting skills

MRO

Maintenance, Repair, and Operations

- Business that sells replacement parts

- Handles all materials needed to keep a factory running

- Need the right inventory on priority items

- Need technically skilled sales and repair personnel

Distributors invest in and carry _____ that ____ __ ______ needs with manufacturers capabilities

inventories; match the customers'

Distributors determine and create a network of _____, ______, ____ and other _____ capabilities to excel in the chosen market.

warehouses, transportation, equipment; service

Choose a ___ ______ _____ with the products, technology, brand name, and service to secure that market

Group of Suppliers

Distributors choose a _____ ______ which they want to secure and then determine what ______ _____ ________ to serve that market

customer market; resources are needed

Manufacturers Rep

Master distributor: Agent

The alliance between the manufacturer and distributor should seek to

maximize long term revenue, growth and profitability

5 S's of a distributor

- Source

- Stock

- Store

- Sell

- Ship

TCO

Total Cost of Ownership

invoice cost, freight, product life, maintenance, utility cost, installation and training, salvage value

Good Practice (distributor)

Distributor

- On-time delivery

- Lead time

- Quality and delivery completeness

Best Practices (distributor)

- On time delivery

- Lead Time

- Quality and Delivery completeness

- Lead time variability

- Combination methodology

Common Practices (distributor)

- No supplier Performance measurement

- On time delivery

- Quality

Best Practices (supplier)

- Loyalty, profitability, services, performance

- Risk/Exposure: supply availability, technical requirements, financial factors, technology factors, and environmental issues

- Landed Cost (TCO)

- Combination Methodology

Good Practices (supplier)

- segmentation based on COGS by supplier

- Pareto framework (80% - 20%)

Common Practice (supplier)

- Purchase price variance

- Landed cost

- Lacks segmentation framework

Alliance

Two or more organizations connected legally, economically, or interpersonally such that they function according to a perception of common interest, shared by all the parties

- Genuine Commitment

- Willingness to sacrifice

- Risk becoming dependent

Commitment to marketing partners

- Long time

- Defend them

- Work out problems

- Loyal

- Grow the relationship

- Patient with their mistakes

- Long term investments, wait for payoff

- Dedicate people and resources

- Not looking for another organization

- Would not drop this organization if you found a better one

Manufacturers Motives to Form Alliances

- Better coverage at lower cost

- Better representation

- Better coordination of marketing efforts

- Greater access to information

- Pool of potential partners drying up

- Assured and dependable supply

- Enhance marketing efforts

- Cut cost

- Discourage competition

- Eliminate Redundancy

Manufacturers and distributors bother in pursuit of

enduring competitive advantage leading to market share and profit

Key factors for building commitment

- Trust

- Two-way communication

- Reputation for treating channel members fairly

- Beneficial experience over time

Commitment demonstrated by a manufacturer

- Dedicate personnel and facilities

- Efforts to learn about operation

- Coordinate reporting systems

- Coordinate planning and training efforts

- Alignment in the mind of the end-user

Commitment demonstrated by a distributor

- Dedicate personnel and facilities

- Build relationships within the organization

- Invest in product training and support

- Invest in compatible reporting system

- Alignment in the mind of the end user

- Willingness to market a single manufacturers family or products

To trust a channel member is to believe in that party's ___ ___ ___ for mutual well-being.

integrity and concern

Distrust

to fear deception and exploitation

Power

The ability of one channel member to get another channel member to do something it otherwise would not have done

Types of Power

Coercive: punishment for not complying

Reward: Benefit for altering behavior

Expert: Special Knowledge or ability

Legitimate: in accordance with standards

Referent: B wants to identify with A

Channel Outcomes

rest on the balance of power in a given relationship

Management

dealing with a managing the conflict

Resolution

conflicts may or may not be resolved. Not all conflicts can or need to be resolved

Goal Conflict

- goals are incompatible

- each party's goals threaten the goals of the other

Judgement Conflict

Agree on goal but disagree on how to attain it

- One party feels the other party's conclusion is incorrect

Value Conflict

One party evaluates the other on the basis of how they behave or what they believe

- Involves the notion of justice, equity, honesty and values

Power Conflict

Both want to establish credibility and power

- each party feels certain they are right

- both feel it is disadvantageous to share power

Innovate

Value proposition innovation

- redefine offering on products and services

Build

New platform (multiple drivers)

- New supply chain

Expand

Market Segments

- New type of market segments not currently served

Reach Out

Same types of customers, new territories

Add

New ways to reach current and maybe new customers

Broaden

New products and services to existing customers

Business we want to do

- Core customers

- Strong products

- Growth potential

- Low cost to serve

Business we have to do

- Service drain

- Core "B" products

- Economies of scale

- Moderate - high cost to serve

Business we don't want to do

- Aggravation customers

- C and D products

- Low economies of scale

- High cost to serve

Growth drivers

- Industry dynamics

- Customer relationships

- Supplier relationships

- Sales and marketing strategy

- Sales force effectiveness

Leverage

Existing customers

Penetrate

New customers

Three basic customer types

OEM, MRO, contractors

Factors of Customer Supplier Index

Lead time average, lead time variability, On-time index, completeness index

Conflict Resolution

1. Managing feeling before discussing a conflict

2. Create a supportive Climate

3. Describe the conflict

4. Understand Goals

5. Create Solutions