Understand the Value Chain

,
Understand the Market,
Understand the Industry and
Understand the Customer
David Walters
Institute of Transport and Logistics
University of Sydney
Assets
Equity
Revenues
Assets
“Profit”
Revenues
Productivity
Materials Flows/Time
Profitability
Cash & Transactions Flows/Time
Customer,
Corporate &
Partner Value
Expectations
Information Flows/Time
Stakeholder/Investor Value
The Basis of the Business Model
Inbound
logistics
Operations
Outbound
logistics
Marketing
and Sales
Service
Firm Infrastructure
HRM
Technology Development
Procurement
Margin
Value and Cost is Added throughout the Value Chain
Note for Porter this is essentially a cost reduction model
Porter’s Value
Chain:1985
The IMS (Intelligent Manufacturing Systems) Vision
Forum 2006 identified four ‘agents of change’ for
Next Generation Manufacturing:
Customised solutions – integrating capabilities
through products, services, and information to meet
individual customer requirements.
A lean approach – minimising waste and
emphasising resource utilisation
The Competitive Batch of One – creating individual
solutions in a cost-effective (and profitable) way;
and
Time – instant delivery of service to all customers
“The “virtual factory”of the future will
manufacture in adaptable value chain
networks linking medium and large-sized
OEMs with value chain partners and
suppliers of factory equipment/services
selected according to needs at a given
time. Its composition will not be limited by
the presumption of physical co-location, nor
by a need to maintain long-term
relationships”
(Executive Summary, Manufuture-EU, 2006)
A value chain network based business model
Collaboration
Added Value
Added Value
Interpreneurship:
Integration
and
Coordination
Co-opetition
Co-productivity
Co-creativity
(Demand Management)
(Resource Management)
Stakeholder
Expectations
Stakeholder
Value Delivery
Co-destiny
SRM
CRM
Dell
Nike
Levi
Ikea
Sustainability
Conservation of resources (recyclable products –EU)
“Managed consumption” Product-service formats
Applied reverse logistics Mandatory waste recycling
Environmental compliance and stewardship
HR/workplace conditions compliance
Ecological Concerns
Energy scarcity and pricing concerns
Resource conservation management
Accessibility controls on threatened resources
and heritage locations.
Regulation
Product codes and labels
Delivery vehicle access (size, hours)
Consolidationdeliveries in large urban areas
“geographic-centric-logistics”
Time and size controls on vehicle access
Liberalisation of product –service resellers
Taxation on infra-structure use
“ Technology”
Product technology
Multi-functional products
Miniaturisation Service-systems
Process technology
On-line home shopping –inventory management
and replenishment Decreasing cycle times
Changing Demographics
Developed economies face ‘aging populations’
Changes in global population growth rates
Shifts in urbanisation trends Increased migration
Economic Change
China, India, Brazil will continue to be significant in
resources consumption
New and large, emerging “middle class aspirations
and spending power in the NED countries June 08
Sep 08 Global loss of confidence in financial
systems accompanied by losses on investment
markets
Social Change
Multi-cultural lifestyle impacts (work, leisure, shopping)
“Cultural-centricity” (product-services, locations)
Organisational cultures and management styles
ICT Interactions
Information reach and richness
Co-creativity (product-service design)
Virtual stores Digitised products
Personalised communications
Personalised home-shopping
Decreasing costs
The New Environment Confronting the New Business Model
see Capgemini 2008
Co-opetition
Collaboration
Added
Value
Co-productivity
Co-creativity
(Resource
Management)
Stakeholde
r
Expectation
s
Stakeholder
Value
Delivery
SRM
CR
M
Added
Value
Interpreneurshi
p: Integration
and
Coordination
(Demand
Management)
Ecological Concerns
• Energy scarcity and pricing concerns
• Resource conservation management
• Accessibility controls on threatened
resources and heritage locations.
