Business Operations and the Influence of Development of Technologies - Coursework Example

Introduction: Technology has revolutionized business operations around the world. Local businesses have become international due to their websites which give them global visibility. Business is inextricably intertwined with technology from the smallest home office to the multinational corporations. Technology has evolved around the areas of telecommunication, travel, stock market and shipping and even around our daily lives. Utilization of the latest and apt technology in areas of product development, design and IT application impacts the buying choices of the consumer. Supply chain management integrates the key business processes, from end user through original suppliers. Companies and corporations involve themselves in a supply chain by exchanging information regarding market fluctuations and production capabilities. Technology can be used effectively to enhance the performance of the supply chain to ensure value propositions at all points of the supply chain. Ensuring superior value propositions based on customer service leads to competitive advantage. If all relevant information is accessible to any relevant company, every company in the supply chain has the possibility to and can seek to help optimizing the entire supply chain rather than sub optimize based on a local interest. This will lead to better planned overall production and distribution which can cut costs and give a more attractive final product leading to better sales and better overall results for the companies involved. The primary objective of a company’s supply chain management is to fulfil customer demands through the most efficient use of resources, including distribution capacity, inventory and labour. A supply chain seeks to match demand with supply and do so with the minimal inventory. Various aspects of optimizing the supply chain include liaising with suppliers to eliminate bottlenecks; sourcing strategically to strike a balance between lowest material cost and transportation, implementing JIT (Just In Time) techniques to optimize manufacturing flow; maintaining the right mix and location of factories and warehouses to serve customer markets, and using location/allocation, vehicle routing analysis, dynamic programming and traditional logistics optimization to maximize the efficiency of the distribution side. Incorporating SCM successfully leads to a new kind of competition on the global market where competition is no longer of the company versus company form but rather takes on a supply chain versus supply chain form. A simplified representation of Supply Chain Management: Ref: http://student.dcu.ie/~deer3/scm_fig1.jpg Competitive Advantage: When a firm sustains profits that exceed the average for its industry, the firm is said to possess a competitive advantage over its rivals. The goal of any business operation is to achieve sustainable competitive advantage. Michael Porter posits that a competitive advantage, exists when a company makes economic rents, that is, their earnings exceed their costs (including cost of capital). That means that normal competitive pressures are not able to drive down the firms earnings to the point where they cover all costs and just provide minimum sufficient additional return to keep capital invested. Most forms of competitive advantage cannot be sustained for any length of time because the promise of economic rents drives competitors to duplicate the competitive advantage held by any one firm. A firm possesses a Sustainable Competitive Advantage (SCA) when it has value-creating processes and positions that cannot be duplicated or imitated by other firms that lead to the production of above normal rents. An SCA is different from a competitive advantage (CA) in that it provides a long-term advantage that is not easily replicated. But these above-normal rents can attract new entrants who drive down economic rents. A CA is a position a firm attains that lead to above-normal rents or a superior financial performance. The processes and positions that engender such a position is not necessarily non-duplicable or inimitable. By creating positional advantages in the supply chain that result in benefits that exceed those of competition products at the same price or the same benefits at lower cost the company can attain competitive advantage. HP: An example of Dynamic replenishment: This particular example of HP is about an inventory practice involving supplier relationships with the objective to increase supply chain transparency using a standard and scalable collaboration solution. This approach is called Dynamic Replenishment. HP was having inventory issues with one of its key integrated circuit suppliers in its printing supply division. To address those issues, HP recognized the need to open up the supply chain between themselves and their supplier and to share the inventory responsibility between the two partners. In the current system, the forecast had to be frozen three months in advance and used to negotiate the demand with the supplier. Misses in forecast were extremely costly as they were leaving HP with excess inventory or the supplier scrambling to catch up with an underestimated demand. A collaborative approach appeared to be the only way the partners could address the needs. Fundamentally, DR is an e-procurement mechanism using internet applications, services and technologies to automate and streamline purchasing processes and enable new procurement processes and business models. The inventory is managed by the supplier, all the way from the manufacturing facilities to the suppliers stocking locations. The approach balances the responsibility between the customer and the supplier by putting in place service level agreements and a feedback loop. The service level metric represents the availability of material against planned consumption. If HPs planned-to-actual variability (within the lead time) is higher than expected, the service level shows that the supplier managed the inventory well, while HPs planning was poor. Controversially, if the consumption level matches the plan, but the inventory isnt there, then the service level of the supplier needs to be improved. This creates a true partnership where both parties attempt to manage to a service level. In