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NewBusinessModelsinSupplyChainHarryE.SalzbergMemorialProgramSyracuseUniversity,April6,2001,SupplyChaincapabilitycontinuestobethedifferencebetweeneCommercesuccessandfailure,TheInternetisntthefirstcommerceplatform,butitcertainlyholdsmorepotentialthananythathavecomebeforeit.Thatpotentialisparticularlyevidentinsupplychainmanagement.HoweffectivelyorganizationscanintegratetheInternetintotheircoresupplychainstrategywillinlargemeasuredeterminetheirfuturebusinesssuccess.-GoldmanSachsAtrulyintegratedsupplychaindoesmorethanreducecosts.Italsocreatesvalueforthecompany,itssupplychainpartners,anditsshareholders.Theindustryleadershavemadeonethingclear:Thepayoffsfromsuccessfulsupplychainintegrationcanbehandsomeindeed.-HauL.Lee(StanfordUniversity)Onlinesupply-chainmanagementwillstayoneofthehottestB2BtechnologyfieldsCompaniesareonlynowstartingtofigureouttheefficienciesandcostsavingstheycanrealizewithWebsystemsthatallowbuyersandsellerstoaccessthesameinformationonline.-JupiterResearch,Agenda,NewBusinessModelsinAction:SelectedCaseStudies,MakingitHappeninYourCompany,RedefiningSupplyChainstoDriveRevenueandProfits,Agenda,NewBusinessModelsinAction:SelectedCaseStudies,MakingitHappeninYourCompany,RedefiningSupplyChainstoDriveRevenueandProfits,Whatisabusinessmodel,anyway?Itsanorganizationscorelogicforcreatingvalue,WhataretheCompanysRevenueStreams?,OperatingRevenue,Whatdoesitsell?Towhom?Whydocustomerschoosethiscompanyoverothers?Howdoesthecompanycommunicatedistinctivelywithcustomers?Howdoesitpricedistinctively?,WhataretheCompanysvaluepropositions?,Non-OperatingRevenue,Howdoesitattractfinancialresources?Howdoesitmaximizethevalueofitsfinancialassets?,HowdoestheCompanymanageitsfinancesdistinctively?,Whatroledoesitplayinthevaluechain?Howisitscoststructuredistinctive?Whatdistinctiveresources,assets,andcapabilitiesdoesitleverage?Whatdistinctiverelationshipsdoesitenjoy?Howdoesitstructureandleadsitsorganizationtoachieveworldclassperformance?,Successfulbusinessmodelsaredrivenbytwokeyconceptsrevenueandprofitability,BusinessModelDesignConcepts,DesignConcepts,ThinkGlobal;ActLocal,CustomerRevenueandProfitability,CustomerServiceRequirements,ChannelAssetLeverage,CollaborativeValueCreation,Revenue/Profitability,Service,GlobalOptima,Customer(1),Customer(2),Customer(3),Focusingonrevenue/profitabilityorientedbusinessmodelshavesignificantimplicationsforsupplychaindesign,TraditionalSupplyChainDesigns,SupplyChainDesignInnovations,OveralllogisticscostsChannelservicelevelsDoityourselfFocusongettingstuffoutthedoor,Customer-levelrevenue/profitabilityCustomer-levelservicestandardsCollaboratewithsupplychainpartnersFocusoncreatingcustomervalue,Letslookatthetrackrecordfornewbusinessmodelsinsupplychain,especiallythe“neweconomy”entrants,EvolutionaryMastersconstantlyimprovingonprovendesignsNew,NewEntrantsweb-enabledentrantsseekinglong-termcompetitiveadvantageSpectacularFailuresthe$100millionspaceexplorers,OurEvolutionaryMastershavedeftlymanagedsupplychaincomplexityandrelationshipsoverthelastdecade,ManagingRelationshipsIntegratetechnologiestoextendintosuppliersandcustomersBuy,buildsupplieraccuracyincreasedby30%Ordersdeliveredinlessthanaweekincreasedby50%Work-in-progresslevelsreducedupto85%;Finishedgoodsinventorydropsbyafactorseveninsomemarkets,Defineandimplementsupplychainstrategies,businessmodelsandsystemsDevelopnewbuild-to-ordermanufacturing,supplier-managedinventoryandstreamlinedlogisticscapabilitiesCreateglobal,procurementorganizationImprovemanufacturingyieldsdramaticallyImplementSAPR/3systemtooptimizeandintegratesupplychainprocessesandtechnologies,Agenda,NewBusinessModelsinAction:SelectedCaseStudies,MakingitHappeninYourCompany,RedefiningSupplyChainstoDriveRevenueandProfits,HowdoIgetstarted?,SupplyChainInformationSharingPlan,ContinuousRelationshipManagement,Process/activityCollaboration,ChannelOwnership/Rationalization,eSynchStrategy,VirtuousCircleofeSynchronization,Asuccessfulbusinessmodelforsupplychainsynchronizationrequiresacold,hardlookatwhomandhowtodefinepartnershiprelations,Whom?,How?,StrategicPartners,KeyCapabilities,Revenue/ProfitOpportunities,OptimalSupplyChainStructure,NatureofRelationship,ProductLines,ProcessIntegration,SupplyVendors,CustomerPriorities,ChannelPriorities,Fivekeytrapstoavoidasyoudefineyournewsupplychainbusinessmodels,BeingdevotedtothewrongcustomersStuckwiththewrongsupplychainpartnersChokingonphysicalassetsCreatingfalsesynergyLookingtoofarahead,Pitfall#1:Beingdevotedtothewrongcustomers,Over50%ofcurrentsupplychaindesignscatertoleastprofitablecustomers,Issue,Top1020%ofcustomersgenerateover80%ofrevenueandprofitability,Reality,AdjustyoursupplychaintocatertothecustomersyouwantDefinelesscostly(web-based,distributor)solutionsforleastprofitablecustomersMakeallcustomerscontinuetofeeltheyaregettingagooddeal,ActionPlan,Pitfall#2:Stuckwiththewrongsupplychainpartners,Consumerspreferadirect-to-customerdistributionmodel,Long-termchannelpartnercontracts,relationships,ownershipcreatedifficultconflictscenarios,Dispassionatelyevaluatelong-termindustrytrendsIdentifyrightpartnersandrightrelationshipsthatmatchbusinessplansDefinewin-winexitstrategieswithloserpartners;executecautiousdealswithwinners,Issue,Reality,ActionPlan,Pitfall#3:Chokingonphysicalassets,Significant,duplicativesupplychainassetsclogexistingdistributionchannels,Collaboratingonoptimallevelsofwarehouses,inventoryandtransportwithsupplychainpartnerswillyieldsignificantbenefits,Identifyoptimaldistributionstrategiesforkey/non-keycustomersWorkwithpartnerstocollectivelylowercostsandimproverevenue/profitsthroughenhancedavailabilitySeriouslyconsideroutsourcingchannellogisticsoperations,Issue,Reality,ActionPlan,Pitfall#4:Creatingfalsesynergy,Addingnewsupplychaincapabilitiesinthehopesofcreatingadistinctivepositioncanbetrulytreacherous,Issue,Makesureyouknowifnewcapabilitiesreallycontributetovaluecreationforcustomers,Reality,Developproductdesign,manufacturing,logistics,sales,andserviceteamstocollectivelyassesswhatcustomerswantDefinerevenue/profitenhancingsynergisticofferingsPilot/implementinrealworldclientsituations,ActionPlan,Pitfall#5:Lookingtoofarahead,Misguidedproductanddeliverystrategiesfocusedonmarketshareratherthanprofitability,Issue,Consumersunderstandtheyneedtopayrealisticpricesandgetrationaldeliveries,Reality,EnsureproductstrategistsunderstandtotalcostofservicemodelsClearlydocumentcustomerexpectationsonserviceneeds;userevenuebasedmodelstoassessimpactsDonotfallvictimtodot-comfever,ActionPlan,Emergingsupplychainbusinessmodelswilldrivenewcompetitiveadvantagesbyenablingforward-thinkingcompaniesto
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