The decisions they make need not be communicated to designers of other modules or even to the system's architects, the creators of the visible design rules. Those suppliers may experiment with production processes or logistics, but, unlike in the computer industry, they have historically had little or no input into the design of the components. For the module maker, advantage comes from mastering the hidden information of the design and from superior execution in bringing its module to market.
Computer and Sun Microsystems, relied heavily on other companies for the design and production of most of the modules that formed their workstations. The term architecture was first used in connection with computers by the designers of the System/360: Gene M.
Fast, Global, and Entrepreneurial
Supply Chain Management, Hong Kong Style An Interview with Victor Fung
Enter Li & Fung, Hong Kong's largest export trading company and an innovator in the development of supply chain management. This structuring of the organization around customers is very important—. Supply Chain Management: How Li & Fung Adds Value. Each is run by a lead entrepreneur—we sometimes call them "little John Waynes" because the image of a guy standing in the middle of the wagon train, shooting at all the bad guys, seems to fit.
Now, instead of managing a few relationships—the essence of the old model—we're managing large, complex systems. Li & Fung is a good example of the new generation of companies coming out of Asia.
How Chrysler Created an American Keiretsu
Critical components of the model include cross-functional teams, targ et costing , choosing suppliers early in the vehicle's concept-development stag e, and having Chrysler's and its suppliers' eng ineers work side by side to develop components. The automaker has proved that hig hly productive partnerships with suppliers not only can flourish in the United States but are the wave of the future. Its experience demonstrates not only that a modified form of the keiretsu model can work in the United States but also that the benefits can be enormous.
But surprisingly, one crucial aspect of the. story has been overlooked: exactly how the company managed to transform its contentious. By benchmarking competitors, listening to suppliers, and. experimenting with ideas and programs, they gradually developed a vision of the changes that Chrysler needed to make. The LH was being developed in record time and below the aggressive cost targets set at the beginning of the program.
The new approach to product development and working with suppliers was extended to the rest of the company that year. Enough of the early ideas were accepted to convince suppliers that Chrysler really was open to suggestions. Only as a third step did it turn to what the key suppliers—the ones that made strategic components or systems—were doing wrong.
Suppliers are expected to offer suggestions that result in cost reductions equaling 5% of the supplier's sales to Chrysler. The average length of the contracts held by a sample of 48 of Chrysler's suppliers on the LH program in 1994 was 4.4 years. Today Chrysler has given oral guarantees to more than 90% of its suppliers that they will have the business for the life of the model they are supplying and beyond.
The Power of Trust in Manufacturer-Retailer Relationships
It turned out that the manufacturer had a high level of trust (an average of 5.8 on a 7-point scale) in 218 of the retailers that distrusted the. Each of the manufacturer's 429 retailers was classified into one of two g roups—retailers with hig h trust in the manufacturer or. retailers with low trust in the manufacturer—based on the retailer's response to our scale measuring retailer trust. Although most make appointments first, having the card makes them feel that they are members of the Marks & Spencer family.
Marks & Spencer has a rule that a supplier always can appeal a decision to a higher level in the company. Marks & Spencer believes that this interaction is critical because it permits the retailer to ascertain the ability of the manufacturer to meet its requests or demands. manufacturer of electrical and electronic products, encourages its salespeople to call on the dealers' customers jointly with its dealers' salespeople. Most manufacturers periodically evaluate the performance of the retailers or dealers that they use to reach the market.
To help reduce bias, two members of the manufacturer's org anization who are familiar with the retailer being evaluated should perform the assessment. The two people separately rate the retailer or dealer on a 7-point scale for each statement. Over the next year, we expect the revenues this retailer or dealer g enerates for us to g row faster than .. the revenues our competitors' retailers or dealers within the same territory g enerate for them.
The retailer or dealer demonstrates deep knowledg e of the features and attributes of our products and services. Over the past year, we have usually had success g etting the retailer or dealer to participate in the following important prog ram. Ekornes also took steps to involve retailers in the chang e process and to make them feel like members of the Ekornes family.