practice, HP uses signals from its distributors to establish a realistic consumption plan. This plan is then sent via the internet to the back-end systems from the supplier which responds with the capacity information. It is only if capacity cannot match plan that manual intervention is required. The supplier is then shipping materials based on the manufacturing sites daily consumption plans. "Advanced shipment notifications" (Altavilla 2010) and "goods receipt notifications" are used to close the loop. (What’s GS1 upstream integration? n.d.). This approach replaces discrete order management with blanket purchase orders, avoiding a costly management, provides both parties with full visibility of inventory updated automatically, and it shares the daily updated HP demand automatically. The whole process is automated and alerts are generated only for exceptions. This approach has allowed HP to increase the availability of components drastically while keeping the safety stocks low. At the same time, the management of the interactions with the supplier have been reduced and focused on exceptions, increasing its efficiency. By giving the supplier full visibility of the demand, much tighter relationships have been built, making HP an important client of the supplier. The effect of DR in the supply chain has drastically reduced the gaps in the market and has ensured a steady supply of their products even when other competitors struggle to supply as per demands. Life Technologies: E Commerce solution to improve customer service: Life Technologies is a global biotechnology tools company that provides product and services to scientist engaged in biological research during discovery and development and the commercial production of bio-molecules. The company had sales of $3 billion in 2008 and it employs 9500 people. The company enjoys industry recognized leadership and has 3600 patents and many exclusive licenses to its credit. The company has partnered with Infosys to provide a new comprehensive e-commerce solution that incorporates the voice of the customer process to enhance customer experience and satisfaction. This was done by providing an effective merchandizing channel and an improved buying process. The solution also realizes cost saving by reducing call centre costs through the introduction of customer self-service features. Life Technologies realized that the key to driving growth was responding to the voice of the customer for the development of an agile, scalable and adaptable system. The principal business objectives for the introduction of the e-commerce system was to ensure ease in finding the best product required by the customer and also offer a simpler way for customers to find correct configuration for more complex life science products. The new system provided customers with appropriate content for customers to make instant decisions and all relevant pricing information including shipping and handling were given upfront to the customers. This provided the customers with an easy and interactive buying process. Up-sell and cross-sell options were provided to customers. The customers could now experience seamless buying and the service exceeded customer expectations in delivery and shipping. The customer self service features enabled customers, the ability to look up transaction history and track status. Customer experiences could be shared online and could be resolved online leading to reduced calls to the call centres. The business benefits included increased order conversion rate, higher average order value through effective merchandising across sales channels, offers real-time product availability information allows accurate and effective tracking of customer orders. The new system in totality enhances user experience based on customer behavioural pattern. To the business operation, the new system improves efficiency and lowers customer support cost with enhanced customer self-service features. The total cost of ownership is lowered by consolidating multiple channels on the same technology stacks. These features differentiate their products and services in the market and increases customer loyalty. Other examples: Technology related: Nokia has the highest market share in the telecom industry which can be owed to the technological improvements in their products and their R&D which strives in producing technologically advanced products faster than competition. As per the market demands the company includes features and applications into their products in line with the customer needs and requirements. I.T. has helped in Customer Service; huge corporations like Microsoft attend to customer needs through email and chat services. Networking internal and external in organizations has improved the working of businesses. Communication has bloomed; two business organizations if they need to work together can easily do so. Hotmail when merged with MSN was easy since the service was online. Business these days require a lot of planning, due to high tech organization systems on computers, planning can be done on an organized pattern, with schedule formats, Gantt charts etc. Huge databases can now be controlled and stored on network and back up drives. Accessibility of files also has become an easy task with series of password keys and shared folders. Cash transaction are easily made, delay in reduced hence giving liquidity to business. Conclusion: Innovation, efficiency, quality and customer responsiveness should be leveraged to create cost or differential advantages for a company. The company should adopt the apt technology to operate in a value system of vertical activities including those of upstream suppliers and downstream channel members. Technology development can determine how a firm can exploit opportunities to form Competitive Advantage. Very often we see the advent of several technological factors converging into a capability that forms a competitive advantage. Reference List Altavilla, G., 2010. Improve your delivery process with advance shipping notification. [Online] SCM Expert. Available at: http://www.scmexpertonline.com/article.cfm?session=&promo=iz1623&id=5092 [Accessed 22 March 2010]. What’s GS1 upstream integration? n.d. [Online] GS1. Available at: http://www.gs1.org/docs/upstream/GS1_upstream_brochure.pdf [Accessed 22 March 2010]. Read More