Article 1 What is the right supply chain for your product Never has so much technology and brainpower

r been applied to improving supply chain performance. New concepts as quick response, efficient consumer response, accurate response, mass customization, lean manufacturing and agile manufacturing offer models for applying the new technology. Nevertheless, the performance of many supply chains has never been worse. Poor coordination, excess in goods and shortage of others make it difficult to predict demand. Because of the fact that managers are lacking a framework, new technologies havent improved the chains yet. The first step in devising an effective supply chain strategy is to consider the nature of the demand of products: either functional or innovative. Demand PLC Contribution margin Product variety Average margin of error in forecast at the time production is committed Average stock-out rate Average forced end-ofseason marktdown as percentage of full price Leadtime required for made-to-order products Functional Predictable More than 2 years 5% to 20% Low (10 to 20 variants) 10% 1% to 2% 0% 6 months to 1 year Innovative Unpredictable 3 months to 1 year 20% to 60% High (millions of variants) 40% to 100% 10% to 40% 10% to 25% 1 day to 2 weeks

Functional products satisfy basic needs, which dont change much over time. They have a stable, predictable demand and long life cycles. Their stability invites competitors, which often leads to low profit margins. Although innovative products can enable a company to achieve higher profit margins, the very newness of innovative products makes demand for them unpredictable. Their life cycle is short and because of this, companies are forced to introduce a steady stream of newer innovations. With their high profit margins and fluctuating demand, innovative products require a fundamentally different supply chain than functional products. A supply chain has two functions: physical and market mediation. The physical function is readily apparent and includes converting raw materials into parts, components and eventually finished goods and transporting all of them from one point in the supply chain to the next. Less visible is the market mediation function, whose purpose is ensuring that the variety of products reaching the marketplace matches what customers want. Each of the two functions incurs distinct costs. Physical costs are production costs etc. and market mediation costs arise when supply exceeds demand.

The predictable demand of functional products makes market mediation easy, because a nearly perfect match between supply and demand can be achieved. The uncertain market reaction to innovations increases the risk of shortages or excess. High profit margins and the importance of early sales in establishing markets share for new products increase the cost of shortage. Market mediation costs predominate these products, and should be the managers primary focus. Physically efficient process Supply predictable demand efficiently at the lowest possible cost Maintain high average utilization rate Generate high turns and minimize inventory throughout the chain Shorten leadtime as long as it doesnt increase costs Select primarily for costs and quality Maximize performance and minimize costs Market-responsiveness process Respond quickly to unpredictable demand in order to minimize stockouts, forced markdowns and obsolete inventory Deploy excess buffer capacity Deploy significant buffer stocks of parts or finished goods Invest aggressively in ways to reduce lead times Select primarily for speed, flexibility and quality Use modular design in order to postpone product differentiation for as long as possible

Primary purpose

Manufacturing focus Inventory strategy Lead-time focus Approach to choosing suppliers Product-design strategy

Although the distinctions between functional and innovative and between physical and efficiency and market responsiveness to the market seem obvious once stated, its a great issue for companies, because of the fact that products that are physically the same can be either functional or innovative. Its easy for a company, through its product strategy, to gravitate from the functional to innovative sphere without realizing anything has changed. For companies to be sure that theyre taking the right approach, they first must determine whether their products are functional or innovative. The next step is for managers to decide whether their company's supply chain is physically efficient or market-responsive. Having determined the nature of their products and their supply chain priorities, managers can employ the following matrix: Efficient supply chain Responsive supply chain Functional products Match Mismatch Innovative products Mismatch Match

By using the matrix to plot the nature of the demand chain and the priority of the supply chain, managers can discover whether the process is well matched to the product type

