Disintermediation function Re-intermediation
2.5 Operational Processes
generation to relive their youth (Armstrong, 2015:1). Although vinyl is a mainstream product, Peoples and Crupnick (2014:4) note that people that buy it are more likely than the average music consumer to listen to Internet radio, follow musicians on social media and stream music online. Diduck (2015:4) noted that in 2014, vinyl sales amounted to less than 2% of physical format sales.
2.5.1 Push-based Strategy
Push-based supply chains feature a marketing campaign that is in total control of the message disseminated. Depending on the medium used, the communication can be either interactive or non-interactive. Broadcast communications such as electronic mails (e-mails), radio or television advertisements are typically push communications which originate with the organisation and are delivered to a relatively passive audience where it is not possible for the buyer to interact. Chaffey (2015); Coupey (2005); Benton (2014); Kruger et al. (2007); and Stevenson (2012) describe a push system as “a system whereby a business manufactures good, stores the goods in warehouses, and moves them from the warehouses to the points of sale in accordance with high demand”. Higher inventories are stored in warehouses as the volume of manufacturing is not in line with demand. The inventory decreases as demand increases while at the same time inventory increases as demand increases (Benton, 2014; Coupey, 2005; Pienaar and Vogt, 2009; Simchi-Levi et al., 2009). This can be identified as the approach that operated in the traditional music industry.
According to Benton (2014:205) the primary purpose of push systems are to control inventory levels, assign priorities and execute product flow through a production facility. Push manufacturing activities are guided by master production schedules, bill of materials, inventory records, and output reports which imply that production is based on forecast demand (Pienaar and Vogt, 2009; Simchi-Levi et al., 2009; Stevenson, 2012). Kruger et al. (2007) note that the days of manufacturing goods and services according to a push system are over. Brown and Hagel (2005:84) observe that the highly specified, centralised and restrictive nature of push systems prevents companies from experimenting, improvising, and learning as quickly as they might, both throughout their own organisations and across others. Push systems not only inhibit product innovation, but also make it difficult to rapidly implement process innovations. They therefore prevent organisations from participating in the distributed resource networks that are now necessary for competitive advantage (Brown and Hagel, 2008). This is typical of the traditional supply chain system in the music industry where the focus is on internal production and disinclination to outsource (Steyn, 2005).
The next frontier of innovation requires broader adoption of pull capabilities as well as less reliance on traditional push systems. As demand becomes increasingly difficult to forecast, the system performs increasingly poorly in delivering the efficiency it was designed to promote (Brown and Hagel, 2005). Fitzsimmons and Fitzsimmons (2008:14) note that a product development model driven by technology and engineering could be titled a push theory of innovation. The push model is characteristic of manufacturers that develop an innovative
product, identify a suitable target and create a distribution channel to push the product to the market (Chaffey, 2015:265). The figure below illustrates the push-based strategy.
Figure 2.8: Push-based Strategy
Push to Customer
Source: Chaffey, D. (2015) Digital Business and E-Commerce Management Strategy, Implementation and Practice, 6th ed., London: Pearson: p. 265.
The aim of push-based systems is to optimise the production process for cost and efficiency.
2.5.2 Pull-based Strategy
A pull system is a system where the manufacturing volume of a specific product or service is based on demand; hence an increase or decrease in demand results in minimal inventory as supply is attuned to demand (Benton, 2014; Kruger et al, 2007; Simchi-Levi et al, 2009;
Stevenson, 2012). The media have been transformed by the digitalisation of content in the form of text, voice or video, and new ways for customers to access and distribute digital content through the Internet (Brown and Hagel, 2008; Chaffey, 2015). In contrast to push-based systems, rather than waiting for media organisations to push their content, customers are instead increasingly pulling information at will (Brown and Hagel, 2005:85). The pull strategy is perceived as a shift in power from marketers to the consumer. It is initiated by the consumer and requires higher levels of activity (Benton, 2014; Coupey, 2005). In cases where communication is done electronically, the consumer has the opportunity to interact with the seller. In these types of systems it is possible for the consumer to demand the information they require. According to Brown and Hagel (2008:93) “pull models help people come together and innovate in response to unanticipated events, drawing upon an array of highly specialised and distributed resources.
Rather than seeking to constrain the resources available to people, pull models strive to continually expand the choices available while at the same time helping people to find the resources that are most relevant to them.” Thus pull models provide individuals with the tools
Supplier Manufacturer Distributor Retailer Customer
(PCs, cellular phones or any medium to connect to the Internet) and resources (including connections to other people and groups through social media, Twitter, Facebook and Myspace) required to take the initiative and creatively address opportunities as they arise. In the contemporary music environment. Pull models become appropriate as customers and fans demand services and more involvement in activities. This results in an increase in online music service providers and social media interactions. Pull models hence treat consumers as networked creators.
The figure below shows the closer links between the elements of the supply chain through the use of technology.