What is the Right Supply Chain for Your Product?
Fisher offers such a framework to help manag ers understand the nature of the demand for their products and devise the supply chain that can best satisfy that demand. The root cause of the problems plag uing many supply chains, the author contends, is a mismatch between the type of product and the type of supply chain. It helps managers understand the nature of the demand for their products and devise the supply chain that can best satisfy that demand.
The first step in devising an effective supply-chain strategy is therefore to consider the nature of the demand for the products one's company supplies. The root cause of the problems plaguing many supply chains is a mismatch between the type of product and the type of supply chain. With their high profit margins and volatile demand, innovative products require a fundamentally different supply chain than stable, low-margin functional products do.
Hence, when the company launched a supply chain program in 1991 called continuous replenishment, the goal was physical efficiency. The company's supply chain efforts have been directed at reducing those costs through increased speed and flexibility. By using the matrix to plot the nature of the demand for each of their product families and its supply chain priorities, man-.
In other cases when a company has an unresponsive supply chain for innovative products, the right solution is to make some of the products functional and to create a responsive supply chain for the remaining innovative products. Finally, the Campbell story illustrates a different way for supply chain partners to interact in the pursuit of higher profits. In this competitive model of supply chain relations, costs in the chain are assumed to be fixed, and the manufacturer and the retailer compete through price negotiations for a bigger share of the fixed profit pie.
Make Your Dealers Your Partners
Fites Executive Summary
In the vast majority of cases, our dealers can provide the replacement part on the spot. Everyone in the business world talks about the importance of the trust that exists between Japanese manufacturers and their suppliers. Although we have long guaranteed delivery of any part anywhere in the world within 48. hours, our dealers now provide more than 80% of the parts a customer wants immediately.
I can turn to the computer on my desk and find out how many machines in the world are waiting for a part. The reputation of the D9L, customers' acceptance of the new design, and our leadership in the large-tractor business were at stake. For instance, our distribution system made. it possible for us to become one of the leading players in backhoe loaders, a business we entered in the mid 1980s.
The foundation of our relationship is that both sides profit from their respective investments in the distribution system. They also know very well that Caterpillar is much more than just a good account—we are a valuable long-term business associate. In the United States, for example, our dealers remained financially sound throughout the recession and were able to order machines in advance of the upturn in late 1993.
When we see particular dealers not performing well, we jump in and help them. performance seriously—we want dealers to succeed. We have the financial statements and key operating data of every dealer in the world. On average, our dealerships have remained in the hands of the same family or company for more than 50 years.
From Value Chain to Value Constellation
Designing Interactive Strategy
The company then adds value to these inputs, before passing them downstream to the next actor in the chain, the customer (whether another business or the final consumer). Seen from this perspective, strategy is primarily the art of positioning a company in the right place on the value chain—the right business, the right products and market segments, the right value-adding activities. But to focus on IKEA's low costs and low prices is to miss the true significance of the company's business innovation.
The result is an integrated business system that invents value by matching the various capabilities of participants more efficiently and effectively than was ever the case in the past. It offers a brand new division of labor that looks something like this: if customers agree to take on certain key tasks traditionally done by manufacturers and retailers—the assembly of. Though each catalogue features only 30% to 40% of the company's roughly 10,000 products, every copy becomes a ''script," explaining the roles each actor performs in the company's business system.
In addition, each item carries simple readable labels with the name and price of the product; the dimensions, materials, and colors in which it is available; instructions for care; and the location in the shop where it can be ordered and picked up. It takes enormous care to find and evaluate potential suppliers and to prepare them to play their role in the IKEA business system. This effort got started in the early 1960s, when IKEA began to purchase components from Polish manufacturers.
The image of a value chain fails to capture the complexity of roles and relationships in the IKEA business system. IKEA's extraordinary business innovation is made possible by a fundamental transformation in the way that value is created. But in the last decade, this traditional service has been completely transformed by the application of information technology.