Most companies that introduce functional products realize that they need efficient chains to supply them. Often, companies find themselves in upper hand right cell, which doesnt make sense: for any company with innovative products, the rewards from investments in improving supply-chain responsiveness are usually much greater than the rewards from investments in improving the chains efficiency. The rate of new-product introductions has skyrocketed in many industries. As a result, many companies have turned or tried to turn traditionally functional products into innovative products, but theyve continued to focus on physically efficiency in the processes for supplying those product. This leads to many variants of a product, which the customers mostly dont buy. A company can overcome this schizophrenia by moving to the left of the matrix or moving down, depending on whether the product is sufficiently innovative to generate enough additional profit to cover the costs. A sure sign that a company needs to move to the left is if it has a product line characterized by frequent introductions of new offerings, great variety and low profit margins. In other cases, when a company has an unresponsive supply chain for innovative products, the solution is to make the product functional. Cost reduction is a familiar territory, and most companies have been at it for years. Nevertheless, there are some new twists to this old game. As companies have aggressively pursued cost cutting over the years, theyve begun to reach the point of diminishing returns within their organizations own boundaries and now believe that better coordination across corporate boundaries presents the greatest opportunities. The overuse of price promotions may have a negative impact on physical efficiency. With price promotions, retailers respond by stocking up, for as much as a years supply, but forgot that they have to pay for the carry. Also the company detects a huge increase, having to work in overtime to meet demand. This costs money for both suppliers as the company. Uncertainty about demand is intrinsic to innovative products. As a result, figuring out how to cope with it is the primary challenge in creating a responsive supply chain. The first step is to accept the uncertainty. The fact is that risk and return are linked, the higher the risk, the higher the profit margins. Once a company has accepted the uncertainty it can employ three strategies: 1) Reduce it: finding sources of new data 2) Avoid it: cutting lead times and increasing supply chains flexibility 3) Hedge it: implementing buffers of inventory or excess in capacity. A new movement called mass customization is not without challenge. Building the ability to customize a large volume of products and deliver them close to mass-production prices is a challenging a hard thing to do.

Article 2 The relationship between Distribution and Market Share The relationship between distribution and market share has increasingly become a matter of concern for consumer goods marketers. Competition for shelf space is growing and power is shifting from marketers to retailers. A model of distribution and share can help explain why market leaders enjoy a certain leverage when compared to small share brands, and eventually may offer a means for measuring and optimizing the mix of push and pull marketing efforts. Three simple concepts underlie the complex pattern: 1) distribution defines the consumer choice set, 2) depending on the product category and products stocked, consumers are willing to compromise their choice, 3) consumer demand affects distribution. Traditionally push & pull have designated classifications of marketing strategies. However, because it is the distinction between consumer and trade behavior that separates them, its found useful to model push & pull as effects of marketing mix decisions. One implication of this view is that a single marketing mix element can have both push and pull effects. Another is that distribution, although perhaps constrained by policy, is not an element of the marketing mix Consumer behavior. Consumers have unmodified preferences for brands that may be modified by in-store attractiveness, determined by such factors as shelf space, the number of sizes and flavors stocked. If a preferred brand is not in distribution, consumers who resist compromising may in the short term either buys another brand in the same purchase amount. Trade behavior. Manufacturer support of the trade combines with consumer pull to affect retail choice of brands to stock and their allocation of merchandising resources. Although it is possible to obtain initial distribution for products with little pull, rarely it can be maintained Pi: Unmodified preference. The proportion of category buyers (weighted by average purchase amount) who would choose brand i if all brands were stocked and had exactly the same in-store attractiveness i: In-store attractiveness. The effect of in-store merchandising variables on unmodified preferences as determined by two components: Si (relative merchandising variables) and i (the elasticity of in-store attractiveness) PCVi: the weighted fraction of stores stocking brand i. i: Resistance to compromise. A parameter indicating the depth of brand loyalty. The effect of i on availability can be illustrated by considering one of its manifestations.

If all brands are available and enjoy equal in-store attractiveness, market share is captured by Pi. However, brands obtain different levels of distribution and in-store attractiveness, and these effects need to be considered in a model of market share and distribution. Compromised and uncompromised demand are the main constructs embedded in the Push-Pull model. The disaggregation of total demand into uncompromised and compromised components is a logical consequence of recognizing limitations on the number of brands stocked. The total market share is represented as the sum of two components: somi = somui + somci somui: brand i's share due to its uncompromised demand based on Pi, fi, and availability, somci: brand i's share due to compromised demand from buyers whose preferred brand is not available. Uncompromised Demand formulation: somui = iPiPCVAi Compromised Demand formulation:

