Complexity in the supply chain and assortment in distribution – reason for auto dealer woes ?

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A Chrysler dealer providing testimony to the Senate Committee  reminded me what complexity does to not only the upstream supply chain but really makes things difficult to manage in the downstream distribution channel.Supply chain complexity (too many suppliers, too many different parts, too many color options) is a nightmare for supply chain managers and supply managers spend a lot of efffort in trying to consolidate supplies and suppliers.

On the customer side of a business though, marketing managers love offering something to every segment of the market. All the offerings on the market side are called "assortment." Businesses start  a new product line based on good market prospects. The distribution side then builds up with more dealers,more marketing and service support,service training,aftermarket spare parts and so on. Unfortunately, there is no manager standing in the showroom end and looking backward at all this "complexity" – at the showroom managers are happily showing the assortment to prospects !

Closing product lines or product deletion is a complex activity, that does not bring glory to the marketing manager. Consequently, it does'nt get done till there is a crisis as currently, as  in US Auto.

MBA lessons from GM Bankruptcy

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MBA classrooms across the world will reverberate with lessons from the GM Bankruptcy for future MBA's. Strangely though,since MBA's starting working for GM  in the 1970's the lessons were already there!  For example, MBA's  in the seventies knew that moving with changing customer needs was  the simplest way to win. But fuel efficiency and smaller cars was a "no-no" for Detroit. Important stakeholders like the Unions clung on to expensive health and retirement as the sun set on US auto as the world literally turned and changed.

As an industry old timer told me, it was plain arrogance, complacency and the unwillingness of managers to speak up,in time. It was easier to deride the Japanese automakers ( ha imports) rather than emulate them, at least in part.

On the labor front the UAW is reduced to   a shadow of its old belligerent self.  This probably gives no pleasure to retired auto managers who were given such a hard time when they wanted to change things when there still was time.

This blog has been talking about the US auto industry for some years but academics have been writing about key problems for decades. US Auto is forever changed – the question is -will managers really learn in other industries?

Procurement Reform bill becomes law and Memorial Day

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Today is Memorial Day  and it is significant that President Obama and Congress strove to get the Procurement Reform Act ( officially  the Weapon Systems Acquisition Reform Act of 2009 ) passed before Memorial Day.

The defense industry and supply chain is remarkably "production" oriented. The focus is passively on what the Government  wants rather than proactively understanding the changing needs of  combat in different theaters. To quote:

 “By and large the government gets what it wants, when it wants it,
for the price it’s wiling to     pay,” said Alan Chvotkin, executive vice
president and counsel at the Professional Services  Council, who spoke
this week at a panel discussion about the federal acquisition
workforce. However, he said the procurement system still has room for
improvements.

At the same discussion, Steven Schooner, an associate law professor
and co-director of the Government Procurement Law Program at George
Washington University, pointed out the Obama administration views
contractors as lining their pockets at the taxpayers’ expense. Schooner
said the president, Congress and the news media can’t treat contractors
as pariahs because the government can’t operate without contractors’
support."

The intense public scrutiny of defense contracting results in contractors being treated as pariahs,as Schooner says. Consequently, mindless and irrelevant projects take a life of their own while combat troops have changing needs on the ground.Choosing and changing projects quickly is a top requirement in today's globalized world.

Let us hope, that efficiency and communication in the supply chain, right to the brave soldier whether in Afghanistan or South Korea,improves with the Procurement Reform Bill.

Turbulent times make B2B and Supply Managers more important in organizations

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Think about it – if things are going smoothly in the environment like the economy is humming along, there is general peace where you conduct business and the weather is predictable you have steady demand for your products and services. On the supply side you can put together long term contracts, try Just in Time (JIT) and suppliers can drive down costs and bring steady improvements to quality. Generally, the sales forecast is working well and the sales people are making good commissions. Your internal operations are your only concern when you craft strategy.

But in turbulent times,such as these, both boundaries of the firm face uncertainties. On the supply side long term contracts are a "no-no" and on the demand side uncertainty in quantities and payment has your marketing severely challenged. You find that your boundary spanning managers (Supply chain managers and Marketing managers)  are the only ones who have been looking up (the supply managers) and down (your marketing and sales managers) your value chain. Suddenly, managers at both ends of your firm become much more important.