Sustainability
•Conservation of resources (recyclable products –EU)
•“Managed consumption” • Product-service formats •
Applied reverse logistics • Mandatory waste recycling
•Environmental compliance and stewardship
• HR/workplace conditions compliance
Regulation
• Product codes and labels RFID
• Delivery vehicle access (size, hours)
• Consolidationdeliveries in large urban areas -
“geographic-centric-logistics”
• Time and size controls on vehicle access
• Liberalisation of product –service resellers
• Taxation on infra-structure use
Economic Change
• China, India, Brazil will continue to be
significant in resources consumption
• New and large, emerging “middle class
aspirations and spending power in the NED
countries June 08
• Sep 08 Global loss of confidence in financial
systems accompanied by losses on investment
markets
Traditional Approaches
Were/Are:
New Approaches Are/Or Are
Becoming
•Command
•Control
•Vertical/hierarchical structures
•Suboptimal productivity
•Reactive market responses
•Inter-organisational competition
•Generic and mass customised
solutions
•Lagged/limited content/expensive
system communications
•Restricted interactions
•Entrepreneurship and
Intrapreneurship
•Integration
•Coordination
•Holistic/virtual structures
•Super-optimal productivity*
•Proactive market responses
•Inter-organisational collaboration
•Customer specific product-service
solutions
•Instantaneous/comprehensive
content/low cost communications
•Comprehensive interactions
•Interpreneurship*
Super-optimal productivity refers to the ability to couple processes such as design and
development through ICT (information communications technologies) to increase productivity
in a time space (24 hours) by operating in a number of global locations linked by ICT.
Interpreneurship refers to the management expertise required to integrate the resources
(assets, processes, and capabilities) of an alliance or partnership comprising a number of
independent organisations.
Fixed Assets
Tangible
Intangible
NCA
NCA
Fixed Assets
Tangible
Intangible
Market Revenues
Operating Margin
Operating Margin
Additional Revenues from Network Specialists
Knowledge Management (Enablers)
iMarket characteristics
iDetailed knowledge of supply markets
iProduct & process applications
Technology Management (Enablers)
iICT (Information Communications Technology)
iRate of change of innovation
iTechnology Integration iApplication
iTime management iDistributed manufacturing
Process Management (Enablers)
iScale iScope iIntegration
iCoordination iDifferentiation
iSpecialisation
Relationship Management (Enablers)
iIntegration/Coordination
iCooperation iCo-creativity
iCo-productivity iCo-opetition
Financial Gearing
High
Financial Gearing Low
Operational Gearing High
Operational Gearing Low
Market Revenues
Cash Flow Management
•Operations
•Asset management
•Strategy options
•Structure options
Dell
IKEA
Nike
Li and Fung
VC
Revenues
$
Vol
FC
VC
Revenues
$
Vol
B/Even B/Even
VC +FC =TC
VC +FC =TC
FC
Questions
iWhat is the customer value to be delivered?
iWhat are the preferred product-service
format alternatives?
iWhere is the R&Dexpertise?
iWhat are the assets, processes and
capabilities required for success?
iWhat are the investment implications (capital,
capacity, forecast utilisation?)
iAre they already available?
iWho owns them?
iWhich of them are “core”to the market
opportunity?
iWhat are the competitive issues?
iAre there enablers that are required?
iDo complementors exist?
Questions and Decisions
iHow and where and by whom will the
product be “manufactured”?
iWhat are the product-service production format
alternatives?
iWho will “deliver”the product? iAnd how?
iHow will the value be serviced and reinforced?
iWhat are the cost profile alternatives?
“Design and
Development

Procurement
Production
“Service”
Marketing
Logistics
Effective Value Chain Network Management “ Thinks the Problems Through”
Who " owns and manages"
the processes and
activities is function of
strategic effectiveness
and operational efficiency
Customer and Market Research
iMarket/segment volume
iCustomer/Market “value driver”characteristics
iCompetitive products
iCompetitive “value delivery”systems
iOpportunities for value and revenue enhancement
Complementors
Caterpillar
Rolls Royce Engines
A value chain network based business model
Collaboration
Added Value
Added Value
Interpreneurship:
Integration
and
Coordination
Co-opetition
Co-productivity
Co-creativity
(Demand Management)
(Resource Management)
Stakeholder
Expectations
Stakeholder
Value Delivery
Co-destiny
SRM
CRM
Dell
Nike
Levi
Ikea
Delivering the
Value Proposition
