Lecture 3

Question 1

High supply power and demand: monopolistic supplier & manufacturer

Answer 1

supplier dependent on producer and vice versa
(e.g. VW vs. Bosch

1. Seek joint advantage with supplier
2. Supplier development

Question 2

Seek joint advantage with supplier

Answer 2

1. Value chain management
2. Value partnership
3. Integrated operations planning
4. Cost partnership

Question 3

1. Value chain management- Value chain reconfiguration

Answer 3

Companies analyze current value chains
Breakdown in their component parts

Goals:

1. Acquire/maintain maximum control of key stages and processes
2. Thus: internalizing core competencies as a competitive advantage
3. To have the least possible ownership of capital or assets(=?) involved in the value chain.

Process of Value chain reconfiguration (VCR)
1. Defining and weighting the drivers of customer value and growth. - Supply and demand. Possible drivers are (Economy of scale (EoS), Timing of market entry, Geographic location, Institutional factors (regulation, taxes)

2. Setting up a detailed value chain for the company (involved partners,value of partners)
3. Identifying the dependencies of the customer-value drivers, and allocating them to the segments of the value chain. “Who delivers to whom?”, “What/ who is important for the customers?”, “Where are the value drivers located?”
4. Allocating costs to the value chain. “What are the costs?”, “Where are most of the costs allocated?” ,“How to reduce them?”
5. Breaking down the value chain into core and
   non-core activities(“what could be outsourced to third parties?”

Possible core/ none-core activities are:
Warehousing
Production
Delivery

6. Screening various options: performing certain steps
   internally or outsourcing, omitting, or leapfrogging
   them, and/or networking moreclosely with suppliers

Comparison of advantages/ disadvantages

“What is the best way for the own company?”

7. Choosing the best options and implementing them

focus on advantages

outsource non-core activities

Question 4

Triple bottom–line (Sustainability management - Value chain management
)

Answer 4

strives for economic, ecological and social sustainability at once

signifies:
long-term thinking and action
respect for ecological and ethical values

Prevention of
1. the occurrence of supply bottlenecks as a
result of statutory restrictions on certain materials
2. harm to the company’s image and forestalls*
purchasing boycotts by consumers

Leading companies save money through

1. deployment of new materials
2. more efficient use of resources

Goals:

1. Overarching (preserve or create an environment
   fit for the next generation to live in; international & inter generative justice)
2. economic ( full employment, price stability)
3. ecological ( protection of Earth‘s Atmosphere, Biological & landscape diversity)
4. sociocultural (social security, quality of living & healthy)

Question 5

Revenue sharing - Value chain management

Answer 5

The basic precondition is that the supplier must indeed play a significant role in the success or failure of the business.

Goals:

1. The customer takes the initiative when the supplier
   has particularly attractive products and services
   that the customer wishes to obtain exclusively for himself.
2. The supplier takes the initiative when it launches a new product or service and is looking to the customer
   to act as a multiplier in establishing new sales channels.

AT&T and Apple set up an arrangement to increase
the sales revenue of both firms.
- Apple shared in the profits from each phone call made by iPhone customers
- AT&T’s revenue was boosted by the popularity of the Apple brand
- Percentage of the sales revenue:
Apple: x %
AT&T: (100-x) %

AT&T became associated with a product icon

Apple earned higher sales revenue by focusing on one provider benefits from AT&T’s dependability

Question 6

Cost partnership (Supplier development)

Answer 6

1. Taking stock
   - Identify current relationship with suppliers
   - Identify development potential of suppliers
   - Record results for better overview
2. Creation of appropriate supplier strategies
   - Assessment criteria for suppliers
   - Drawn and agreed in workshops with all stakeholders
3. Development of tools for strategy implementation

Developing implementation plan with appropriate tools
e.g.: scorecards: vovering all key parameters from procurment volume to supplier dependability

4. Implementation of measures and reporting on the results

Additional:
( - Make resources available, develop supplier relationship and generate more value
- Think globally
- Open communicatition to enhance learning process
- Enhance relationship to grow supplier into an enterprise that makes important contribution)

Question 7

Total life cycle concept (Cost partnership)

Answer 7

Five life cycle phases

1. Introduction phase( Sales rise slowly; No profit is raised at this stage (cause of development costs and ongoing spending on communication); Introduction phase decides whether and how the product is accepted by the market; Ends when break-even point is reached)
2. Growth phase (Profits are made for the first time; Phase is characterized by rapid growth; Accelerated by further marketing activities; Ends when sales curve becomes digressive)
3. Maturity phase (Product no longer requires intense advertising; Highest profits can now be recorded; Profits decline because of increasing competition; Product has the highest market share)
4. Saturation (Begins as soon as market growth ceases; Sales revenue and profits decline; Phase can be extended through modifications and product re-launching)
5. Degeneration phase (The market shrinks; No longer possible to steam the fall in sales revenue; Market share is inevitably lost; Profits fall; Time to readjust the product portfolio)

Question 8

Collaborative cost reduction (Cost partnership)

Answer 8

1. Collect information’s from suppliers

All suppliers get an standardized formula (via internet possible)
Explanation of ideas
Potential savings
Potential implementation date
Probable implementation and relevant effort

These information’s help to simplify the priority process and to select ideas

2. Validate and check Information from suppliers:

• Discussion between production, controlling etc.
• Information’s gets validated for the chosen ideas
• Suppliers have to consider the consequences and coherences (otherwise its impossible to implement ideas)
• Create implementation plan and allocate responsibilities

3. Consequence sales controlling:

• Try to really implement ideas
• Companies often create ideas with suppliers but if responsibilities are not clearly allocated, they fail!

4. Consequence prioritizing and choice of ideas:
   - Its important to tolerate every idea
   - But its crucial to chose the right ideas quickly and to separate unimportant ideas
   (not to miss the forest for the
   trees)