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Value Chains And Alliance Networks
 

Value Chains And Alliance Networks

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    Value Chains And Alliance Networks Value Chains And Alliance Networks Presentation Transcript

    • Value Chains and Alliance Networks Jordan D. Lewis
    • Introduction
      • M&S
        • Quality, cost, value, fast response to changing market demands
          • Depends on performance of
            • Garmet makers
            • Fabric producers
            • Fiber sources (e.g., Du Pont)
      • Suppliers account for 50% of costs
        • Suppliers of suppliers rfepresent 50% of those costs
      • Effective management of supplier relations gives a competitive edge
      • Chrysler
        • Every supplier will see itself as a partner of its customer
          • And its customer’s customer
    • Value chain management
      • Every firm may belong to more than one value chain
        • Suppliers of Motorola, Chrysler, Marks & Spencer serve those firms’ rivals through seperate value chains
        • In effect, value chains of rivals compete
        • Value chain management becoming central to a company’s business advantage
    • Choosing value chains
      • Performance of a value chain depends on:
        • Appeal of a customer for a supplier compared to others
          • Purchasing power, rapid growth, good innovation
        • Conduct of the customers of the customer and other firms downstream
      • Consumer goods industry
        • Retailer-manufaturer relationship
          • Traditional arm’s length
            • Focus on price, shelf-space
    • Choosing value chains (cont’d)
        • Standard, traditional terms
          • Reduce the incentive for retailers to improve efficiencies (e.g., joint cost management)
            • Most consumer goods are price elastic – Reduction in growth oppotunities
            • Du Pont and M&S relationship as a counter case
      • Molex: Supplier, customer or both?
        • Manage in both directions
        • Reduction in supply base
        • Giving suppliers clear descriptions of its objectives and those of its customers (e.g., HP, Ford, Motorola, Chrysler)
    • Innovating in the value chain
      • Traditional view of suppliers
        • Hierarchy
          • Direct suppliers rank first
          • Others distant in the hierarchy often unknown
      • High performance value-chain
        • Order of supply links depends on the best way to create value, reduce costs, and cycle time
          • Bypass the hierarchy to cooperate on new developments
    • M & S example
      • 1st tier suppliers: Garment makers
      • 2nd tier suppliers: Fabric knitters, weavers, makers of buttons, belts, trimming, linings
      • 3rd tier suppliers: Spinners, dyers, finishers, printers
      • 4th tier suppliers: Fiber manufacturers
    • M & S example (cont’d)
      • Textile attributes
        • Garment texture, aesthetics, construction, performance
        • M&S deals with textile suppliers and their suppliers value (i.e., Courtaulds textile and garment makers are always ready in meetings)
      • Suppliers also innovate on their own initiative
        • Lycra: A highly technical product that needs custom equipment
          • Du Pont partnering with machine manufacturers
            • Ensure textile buyers receive equipment best suited with Lycra
    • M & S example (cont’d)
      • Examples of innovations in clothing
        • Machine-washable silk blouses
          • Developed by DuPont and Ciba Geigy
      • How fast does information travel along the supply-chain?
        • M & S shares weekly sales and related data with all relevant suppliers
          • Advantage: Quick reaction capability
    • M & S example (cont’d)
      • To be the fashion leader
        • M & S invites supplier presentations to its board of directors
        • Shares development plans, changing consumer values, and needs, etc. With suppliers – especially Du Pont
          • Sharper insights on where the market is going
          • Ex: Market data: Swimsuits were becoming worn out in chlorinated pools
            • M&S developed swimwear with its suppliers
    • Promoting cooperation between suppliers
      • Better view the value-chain as a network than as a set of vertically linked companies
      • Motorola
        • Daily inventory information available on line
          • Supplier adjustment to demand fluctuations
        • Suppliers benchmark against excellent firms to reduce cycle-time
          • A small group of suppliers that were not rivals
            • Information, skill, best practice sharing
    • Promoting cooperation between suppliers (cont’d)
      • Philips
        • Annual town meetings to leverage total TV set performance
          • All relevant suppliers and function managers involved
          • (i.e., wire connector, projection lense and TV screen suppliers)
        • Annual new product and technology meeting
          • Design, quality, engineering, production, purchasing, materials control and their counterpart suppliers
          • A joint vision of product performance and how parts contribute to that
          • Contribuets to production costs and performances
            • A new method of assembling TV sets
    • Promoting cooperation between suppliers (cont’d)
      • Motorola
        • Seiko and Automatix collaboration for vision systems
          • Seiko best in robots, Automatix best for vision systems
          • Conceptual design – facility visits
          • Tenfold improvement in the automated vision systems of Motorola
            • Entire development effort baased on trust
              • No formal contracts until the system was complete
    • Linking rival supplier firms
      • Cannot share as much information as non-rivals
        • Cooperate when benefits outweigh risks
        • M&S food suppliers exchange notes on safety
          • Visit each other’s factory: Cooperate on quality, safety, service, safety-related technology
            • No discussion of product innovation, pricing, profits
    • A committed supply base
      • M&S helps its suppliers to keep up:
        • Technical assistance
        • Manufacturing equipment
        • Necessary skills, training
        • Prototype garments
      • In return, suppliers help M&S to meet difficult times
        • 1992 recession in UK
        • Price-cuts: Outstanding value campaign
          • Working closely with suppliers of core products
    •