Customer and
Partner Value
Expectations:
The Value
Proposition
Accurate and
Timely
Value Delivery
Customers and
Partners
Customer
Relationship
Management
Added Value
Resources Decisions
Supplier
Relationship
Management
Added Value
Integration
and
Coordination
Agile
Market
Development
Distribution
Services
Choice
Service Support
Quality
Complexity
Flexibility
Reliability
Innovative
Response time
Capacity
Capability(ies)
Style/Aesthetics
Dell
IKEA
Nike
Li and Fung
Increasing customer value by understanding the value chain: identifying process alternati ves
Expand existing markets
Access new markets
Identify low cost/tax locations suitable for operations
BFI BTO DTO
Mass customisation - Shared product platforms
Process/Flow production systems Standard products
“Standard” processes Shared processes
Value engineering Customised solutions
Modular/system integration
Project/Specialist production systems
Co-productivity models (upstream/down stream
Co-opetition Order cycle management
Proactive versus reactive
Pre-transaction/transaction/post transaction
Frequency Reliability Availability
Returns & redeliveries
Reverse logistics
Co-ordinated sales calls and PDM
JIT VMI QR product-service ranges
Selective customer credit programs
Relationship management –distributors
and end-user customers
Coordinate promotions - marketing/selling
activities and logistics
Increase market share
Leverage brand Franchise the brand
Order cycle management performance
Order accuracy
Product-service availability (service levels)
Product service availability (locations)
Delivery frequency Delivery reliability
Reverse logistics processes & performance
Innovative product-services
”Product-Service- Solution” based
Problem prevention versus problem solving
Continuous Customised service offers
Use of service specialists
Customer “fit4purpose”
Customer co-creativity/JV
Outsourced RD&D
Reseller drivers
Customer service expectations
Service organisation skills & locations
Collaboration
Added
Value
Co-productivity
Co-creativity
(Resource
Management)
Stakeholde
r
Expectation
s
Stakeholder
Value
Delivery
SRM
CR
M
Interpreneurshi
p: Integration
and
Coordination
(Demand
Management)
Reducing materials & labour costs
Standard product/industry components
Industry buying consortia - “Elemica”
“Restructure the business model
Added
Value
Value Chain “ Organiser” Role
(hPartnership Integration hControl hCoordination)
Procurement
Marketing
Supplier
Relationship
Management
Production/
Processing
Value
Delivery
Customer
Relationship
Management
Service
Logistics
Demand
Chain
Analysis:
Customer
and Partner
Expectations:
Value Drivers
Resources
Needs and
Internal
Availability
Product-
Service and
Market
Options and
Specifications
Investment
Required
Externally
Available
“Research &
Development

Concept
Design &
Value
Proposition
(Demand Management)
(Resource Management)
The generic value chain network
Complementors
Customer(s)
Coordinator
Fixed value chain networks create
stronger supplier/customer
relationships built on long-term
relationships based on an
understanding of mutual
objectives: Automobile industry
(Toyota)
Fixed Value chain
networks:
Automobile Industry
Aerospace
Design
and
Development
(Components and
Systems)
Assembly
Value
Delivery
Boeing’s Business Model for the 787
(Fixed Network)
Exclusive Assets, Processes and
Capabilities
Exclusive Assets, Processes and
Capabilities
Demand Chain
Analysis:
Customer
and Partner
Expectations:
Value Drivers
Resources
Needs and
Internal
Availability
Product-Service
and Market
Options and
Specifications
Investment
Required
Externally
Available
Concept
Design &
Value
Proposition
Response Management
hAssets, Processes & Capabilities
hOperations Facilities and Networks
hMarketing and Sales Operations
Market Entry Network
Market Management Networks
hLogistics Services
Customer(s)
Coordinator
Involvement in
Competitive Value Chain
Value chain networks
Variable
Customer
Expectations
Flexible
Value chain
networks:
Apparel
Industry
Flexible value chain
networks offer variable
responses to meet
changing market
requirements
Li & Fung Response Management
Integrate and Coordinate:
hAssets, Processes & Capabilities
hOperations Facilities and Networks
hLogistics Services
Customer Marketing and
Customer Services
Complexity
Rapid Time
Response
Quality
Volume
Customer Concept
Design and Value
Proposition
Li and Fung Response Management Model
(Flexible Network)
7500 Suppliers
37 Countries
Procurement
Marketing and
Selling
Supplier
Relationship
Management
Value
Delivery
Service
Complex Systems the (High Value – Low Volume) Business Model
Target Customer Group B2B: “Solutions Seekers”