The allocation of compromised demand in a given store class depends on the set of brands presented in that store, because to benefit from the unavailability of a competitor, brand i must be present when the competitor is not. The store-class dependant stocking rule (SDR): At one extreme, if all stores use the same decision heuristic, have the same incentives to stock a given brand, and have the same understanding of these incentives, the purely deterministic SDR applies. Under this rule, stores are divided into classes based on the number of brands stocked, the second most attractive in all stores with 2 or more brands. One SDR characteristic that may be unrealistic in some markets is the implication that at least one brand has a PCV of 1.0. In addition, more or less random variations from the SDR are to be expected due to out-of-stocks, as well as systematic deviations, resulting from imperfectly segmented consumer markets and heterogeneous retail outlets. When the definition of product category (the set of brand competing for consumer preference, and for retail distribution and support) it is unclear, the SDR is likely to be problematic. The store-class independent stocking rule (SIR): If a brands chance of being stocked is proportional to its relative PCV, independent of store class, the following formulation for brand is expected share of compromised demand would apply:

An important difference between the SIR and SDR is that, under SIR, stocking is probabilistic, not deterministic. Whether the SIR or SDR rules are more appropriate will likely depend on both the specific product category and the retail trade structure. Neither may apply in the pure form and some mix of both might need to be devised. Proposition 1: Over the short term, the space allocated to a product category (within and across stores) is relatively fixed, and not all brands are distributed in all stores. In other words, gains PCVi or i for brand i will result in loss of and/or PCV by some brands Recognizes that retailers are constrained by limited shelf space. For established products, the space allotted to a given category, and thus total distribution for the brands defining the category, is relatively fixed Proposition 2: Given equal trade support, or greater trade support for larger stores, brands with the greatest pull will also have the greatest PCVi and i Accounts for rational allocation of space among the brands competing for distribution and in-store display, and reflects the feedback effects depicted. While specific causal equations relating to PCVi, i, Pi and i could be postulated, they are not necessary for model explication. The push-pull model shows that relative PCV is an important determinant of participation in compromised demand, but absolute PCV and determine uncompromised demand. Depending on the applicable stocking rule, , and collinearity of PCV, , and P, returns to either compromised demand or uncompromised demand can be either increasing or decreasing. Proposition 1, that gains in one brand's distribution come at the expense of another's, is sufficient to guarantee that the rate of change in somi per PCV point strictly increases with PCVi, provided that (1) the SDR holds, (2) = 1.0, and (3) neither PCVi nor i are negatively related to Pi. For convenience goods in categories where the SDR is a good description of trade stocking decisions, increasing returns of market share to PCV can be expected over all ranges of PCV. With either the SIR or SDR in effect, and regardless of a, the increase in share for a given increase in PCV will be greater when Proposition 2 holds (i.e. , PCV, and P covary positively). The incremental share gains attributable to increases in f or P are not as great, however, when resistance compromise is generally low.

Positive covariance of , PCV, and P is expected for most convenience goods because of trade tendencies to stock and merchandise brands with the greatest pull when trade support is equal. Farris and Reibstein (1981) argue that ignoring feedback effects of P on and PCV biases results in certain highly controlled market experiments. Propositions 1 and 2 together are not sufficient conditions to guarantee that somi increases at an increasing rate with respect to PCV, under either the SDR or the SIR if there is some resistance to compromise. High resistance to compromise means that relatively high levels of availability can be achieved with low levels of PCV and returns of uncompromised demand to PCV will diminish rapidly. Although share of compromised demand does not depend on a, the total amount of compromised demand will decrease if other brands have high resistance to compromise. Particularly for brands with low PCV, creating resistance to compromise is important. Couponing is probably one way to increase both a and P in the short term, and may pressure retailers to stock certain items or brands. Whether these temporary increases in a and P cause longer-term increases in PCV is one of several interesting questions for further work

