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Information and competition It changes industry structure and alter the rules of competition It...

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Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways to outperform their rivals It spawns whole new businesses, often from within a company’s existing operations ---Michael Porter and Victor Millar, HBR 1985
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Page 1: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Information and competition

• It changes industry structure and alter the rules of competition

• It creates competitive advantage by giving companies new ways to

outperform their rivals

• It spawns whole new businesses, often from within a company’s

existing operations

---Michael Porter and Victor Millar, HBR

1985

Page 2: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Determinants of industry attractiveness

• Threat of new entrants

• Threat of substitute products or services

• Bargaining power of suppliers

• Bargaining power of buyers

• Rivalry among existing competitors

Page 3: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

The concept of “value chain”

• Highlights the role of information technology in competition

• The value a company creates is measured by the amount buyers are willing to pay for a product or service.– Profitable: the value created >the cost of performing

the value activities

Page 4: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

• To gain competitive advantage (do either)

– Perform the value activities at lower costs

– Perform them in a way that lead to differentiation

and a premium price (more value)

Page 5: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Value activities

• Firm infrastructure• HRM• Technology development• Procurement• Inbound logistics• Operations• Outbound logistics• Marketing and sales• services

Page 6: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

The value system

• Supplier value chain (upstream value)

• Firm value chain (firm value)

• Channel value chain (downstream value)

• Buyer value chain (downstream value)

Page 7: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

How information changes the value chain?

• Each activity has two parts:– Physical component (all physical tasks required to

perform the activity)– Information-processing component ( steps required

to capture, manipulate, and channel the data needed to perform the activity)

– Which is moving faster?

Page 8: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Old supply chain model

• Buy raw materials

• Make finished products

• Move goods to market

• Sell through retailers

Page 9: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

New SC model (demand chain)

• Sell customized products

• Move to delivery based on consumption

• Make only those products for which there is known

demand

• Buy raw materials in line with accurate production

requirements

Page 10: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Key issues

• Do not wait for customers placing orders or forecast

– Information to sense the change in demand

– Information allows companies to respond to the

change

Page 11: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Information distortion in SC

• The Bullwhip effect

• The cause of the effect

• The Beer Game………

Page 12: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Importance of Information

• Forecasting is everything……..

• Who should do the forecast?

• Uncertainty is evil, …

• How to reduce it?

• Lead time, another devil

Page 13: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Information integration

• Everybody in the SC has his/her own objectives

– Usually conflicting to one another’s

• We need a SC that will balance all the members’ needs.

Page 14: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

The trade-offs

• Lot size-inventory

• Inventory-transportation

• Lead time-transportation

• Cost-customer service

Page 15: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

What about E-Commerce?

What is E-Commerce (or eCommerce)?

Where is it going next?

Page 16: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Order fulfillment

• Challenges:– Provide dealers (B2B) and consumers (B2C) to

purchase goods– Improve order fulfillment efficiency

• Benefits:– Reduce overhead for order processing– Reduction in turnaround time– Improved customer service

Page 17: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

eCommerce enabled SCM benefits

• Reduction in

– Supply costs

– Transaction/system costs

– Inventory costs

– Transportation costs

– Lead time

Page 18: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

eCommerce enabled SCM benefits

• Increase in:

– Responsiveness to customer and market demands

– Quality of service

– Ability to track customer behavior and buying

patterns

Page 19: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Components of SC information

• Demand planning

• Procurement/purchasing

• Capacity planning

• Inventory tracking

• Market information collection and analysis

• Transportation planning

Page 20: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Technology

• To respond to demand changes– QR– ECR– Flexible manufacturing systems (FMS)– EOS– CRP

Page 21: Information and competition It changes industry structure and alter the rules of competition It creates competitive advantage by giving companies new ways.

Technologies

• To sense the change in demand– POS– VMI– EDI– Information transparency– Centralized information collection


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