hLarge enterprises hIP based hHigh Value-Low Frequency transactions
Industry Value Drivers: Knowledge and Relationship Management
Aerospace, Medical/Healthcare equipment and components
Customer Oriented Research
Supplier RD&D
Operations
hEvaluate “Strategic & Operational Outsourcing”
hCustomised solutions
hModular/system integration
hProject/Specialist production systems
hCollaboration/Cooperation
hInnovative product-services
h“Pre-transaction-Transaction-
Post-transaction ”
h”Product-Service- Solution”based
hContinuous hCustomised
Customer
Relationship
Management
Service
and
Production/
Processing
Demand Chain
Analysis:
Customer and
Partner
Expectations:
Value Drivers
Resources
Needs and
Internal
Availability
Product-Service
and Market
Options and
Specifications
Investment
Required
Externally
Available
“Research &
Development”
Concept Design
and Value
Proposition
Logistics
hModular assemblies hMFI MTO DTO h“Product-Service”
hShared technology platforms hERP MRPJ IT EDI RFID h“Tailored Logistics”
Value Chain “ Organiser” Role
(hPartnership IntegrationhControl hCoordination)
(Resource Management)
(Demand Management)
hRelationship marketing
hPartner Collaboration and
Cooperation
Target Customer Group B2C: “
hMass market distributors & consumershPrice-Led satisfactionhLow Value-High
Frequency transactions
Industry Value Driver: Process Management: Systemised Products & Transactions h
FMCG products hApparel hHousehold hardware
Market Potential Oriented
Research (Applied use of
Process led R&D)
hBrand management
hDistributor relationships
hMedia driven
hGeneric service offer (warranties)
hTransaction based “extra packages”
Logistics
hCFPRI h“Generic”
hEDI RFID GPI hCost-led
Procurement
Marketing and
Selling
Value
Delivery
Customer
Relationship
Management
Service
Production/
Processing
Supplier
Relationship
Management
and
Demand Chain
Analysis:
Customer and
Partner
Expectations:
Value Drivers
Resources
Needs and
Internal
Availability
Product-Service
and Market
Options and
Specifications
Investment
Required
Externally
Available
“Research &
Development”
Concept Design
& Value
Proposition
Operations
hEvaluate “Strategic & Operational Outsourcing”
hProcess/Flow production systems
hStandard products i“Standard” processes
h“Experience Effect” processes
Value Chain “ Organiser” Role
(hPartnership Integration hControl hCoordination)
(Resource Management)
(Demand Management))
Volume Operations the (High Volume – Low Value) Business Model
The Future Business Environment
•Capital shortage but no/low retained earnings
•Increasing aversion to risk
Financial gearing declines
Returns spreads will increase
Strategic & Transformational alliances
will increase
Operational gearing declines
Fixed Costs/Variable Costs
•Regionalisation vs Globalisation
•Increasing use of “Network Management”
Co-creation
Co-productivity
Co-opetition
•Importance of Emerging Economies
Labour costs
Specialisation (ICT India)
But there are likely to be Politico/Economic
factors
•Sustainability and recycling
•Energy availability and the development of
alternative energy sources
•Product-services become “Customer Solutions”
•Product-service design becomes focused on
who and where it will be manufacturedand how
it will be supported
•Product Life Cycles will be determined by
Demand Technology Cycles
•Sustainability and Resource Conservation may
be built into Government contracts
•Compliance with International work place HR
The Future Business B2B
•Regionalisation vs Globalisation
•Increasing use of lean operations
time/cost saving techniques
MRP/DRP
J IT/QR logistics/VMI
EDI RFID GPI
CPFR/ECR/ERP
DTO/BTO/BFI
•Increasing use of “Network
Management”– Suppliers &
Customers:
Co-creation
Co-productivity
Co-opetition
The Future Consumer B2C
•Conservative in making long term
commitments – risk averse
•“Value/Quality/Durability/Price Fit”
Value in Use
High suitability for purpose
Service support
“Mass customised
exclusivity”
•Variety/Choice
•Rapid service response
Strategic Operations Management
Decisions
•Access to resources will be
preferred to Ownership. The
acceptance of leveraged assets will
be commonplace
•Network Management based upon
an understanding of Industry Value
Drivers becomes essential for CA
Knowledge management
Technology management
Relationship management
Process management
Logistics Futures
•The “customer –centric”logistics
system
•Life-cycle logistics
•Network Based logistics
•“ICT-led Interactions”to reduce
investment in fixed and working capital
•Fourth party logistics
•Fifth party logistics
•Reverse logistics
•Green logistics
•Lean logistics
Thank you ......