Article 3 Business Marketing: Understand what Customers value Remarkably few suppliers are able to answer: the question what are your products and service actually worth to customers? Customers increasingly look to purchasing as a way to increase profits and therefore pressure suppliers to reduce prices. To persuade customers to focus on total costs rather than simply on acquisition price, a supplier must have an accurate understanding of what its customer value. Customer-value models are based on assessments of the cost and benefits of a given market offering in a particular customer application. They are not easy to develop, but the experiences of suppliers that have built and used them successfully suggest several guidelines that we believe will be useful to any company attempting to define and measure value for its customers. Value in business markets is the worth in monetary terms of technical, economical, social and service benefits that customers receive in exchange for a market offering. The essence can be captured in the following equation: (Valuea - Priceb) > (Valueb - Priceb). The difference between value and prices equals the customers incentive to buy. Field value assessments (Value-in-Use) is the most commonly used customers value model and call for suppliers to gather data about their customers firsthand where possible. The most difficult model to build is the first one. The company has to put together the right kind of value team. Selecting the right market segment is the second step. Its a good idea to start in a segment in which the supplier has close, collaborative relationships. Third, a comprehensive list of value elements must be generated. These elements are anything that affects the costs and benefits of the offering. By identifying as many elements as possible, the team will be able to gauge more accurately the differences in functionality and performance its offering provides relative to the next best alternative. Often, the value research team will have to make trade-offs between relying on a customers perception of what all the relevant elements are and actually observing firsthand the ways in which the suppliers offering affects the customer. With the comprehensive list available, data has to be obtained for each element. The value team also needs to be creative in finding other sources of information. (Fourth step) The ease with which the team can establish monetary estimates for its value elements will vary. The value of social benefits is much harder to express in monetary terms, so many company first provide a quantative data analyze, before they do a qualitative analysis about the social benefits Every supplier will find that some assumptions need to be made in order to complete an analysis. Its important to be explicit about these assumptions, because of the fact that if the customer doesnt know how or why the team assigned a certain value to an element, the credibility of the supplier will be damaged

Fifth, the model has to be validated and the variances in the estimates have to be understood. After building the model, the supplier should validate it by conducting additional assessments with other customers in the market segment. Hereby, the supplier will also learn how the value its offerings provide varies across kinds of customers. Looking at all the data together, the supplier can then determine which descriptors have more impact than others on the value that customers receive. Suppliers can not only use value models to inform and guide their own decision making, but also to create persuasive sales tools. Value assessment can also become a service that suppliers offer as part of a consulting selling approach Suppliers can use their understanding of value to strengthen performance and create competitive advantage in several ways. Suppliers can capitalize on the inevitable variation in customers requirements within market segments and increase their profitability by providing flexible market offers. Naked solutions consist of just those product and service elements that all customers within a market value. These solutions can be wrapped up with option-specific products that some, but not all customers value. Most market research that is conducted to provide an understanding of customers requirements and preferences does not address the question: If we do X, what is it worth to the customers. When a supplier is developing new offering in response to customers requests or demand, it can use value to determine what improvements are worthwhile and which ones have the highest priority. Knowledge of how their market offerings specifically deliver value to customers enables suppliers to craft persuasive value propositions. At the core of all successful working relationships are two essential characteristics: trust & commitment. To demonstrate their trustworthiness and commitment to customers, suppliers periodically provide evidence of their accomplishments. Understanding value in business markets and doing business based on value delivered gives suppliers the means to get an equitable return for their efforts. The essence of customer value management is to deliver superior value and get an equitable return for it, both of which depend on value assessment

Article 4 Customer Value; propositions in Business Markets Customer value proposition has become one of the most widely used terms in business markets in recent years. Some managers view customer value proposition as a form of spin their marketing departments develop for advertising and promotional copy. This shortsighted view neglects the very real contribution of value propositions to superior business performance Once companies become disciplined about understanding customers, they can make smarter choices about where to allocate scarce company resources in developing new offerings. One striking discovery was the fact that it is exceptionally difficult to find examples of value proposition that resonate with customers. The term value proposition can be classified into three types: All benefits Favorable Points Resonating focus of difference Consists of All benefits All favorable points The 1 or 2 points of difference customers of difference in a whose improvement will deliver receive from a market offering has the greatest value to the market offering relative to the next customer for the foreseeable best alternative future Answer the Why should our Why should our What is the most worthwhile for customer firm purchase firm purchase your our firm to keep in mind about question your offering offering in stead of your offering your competitors Requires Knowledge of Knowledge of own Knowledge of how own market own market market offering and offering delivers superior value offering next best alternative to customers, compared with next best alternative Has the Benefit Value presumption Requires customer value potential assertion research pitfall All benefits: Most managers simply list all benefits they believe that their offering might deliver to target customers. A great pitfall is the benefit assertion. Managers may claim advantages for features that actually provide no benefit to target customers. Another pitfall is that many of the benefits may be point of parity with those of the next best alternative, diluting the effect of the few genuine points of difference. Favorable points of difference: Explicitly recognizes that the customer has an alternative. Why should a firm purchase their offering instead of someone elses. This question focuses suppliers on differentiating their offerings from the next best alternative, a process that requires detailed knowledge of that alternative. Knowing that an element of an offering is a point of difference does not convey the value of this difference to the target customers.