This was brought to sharp focus at the Keynote Session  of the 94th ISM conference,with ISM Chair Shelley Stewart where Christina De Luca   started off with a call to action by all supply managers as their work was "not good enough" for the times. Her somber example of the oil industry was powerful because while price dropped to half demand also dropped significantly, putting all calculations in jeopardy. The other panelists, including Lisa Martin  offered valuable tips to deal with this huge turbulence. The bottom line was that Supply Chain Managers suddenly find themselves center stage in their organizations and its a great time to step up.

The Stimulus and Procurement Reform

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Ever since the stimulus package was announced I have been asking friends in the supply chain community as to whether the stimulus package will create new jobs in supply chain and procurement. Logically if you are sourcing stuff, you need managers to both buy (supply chain) and sell (B2B).There were two opinions on this – one was that you can always get contractors to do more if you have a rate contract already set-up. The other opinion was that many local governments will ask for fresh bids . In fact, asking for fresh bids  could really cut down supplier quotes by as much as 45% , given the slow economy. This could in turn free up money for additional projects.

Yesterday, President Obama talked about bi-partisan  procurement reform primarily for the Department of Defense. Any reform means more work for supply chain and procurement management professionals and more jobs for for both B2B marketers and supply managers. Good news as far as this blog is concerned !

Managing outsourcing – in tough times upcoming ISM Workshop

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} catch(err) {}I am scheduled to speak at the 94th ISM conference on Monday, May 4 and the brief of the talk entitled ” You have a  Great Global Outsourcing Contract- Now What? – Managing Transition Issues in Global Outsourcing” posted on the Institute for Supply Management website  is here.

As markets slow down cost cutting through outsourcing continues to be a priority in organizations. Both outsourcers and providers need to do a better job in managing outsourcing transitions so that innovation is accelerated and everyone emerges stronger from the recession.

I am also planning to add some ideas to my presentation about dealing with existing contracts so that innovation is “retrofitted” to existing relationships. Crucial for these tough times.

“Animal Spirits” by Robert Shiller- time to look across disciplines

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 "Animal Spirits"  is a new book by Robert Shiller and George Akerlof. It's sort of interesting that Shiller  an Economist, refers to Psychology pretty often in this video from McKinsey http://www.mckinseyquarterly.com/App_Themes/v2.0/swf/external_player.swfand also throws in Sociology and Political Science in the context of the current "fear" among both businesses and customers. It's sort of interesting that Schiller does not talk about business disciplines at all in the video but I hope does talk about in the book. For example ,Marketing ( an academic discipline that explicitly recognizes economics and psychology as "mother" disciplines) , Management (which draws a great deal from Sociology and informs Operations that studies Supply Chain) and Innovation (which is a lot about "Spirit" the human kind!). The fact is that Economics is a dominant discipline and has an annual Nobel Prize while no other liberal arts or business disipline does. Globally economists have powerful influence  on public policy. And sadly, Econometric models without behavioral variables are unable to explain the current fear in the market as Schiller says. Time to look across disciplines !

New Business Model for Music Industry needs new ways of capturing value

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First record stores were closing in the US as everyone wanted to download music.The record stores were affected as distribution moved online with iTunes selling millions of downloads. The music recording industry was kind of okay with this as they still had a method of capturing value or monetizing their efforts of promoting artists and marketing music. But that was in the US.

It turns out that in China most music ( over 99%) is simply acquired free ,violating copyright laws and disabling the music industry from capturing value. Google in China is offering free music downloads and hoping that AdWords will help capture some tiny piece of value through ad revenues. This ad revenue will be shared by the music industry and Google. In other words, music companies have given up on trying to implement the US business model in China.

Musicians and artists I suppose love all of this as their music gets exposure and anyway they did not make big money in the traditional model where record companies,distributors and retailers made most of the margins and customers had to pay. This industry is sort of different because the musicians work primarily on the premise of "live to work" rather than "work to live" in sectors like banking and auto which seems to be having trouble in recent times.In fact,bankers are leaving banking (they don't love banking ?) given the cut back on bonuses.

The restructuring of the music industry in China  should spread to the US in due course and dis-intermediation of the distribution channels and record companies will create interesting opportunities. You can be sure that musicians and artists will proliferate and new ways of "capturing" value will have to be built.

Publications

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 Here are some journal publications by Dr. Subroto Roy and his co-authors.