...... Your turn now
Value Chain Processes
Design and Procurement “ Manufacturing” Marketing Service
Development
“Industry
Visionary and
Coordinator”
“Brand
Manager”
“Contract
Manufacturer”
“Process
Specialist”
Product-Markets
•Automobiles
•Computers Dell
•Sports equipment
•Fashion Nike
•Consumer durables
•PC assembly
•Design specialists, R&D
•Buying consortia
•“Branded”exclusive components – Intel
•Net-based marketing
•Maintenance services
Positioning Alternati ves in the Value Chain
Value Chain
Role(s)
Logistics
Complementors
•Automobile Finance
•Travel
•Computers
•Homeownership
•Healthcare
insurance
Individual organisations with specialist
assets, processes and capabilities
(STRENGTHS) and limitations
(WEAKNESSES)
….no design & development and no
marketing
The incentive to join a value chain and
partner with firms that have specialist
procurement and production and take the
OPPORTUNITY to make greater use of
their distinctive capabilities and to eliminate
weaknesses!!!
Production
Service
Customer
Expectations
Value
Delivery
Integrating into an Industry Value Chain
Resources
Assets
Processes
Capabilities
Procurement
Haier
Value
Chain
Positioning (1)
Processes
Distinctive
Capability(ies)
Capabilities
Assets
Current/Desired
Positioning –
hAdvantage?
hNecessity?
hDisadvantage?
Risk
Profile(s)
Value
Chain
Positioning (2)
Profitability
Customer
Value
Expectations
Return on
Investment
Productivity
Shareholder
Value
Expectations
Supplier/Partner
Value
Expectations
Cash Flow
Customer and Stakeholder
Partner Value Drivers
Research, Design and
Development
Procurement and Production
Marketing and Sales
Operations
Distribution Services and
Administration
Customer Services
Management
Value Delivery
Demand Chain
Analysis
Response
Management
Value Chain
Network
Management
Vertical Networks
Horizontal Networks
The evolving value
chain network
Co-
productivity
Collaboration
Competition
Co-opetition
Value Proposition Options
Value Migration in the Pharmaceutical Industry: Share of Value and Investment Emphasis
An increase in the service expectations
of healthcare specialists has resulted on
a number of “ service specialists” in the
value chain
Marketing acti vi ties
have attracted an
increased share of
added value due to the
development of co-
opetition (firms using
each others sales &
promotional assets for
non-competiti ve
products
Collaborati ve procurement
and manufacturing has
increased the added-value
content of thereby shifting
the focus of the progressi ve
“ pharmas” down stream
within the value chain. Share
of added-value is captured
by “ M&A” acti vi ties and
alliances. Specialists
manufacture both generic
and patented drugs
Low ROI on R&D has
encouraged many companies
to work with Bio-techs on
research and development
Procurement
Research, Design &
Development
Marketing
Supply Relationships Management
Production Service
Customer &
Partner
Expectations
Value
Delivery
Customer Relationships Management
Customer &
Partner
Expectations
Supply Relationships
Management
Production Marketing
Service
Value
Delivery
Customer Relationships
Management
Research,
Design &
Development
Procurement
Procurement
Research, Design &
Development
Customer &
Partner
Expectations
Supplier Relationships
Management
Production Marketing
Service
Value
Delivery
Customer Relationships
Management
Marketing
Supply
Relationships
Management
Production
Customer
Relationships
Management
Research,
Design &
Development
Procurement
Service
Value
Delivery
Customer &
Partner
Expectations
The Internet has introduced the
concept of co-opetition to
procurement, with firms
collaborating with their
competitors to purchase
components that do not add
differentiation to the product
but are basic items.
Manufacturing has become
‘commodity’ based, offering
very little CA
It is argued that RD&D expertise is critical in
developing CA. and because of the high costs & risks
many projects are joint ventures e.g, a project
between Ford & GM to develop a six-speed automatic
transmission for front-wheel dri ve vehicles is
moti vated by the ability it offers to share risk, cost and
technological capabilities.