Without a detailed understanding of the customers requirements, suppliers may stress points of differences that deliver relatively little value to customers. This can lead to value presumption, a great pitfall within this category. Value presumption means assuming that favorable points of difference must be valuable for the customer. Resonating focus: Although the favorable points of difference value proposition is preferable to an all benefits proposition for companies crafting a consumer value proposition, the resonating focus value proposition should be the gold standard. Managers who make purchase decisions have major, ever-increasing levels of responsibility and often are pressed by time. Suppliers can provide such a customer value proposition by making their offerings superior on the few elements that matter most to target customers, demonstrating and documentating the value of this superior performance. It focuses on the one or two points of difference that deliver, and whose improvement will continue to deliver, the greatest value to target customers. It also may contain a point of parity. This occurs either when the point of parity is required for target customers even to consider the suppliers offering or when a supplier wants to counter customers mistaken perceptions that a particular value element is a point of difference in favor of a competitors offering Value word equations enable suppliers to show points of difference and points of contention relative to the next best alternative, so that customer managers can easily grasp them and find them persuasive. Prospective customers must see convincingly the cost savings or added value they can expect from using the suppliers offering instead of the next best alternative. Value case histories document the cost savings or added value that reference customers have actually received from their use of the suppliers market offering Demonstrating superior value is necessary, but this is no longer enough for a firm to be considered a best-practice company. Suppliers must also document the cost savings and incremental profits (from additional revenue generated) their offerings deliver to the companies that have purchased them. Best-practice suppliers make sure their people know how to identify what the next value propositions ought to be.

Article 5 A General model for understanding Organizational Buying Behavior A buyer behavior model can help the marketer to analyze available information about the market and to identify the need for additional information. It can help to specify targets for marketing effort, the kinds of information needed by various purchasing decision makers, and the criteria that they will use to make these decisions The model presented is a general model, which can be applied to all organizational buying and suffers all the weaknesses of general models. However, generality offers a compensating set of benefits. The model presents a comprehensive view of organizational buying that enables to evaluate the relevance of specific variables and thereby permits greater insight into the basic processes of industrial buying behavior. It identifies the classes of variables that must be examined. Traditional views of organizational buying have lacked comprehensiveness. The literature of economics and marketing has emphasized variables related to the buying task itself and has emphasized rational economic factors. Other traditional views err in the opposite direction, emphasizing variables such as emotion, personal goals and internal politics that are involved in the buying process, but not related to the goals of the buying task. These views have contributed to an understanding of the buying process but none of them is complete, because they leave out task or non-task variables. The fundamental assertion of the model is that organizational buying is a decisionmaking process carried out by individuals, in interaction with other people, in the context of a formal organization. The four classes of determining organizational buying are: Task Individual Desire to obtain lowest price Social Meetings to set specifications Organizational Policy regarding local supplier preference Environmental Anticipated changes in prices Non-task Personal values and needs Informal, off-the-job interactions Methods of personnel evaluation Political climate in an election year

Within each class, there are two broad categories: those directly related to the buying problem (task) and those that extend beyond the buying problem (non-task). Organizational buying behavior is a complex process (rather than a single, instantaneous act) and involves many persons, multiple goals, and potentially conflicting decision criteria. It often takes place over an extended period of time, requires information from many sources, and encompasses many inter-organizational relationships. The organizational buying process is a form of problem solving, and a buying situation is created when someone in the organization perceives a problem that can potentially be solved through some buying action.

The buying center includes all members of the organization who are involved in that process. Members of the buying center are motivated by a complex interaction of individual and organizational goals. Their relationships with one another involve all the complexities of interpersonal interactions. Finally, the entire organization is embedded in a set of environmental influences including economic, technological, physical, political, legal, and cultural forces.