  • “It’s Time to Include Suppliers in the Product Innovation Charter (PIC).” In Innovation and Supply Chain Management, pp. 123-140. Springer, Cham, 2018. Abstract. Full Text.
  • “Control Systems in Outsourcing New Product Development: Role of Globalization and Digitizability,” European Journal of Innovation Management,Volume 20, Issue 2,pp.312-328. (with K. Sivakumar).  Abstract.
  • “Do Sympathy Biases Induce Charitable Giving? The Effects of Advertising Content,” Marketing Science. 35, Issue 6,849-869. (with K.Sudhir and Mathew Cherian) Abstract.Full Text.Press Release.
  • “Which controls are better for service outsourcing? Integrating service-dominant logic and service characteristics,” Academy of Marketing Science Review, Vol.4, Issue 3-4, 45-62.(with K.Sivakumar).Abstract.
  • “Global Outsourcing Relationships and Innovation: A Conceptual Framework and Research Propositions,” Journal of Product Innovation Management 29(4), 513–530.(with K.Sivakumar).Abstract.

  •  “Managing Intellectual Property in Global Outsourcing for Innovation Generation” in  Journal of Product innovation Management. (with K.Sivakumar ).Vol 28, No.1.Pages 48-62,January 2011.Download.
  • “So You Already Have a Survey Database?  A Seven-Step Methodology for Theory Building from Survey Databases:  An Illustration from Incremental Innovation Generation in Buyer-Seller Relationships,” Journal of Supply Chain Management, October 2010, Vol 46, Issue 4, Pages 12-24. Download,
  • “Global innovation generation and financial performance in business-to-business relationships: the case of cross-border alliances in the pharmaceutical industry,” Journal of Academy of Marketing Science, Available October 16, 2010. (with K. Sivakumar, JainJun Zhu,Sangphet Hanvanich). Download.

  •  “Innovation Generation in Upstream and Downstream Business Relationships,” Journal of Business Research. (with K. Sivakumar), December 2010. Volume 63, Issue 12, Pages 1261-1372 .Download.   
  •  “ The Role of Technology Adoption in the Globalization of Business Buying Behavior: A Conceptual Model and Research Propositions”, Journal of Business and Industrial Marketing, Volume 22, No. 4,Pages 220-227,2007. (With K. Sivakumar)  Download.   
  •  “ Internet Diffusion as a two-stage transition- Converting Internet Non-Users to Internet Users and to online buyers,” International Journal of Marketing Research (IJMR); Volume 48, Issue 3, 2006.(with Sanjoy Ghose)  Download.
  • “International Long Term Business Relationship, communities of practice and innovation-A Longitudinal Case Study of NDDB, India and Tetra Pak, Sweden” International Journal of Technology Transfer and Commercialization 2004, 3(4), 454-469. (with Ian F. Wilkinson)   Download.
  • ” Knowledge redundancy in supply chains: a framework”. Supply Chain Management, 9(3/4), 241. (with K.Sivakumar) Download.
  •  “Innovation Generation in Supply Chain Relationships: A Conceptual Model and Research Propositions”. Academy of Marketing Science. Journal, 32(1), 61-79, 2004. ( With K. Sivakumar and Ian Wilkinson)   Download.
  • “OK you are an approved supplier but you still don’t get orders’ understanding the case of the P-Card, ” Industrial Marketing Management. Vol 32 Pages 605-613. 2003.Download.
  • “Gift Buying Behavior Amidst the looming recession: A Case study of Singapore during Asian Economic Crisis” in the Journal of International Business and Entrepreneurship. Vol. 7. No. 1(July), Pages 25-38.1999 (with See Khay Soh)

 

Small Business, Google AdWords and B2B Marketing in a recession

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If you think about it, most jobs,innovation and entrepreneurship is in the small sector. Strangely textbooks and academic work in  B2B,Supply Chain and Innovation focuses on large organizations- perhaps because large organizations are potential employers for students who read textbooks  and have been traditionally employed by large organizations. The current economic situation has many major organizations in disarray with employment being uncertain for existing managers and on hold for fresh recruits.

Students at my B2B (Organizational) Marketing class at University of New Haven are participating in the Google Online Marketing Challenge (GOMCHA). They have a presentation scheduled on April 8, Wednesday and the University announcement is here.

The students have been doing a great job and have focused on creating AdWords for B2B marketing in a recession for the seven area businesses. Google AdWords puts power in the hands of a small business who can start with a very small budget- unlike other traditional advertising. The GOMCHA itself is supported by Google who have given $200 of ad credit to each student team.Students add the Internet Marketing expertise to their resumes and I think several of them will become entrepreneurs. The student chapter of the American Marketing Association is managing the event.