. Schremp (CEO, Daimler Chrysler suggested:
“ …..within 10 years the price of a car will
represent onl y a quarter of the total val ue
provided to a customer with the balance
consumed in maintenance, finance and other
services” . Investment to increase the share of
this value can be expected
Value Migration in the Automotive Industry: Share of Market Value and Capability Emphasis
Procurement
Marketing
and Selling
Value
Delivery
Service
Logistics
h“System”platforms
hBFI BTO DTO h“Generic” service
hERPMRPJIT hCost-ledQR
Semi-Complex Systems the (Medium Value – Medium Volume) Business Model
“Customer Segment”Oriented Research
Demand Chain
Analysis:
Customer and
Partner
Expectations:
Value Drivers
Resources
Needs
and
Internal
Availability
Product-
Service and
Market Options
and
Specifications
Investment
Required
Externally
Available
“Research &
Development”
Operations
hIdentify low cost/tax locations suitable
for operations
hIndustry and product range “standard”
parts – modules & components
hIndustry/Group purchasing
hMass customisation hShared product
platforms hStandard components
hSegment focused
hBrand management
hDistributor relationships
hMedia driven
Customer
Relationship
Management
Service
and
Production/
Processing
Product-
Service
Concept
Design &
Value
Proposition
Supplier
Relationship
Management
Value Chain “ Organiser” Role
(hPartnership IntegrationhControl hCoordination)
Target Customer Group B2C: Seeking Cost-Efficient Exclusivity
hLooking for quasi-customisation at moderate prices hPrice-exclusivity satisfaction
hModerate value-low frequency transactions hConsumer durables
Industry Value Drivers: Process and Relationship Management
Motor automotive and consumer durables
Leveraged technology – using expertise
gained from another industry sector
enables Bishops Technology Group
Sydney to manufacture dedicated
production equipment for automotive
manufacturers
Value
Expectations
Value
Delivery
Process Management Options
(Organisation Structure)
Decisions)
Products based on standard modules
reduces inventory holding and order
lead times providing a 5/10 order
response time in comparison with
competitors’ 4 weeks or more. Codan
communications equipment supplier,
Adelaide
Based on: Roberts P (2006) “Local
Factories are Holden their own”,
Australian Financial Review, 19 April
R&D led customised manufacturing
that requires extensive knowledge
IP inputs provides customers with
market exclusivity/differentiation
without extensive R&D expenditure
Bosch Melbourne
Building robust, reliable
machines for series production
(continuous high volume
output) is the next step
Bishops Technology Group
Superior quality of systems and
management (flexibility and complexity)
has resulted in negotiated supplier lead
times of 2 weeks and order response
times for customers of 4 weeks. GPC
Electronics, Sydney
Examples of Australian companies have adapted to the value chain network approach
Victoria Carpets have invested $40 million to
ensure they are competitive with smaller
production run sizes – allowing the Company to
respond to customer expectations for shorter
lead times on small volume orders.
Robins and Sons (a women’s
fashion shoes producer) operates a
cellular, manufacturing system with
a mobile multi-skilled labour force
that enables the organisation to
meet a two week lead time as
opposed to the six months that is
typical from off-shore suppliers
Response
Management
Product-service
specification
and design
Customer
Services
Management
“Value
Delivery:”
Distribution
Marketing and Sales
Operations
Distributor & Customer
Relationship
Management
Customer
Value Drivers
Target
Customer/
Market
Demand
Chain
Analysis
Value
Proposition
Value Delivery
Considerations
& Implications
Service
Delivery &
Management
Market
Opportunity
Analysis
Product-Service
Profile
Product/Service
Characteristics
Market Entry
Network
Market Management
Networks
Demand
Chain
Management
Procurement,
“Production” Management
& Inventory Management
Supplier
Relationship
Management
t
Identify Value
Expectations
Communicate
the Value
Create
the Value
Service the
Value
Deliver
the Value
Produce the Value
Adding Value to
Customers
Innovative Products &
Service
Value Proposition
“Customisation”
Use existing & proven
proprietary components
"Design" service
support concurrently
with product design
Quality
Build-to-Order
Modular construction
Standard components
Increase customer
performance
Service Information
Location “Availability”
Information
Product Platforms
Order
response time
Flexible
response
Reliability
Influence operating
costs
Order response time
Flexible
response
Product-Service
Availability
Time-to Market
Response
Production
Service
Marketing
Logistics
t
w
8
3
3
3
8
3
3
Identifying the Customer Facing Processes that Create Added Value
Procurement
Current perspectives on the “evergreen”topic the
product life cycle are of interest. The product life
cycle is but one concept that has been debated by
marketing theorists for some time. Its value is `that
it provides insights into a product's competitive
dynamics
Sales
Time
Demand technology life cycle
Demand life cycle
A technology “ driven” PLC
Organisational
Product Life
Cycles
Sales
Time
Demand life cycle
Demand technology life cycles
Investment decisions in the PLC
Innovators
Imitators
Organisational
Product Life Cycles
Imitators
Sales
Time
Demand technology life cycle
Demand life cycle
Imitator individual product life cycles
hProduct “enhancement”
hProcess technology developments
hCost decreases
Product Life Cycles and Technology Life Cycles
Innovator product life cycles
hNew ‘technologies’
hProduct innovation
hNew product applications
hProcess innovation
Competitive Innovation
Advantage
Competitive Market Coverage
Advantage
Competitive Brand Strength
Advantage
Competitive Process/Cost leadership
Advantage
Demand Life Cycle
Demand
Technology Life
Cycles
Time
Suggested by: Lindgren M and H Banhold,(2003) Scenario Planning, Palgrave Macmillan,
Basingstoke, UK
Sales
?