Environmental influences: Environmental influences are subtle and pervasive as well as difficult to identify and to measure. They influence the buying process by providing information as well as constraints and opportunities. Environmental influences include physical technological, economic, political, legal, and cultural factors. The nature of these institutional forms will vary significantly from one country to another, and such differences are critical to the planning of multinational marketing strategies.

The marketing strategist, whose customers are organizations, must carefully appraise each set of environmental factors and identify and analyze the institutions that exert those influences in each of the market segments served. The necessity of analyzing institutional forms is most readily apparent when markets are multinational in scope and require specific consideration of government policies and trade union influences Organizational Influences: Organizational factors cause individual decision makers to act differently than they would if they were functioning alone or in a different organization. This class of variables is primarily task-related. For understanding the influence of the formal organization on the buying process, Leavitt's classification of variables is most helpful. According to Leavitt's scheme, organizations are multivariate systems composed of four sets of interacting variables: Tasks: the work to be performed in accomplishing the objectives of the organization. Structure: subsystems of communication, authority, status, rewards, and work flow. Technology: problem-solving inventions used by the firm including plant and equipment and programs for organizing and managing work. People: the actors in the system. Buying tasks are a subset of organizational tasks and goals that evolves from the definition of a buying situation. Buying decision-making process: 1) Identification of need, 2) establishing of specifications, 3) identification of alternatives, 4) evaluation of alternatives, 5) selection of suppliers. Buyer tasks can be defined according to 4 dimensions: 1) The organizational purpose, 2) The nature of demand, 3) The extend of programming, 4) The degree of decentralization. Each of these four dimensions influences the nature of the organizational buying process and must be considered in appraising market opportunities. At each of the five stages of the decision process, different members of the buying center may be involved, different decision criteria are employed, and different information sources may become more or less relevant Organizational structure: The communication subsystem performs four essential functions: (1) Information; (2) command and instruction; (3) influence and persuasion; and (4) integration. The authority subsystem defines the power of organizational actors to judge, command, or otherwise act to influence the behavior of others along both task and non-task dimensions. The status system is reflected in the organization chart and defines the hierarchical structure of the formal organization. The rewards system defines the payoffs to the individual decision maker. It is intimately related to the authority system which determines the responsibilities of organizational

actors for evaluating other individuals. Every buying organization develops task-related procedures for managing the work flow of paperwork, samples, and other items involved in the buying decision process. Buying Technology: Technology influences both what is bought and the nature of the organizational buying process itself. More obviously, technology defines the plant and equipment of the organization, and these, in turn, place significant constraints upon the alternative buying actions available to the organization Buying Center The buying center is a subset of the organizational actors, the last of the four sets of variables in the Leavitt schem. This interaction leads to unique buying behavior in each customer organization. The marketer's problem is to define the locus of buying responsibility within the customer organization, to define the composition of the buying center, and to understand the structure of roles and authority within the buying center Social (Interpersonal) Influences Within the organization as a whole only a subset of organizational actors is actually involved in a buying situation. The buying center includes five roles: Users: those members of the organization who use the purchased products and services. Buyers: those with formal responsibility and authority for contracting with suppliers. Influencers: those who influence the decision process directly or indirectly by providing information and criteria for evaluating alternative buying actions. Deciders: those with authority to choose among alternative buying actions. Gatekeepers: those who control the flow of information/material into the buying center. To understand interpersonal interaction within the buying center, it is useful to consider three aspects of role performance: (1) Role expectations, (2) role behavior and (3) role relationships Together, these three variables define the individual's role set. In analyzing the functioning of the buying center, it helps to focus attention on the buyer role, primarily because a member of the purchasing department is most often the marketer's primary contact point with the organization. Buyers who are ambitious and wish to extend the scope of their influence will adopt certain tactics and engage in bargaining activities in an attempt to become more influential at earlier stages of the buying process. The individual is at the center of the buying process, operating within the buying center that is in turn bounded by the formal organization which is likewise embedded in the influences of the broader environment. It is the specific individual who is the target for marketing effort, not the abstract organization. The organizational buyer's personality, perceived role set, motivation, cognition, and learning are the basic psychological processes which affect his response to the buying situation and marketing stimuli provided by potential vendors