Procurement
Marketing and
Selling
Supplier
Relationship
Management
Value
Delivery
Service
Complex Systems the (High Value – Low Volume) Business Model
Target Customer Group B2B: “Solutions Seekers”
hLarge enterprises hIP based hHigh Value-Low Frequency transactions
Industry Value Drivers: Knowledge and Relationship Management
Aerospace, Medical/Healthcare equipment and components
Customer Oriented Research
Supplier RD&D
Operations
hEvaluate “Strategic & Operational Outsourcing”
hCustomised solutions
hModular/system integration
hProject/Specialist production systems
hCollaboration/Cooperation
hInnovative product-services
h“Pre-transaction-Transaction-
Post-transaction ”
h”Product-Service- Solution”based
hContinuous hCustomised
Customer
Relationship
Management
Service
and
Production/
Processing
Demand Chain
Analysis:
Customer and
Partner
Expectations:
Value Drivers
Resources
Needs and
Internal
Availability
Product-Service
and Market
Options and
Specifications
Investment
Required
Externally
Available
“Research &
Development”
Concept Design
and Value
Proposition
Logistics
hModular assemblies hMFI MTO DTO h“Product-Service”
hShared technology platforms hERP MRPJ IT EDI RFID h“Tailored Logistics”
Value Chain “ Organiser” Role
(hPartnership IntegrationhControl hCoordination)
(Resource Management)
(Demand Management)
hRelationship marketing
hPartner Collaboration and
Cooperation
Target Customer Group B2C: “
hMass market distributors & consumershPrice-Led satisfactionhLow Value-High
Frequency transactions
Industry Value Driver: Process Management: Systemised Products & Transactions h
FMCG products hApparel hHousehold hardware
Market Potential Oriented
Research (Applied use of
Process led R&D)
hBrand management
hDistributor relationships
hMedia driven
hGeneric service offer (warranties)
hTransaction based “extra packages”
Logistics
hCFPRI h“Generic”
hEDI RFID GPI hCost-led
Procurement
Marketing and
Selling
Value
Delivery
Customer
Relationship
Management
Service
Production/
Processing
Supplier
Relationship
Management
and
Demand Chain
Analysis:
Customer and
Partner
Expectations:
Value Drivers
Resources
Needs and
Internal
Availability
Product-Service
and Market
Options and
Specifications
Investment
Required
Externally
Available
“Research &
Development”
Concept Design
& Value
Proposition
Operations
hEvaluate “Strategic & Operational Outsourcing”
hProcess/Flow production systems
hStandard products i“Standard” processes
h“Experience Effect” processes
Value Chain “ Organiser” Role
(hPartnership Integration hControl hCoordination)
(Resource Management)
(Demand Management))
Volume Operations the (High Volume – Low Value) Business Model
Procurement
Marketing
and Selling
Value
Delivery
Service
Logistics
h“System”platforms
hBFI BTO DTO h“Generic” service
hERPMRPJIT hCost-ledQR
Semi-Complex Systems the (Medium Value – Medium Volume) Business Model
“Customer Segment”Oriented Research
Demand Chain
Analysis:
Customer and
Partner
Expectations:
Value Drivers
Resources
Needs
and
Internal
Availability
Product-
Service and
Market Options
and
Specifications
Investment
Required
Externally
Available
“Research &
Development”
Operations
iIdentify low cost/tax locations suitable
for operations
hIndustry and product range “standard”
parts – modules & components
hIndustry/Group purchasing
hMass customisation hShared product
platforms hStandard components
hSegment focused
hBrand management
hDistributor relationships
hMedia driven
Customer
Relationship
Management
Service
and
Production/
Processing
Product-
Service
Concept
Design &
Value
Proposition
Supplier
Relationship
Management
Value Chain “ Organiser” Role
(hPartnership IntegrationhControl hCoordination)
Target Customer Group B2C: Seeking Cost-Efficient Exclusivity
hLooking for quasi-customisation at moderate prices hPrice-exclusivity satisfaction
hModerate value-low frequency transactions hConsumer durables
Industry Value Drivers: Process and Relationship Management
Motor automotive and consumer durables
Volume
“Customised-Led”Offer
Product-Service-Market
Strategy Options
Price-Led Options
High Impact on Competitive Advantage
Position: Invest for as long as the capability
can be forecast to maintain the advantage
Low Impact on Competitive Advantage
Position: Outsource the capability at a
cost that ensures continuity of supply
Value Proposition (2)
(Value-in-Use Characteristics)
Value Proposition
based on Selective
Customisation offers
Non-Price Based
Differentiation
Customised
Product-Services
Mass Customised
Product-Services
Price-Based
Differentiation
Commodity
Product-Services
Complex Systems
(“Customised”)
Semi-Complex
Systems
Product-Service
Characteristics
Matching Processes and Product-Service-Markets
Customer Value Drivers
•Asset management
•Time management
•Performance
•Cost management
•Information
•Risk management
Volume Operations
Uncomplicated Systems
Value Proposition (1)
(Value-in-Use Characteristics)
Service
SRM Responses
CRM Responses
Value
Delivery
Consumer and
Customer/Partner
Expectations:
Identify the
Value Drivers
COMPANY OPERATIONAL VALUE PRODUCTION FOCUS
Value Chain Planning & Control: Strategy – Partnership Management – Company Operations
Value Delivery Implementation
Identify the Value Create the Value Produce the Value Communicate the Value Deliver the Value Service the Value
PARTNERSHIP MANAGEMENT PROCESS
Value
Delivery
Consumer and
Customer/Partner
Expectations:
Identify the
Value Drivers
Design &
Development
Procurement
Manufacturin
g
Marketing
Distribution
and
Logistics
Service
Value
Delivery
Consumer and
Customer/Partner
Expectations:
Identify the
Value Drivers STRATEGIC VALUE PLANNING FOCUS
Products Serviced
hNetworks
hRouters, Switches, Hubs
hSNA & IP Networking
hInternet Software
hServers
iDesktop
hPCs
hNotebooks
hPrinters
hScreens
hSpecialist Hardware
hLottery terminals
hDigital Photographic
hLegacy printers
hSpecialist hardware
hConsumer Products
hPlasma screens
hMulti Media PCs
hSet tops
Service Offer
iField Support
iOEM Vendor support
iOutsourcing Prime Contractors
iSystem Integrators
iCorporates with Direct Multi-Source
Strategies
iDepot Repairs
iSupport Field Activities
iReturn to Depot Service
iProduct Customisation & Reworking
iHigh Value Component Repairs
iWarranties
iLogistics Support
iAsset Management
iService Parts Procurement and
iInventory Management
iProject Staging
iWarranty Repair Management
Design &
Development
Procurement
Manufacturin
g
Marketing
Distribution
and
Logistics
Service
Value
Delivery
Consumer and
Customer/Partner
Expectations:
Identify the
Value Drivers
STRATEGIC VALUE PLANNING FOCUS
Service Structure
iField Support
iEmbedded in customer organisations
iProject Teams/Roll Outs
iTask Specific Field Teams
iGeneral Desktop Support
iAgency Network
iDepot Repairs
hNational Repair Centre
hBranch Offices
hCustomer – On site
hAgency Network
iLogistics Support
hCentral Logistics & Warehouse
hBranch Logistics Support
hAgent Logistics Management
For Example: The
Service Company within
the Value Chain: Role
and Tasks.
Customer and Consumer Expectations
Value Delivery
Mature and Developing Value Chains
It is suggested that value chains evolve over time.
Much like products and markets they exhibit specific
characteristics during their development cycle
A “ mature” value chain is one in which the partners or stakeholders have a clear
view of their roles and responsibilities within the value chain. Typically they
identify one or two processes that match their core resources (assets, processes
and/or capabilities) and identify partner organisations with complementary core
resources.
Both Value Chain Partners’ (VCP) and Value Chain Customers’ (VCC) “value”
objectives are met consistently, suggesting continuity and stability of membership.
Entry and Exit is stable.
Partnerships have optimal membership numbers.
VCP s have well defined roles and tasks that reflect their expertise and that are
performed to uniform satisfaction.
They are considered to be “industry specialists”.
Typically VCP focus on a limited range of processes

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