Scribd Logo
Upload

Welcome to Scribd!

  • 2013 Module 1 Book 2

    Uploaded by

    Tibi Rusu
    202 views198 pages
    I don't own this.

    Copyright

    © © All Rights Reserved

    Available Formats

    PDF or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    I don't own this.

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    202 views198 pages

    2013 Module 1 Book 2

    Uploaded by

    Tibi Rusu
    I don't own this.

    Copyright:

    © All Rights Reserved
    Download as PDF or read online from Scribd
    Flag for inappropriate content
    of 198
    APICS Certified Supply Chain Professional” Cc Ss Cc P LEARNING SYSTEM PM Ee Se eM ec Preparing for the Certfiation Exam Studying he APICS CSCP Learning System combined! wth on-hejob knowledge, profesional experience, snd other APICS learing tol, such asthe APICS Dictionary isthe most effective way t repre fr the [APICS CSCP cerifcaion exatination. The APICS CSCP Learng System is intended te cover the body of ‘Knowledge este by the APICS CSCP certification examination; however, the APICS CSCP Learning System dos not “each the tes” The Learning System focuses on acquiring knosledge, wheres the exam tests the candidate's bly to apply tat knowledge ia accordance with acepted industry andar ‘Content onthe exam is based on real-world scenarios and requites candidates 1o apply the concepts in the [APICS CSCP Leaning Stem, While both the APICS CSCP Learning System andthe APICS CSCP ‘etiieaton examination are ase on the APICS CSCP Exam Content Manual which 's avilable or ee download a wi. LearnCSCP com > Resource Center > Certification Exam Resources), they ate ‘developed independently of one another. To preserve exam inet, speci exam questions and their ‘breath ar not shared with te APICS CSCP Learning System developers, Intellectual Property and Copyright Notice All printed mater inthe APICS CSCP Learing System and all material and iafrmatien in the companion oaline component are owned by APICS and preted by United States copyright aw as well interationa enter and protocols including the Here Convention. The APICS CSCP Learning Systern andthe companion Access Code forthe CSCP online component are for your personal edeations use only 8nd may not be copied, repreduce, reprinted, mie, dsplayed, published, transmitted (lectoncally ot ‘others, assed, sold, distributed, eased, licensed, adapted, uploaded, downloaded or efirmated. In adition to bing illegal, dsbuting CSCP material in violation of copyright laws willimit the io rete quality professional development ‘opportunities forts membership. Please do not volte APICS" intellectual property eights or copyeiht inwe APICS Dietionary, 13° Baltion Reference ‘Definition contained within the APICS CCP Learning Sytem ae consistent wid "ih edton. You may purchase the complet dictionary from the APICS bookstore, the APICS Ditmar, Module 1—Book 2 Checklist: Fundamentals of Supply Chain Management Section StartDate Completion Date Section Quiz Score® TLE: Logit fundamentals [LF Marketing eumentation 1-6: Demand planing -H: Customer relationship management (CRM) concepts TE Supply management conseps *Look for this test on the Web a ww LeurnCSCP.com, Course Overview and Module 1: Fundamentals of Supply Chain Management Book 2 Module 1, Book 1 Contents 2013 APICS CSCP EXAM CONTENT MANUAL (ECM) COURSE OVERVIEW. i MODULE 1: FUNDAMENTALS OF SUPPLY CHAIN MANAGEMENT Introduetion ua ‘Section A: Supply Chain Management Concepts. 1s It'sa Word of Global, Campls,latexdependent Supply Chains. a Basie Supply Chin bs “The SCOR? Mosel: Linking Proven, Metis, ast Practices, and Technol in Vertical vers Horizontal Ingato Lis ‘Supply Chain Management Objectives las Supply Chain Management Benefits a6 Accounting and Financia Statement Basis. Ls ‘Section B: Supply Chain Alignment with Business Strategy 168 Business Stsegy and Comptitve Advantages 170 ‘Organizational and Supply Chin Strategy, Pivitzation, Capabilities, nd Alignment. La Resolving Misalignment or Gps 1-106 Section C: Supply Chain Design and improvement Considerations. bus ‘Understanding the Marketplace. bus ‘Saply Chin Design Consideration Lue Contin ingrovement bd Section D: Inventory Management. Lae Agree and tem inventory Managemen List Flow af Material 33 Functions of Inventory Lass Inventry-Reated Cost Categories Last Effects of lavenory onthe Financial Statements 139 © a anes ‘Version 31,2013 Ftion ‘et @ reer nner Module 1, Book 2 Contents ‘Section E: Logistics Fundamentals Role of Logistics in Supply Chain Managemen Logistics Service Providers—3PLs and 4s. Reverse Logistics Section F: Market Segmentation. Reasons to Menify and Understand Market Segments Ways to Segment Mares ‘Understanding the Want and Needs of Each Seyrent Section G: Demand Planning Forecasting Demand Demand Management Linkages Among the Element. Demand Management Functional Responsibilities and Interfaces, ‘Section H: Customer Relationship Management (CRM) Concepts [Ned for CRM. Scope of CRM. Benefits of RM Implementing CRM. o Need fr and Uses of Customer Information in CRM, Section I: Supply Management Concepts. Total Cost of Ownessip Outsourcing and Onsoring, Make-verss-Buy Analysis. ange of Buyer-SupplierRestonshis. Developing Supply Plans Supplies Relationship Management (SRM). Interelatonship between CRM and SRM Bibliography. Cumulative Course Index ‘igh eed @ rwnserntenne 1.209 1210 1240 1.257 1262 1am 12 1.276 wan Last Lowe 28s ase 1290 Las La99 1203 1306 1309) 1313 1323 1337 Section E: Logistics Fundamentals “This section Is designed to ‘+ Define logistic and explain its relationship supply cain strategy ‘+ Went the functions within logities ‘+ Describe how to develop a logistics value proposition for each key customer hat balances ‘he sevice Level agains! cost minimization eff ‘Explain the goals of logis ‘Describe the tactics used o create an fective logistics strategy ‘+ Explain how the fw of goods and information occurs within an integrated enerise + Define and diferente between thir and four-part logistics providers and deseribe ther appropriate usage + Keni what activities are supported by reverse logistics + Bnumerate the business advantages of developing reverse logistics supply chin ‘+ Describe the design considerations fo a reverse supply chai, + Topic 1: Role of Logistics in Supply Chain Management Defining Although logistics hasbeen performed around the globe snc ancient civilizations were at war with ne another, wet til earning and ying to ‘become experts a managing it. Despite the research and progres thas been ‘made, logistics is sill ne of the most dynamic and challenging operational cas of supply chain management. The APICS Dictionary. [3th edition, Aefnes logis as “teat and sienceof obtaining producing nd Aisribuing material and product inthe peoper ple and in prope quantities” [tis api evolving busines discipline tat involves management of order processing, warehousing, transportation, materials handing, and packaging — allo which should be integrated troughout a network offices, Now that's ‘tal onder! At the mos asc lov logit ines the various related tasks quite to ‘tthe right goods othe right astomers atthe right me, Ott out a ‘broader definition: geting the ight product inthe right quantity an right condition at the ight place at the ight ime for the right customer atthe right ice © mares nan ‘Version 31,2013 Etin Aighsresret @ rove Modu 1: Pandan of iply Chan Managment ‘Aighseseved ‘No other futon in the supply chain i regi to operate 24 hours a day, seven days a week fom New Year's Day to New Year's Eve—there are no days of ‘Thatis why customers often ake logisties for granted; they've come to expect that product delivery will be performed sponse, Butts not ht simple, you wll eam, ean be expensive and takes expert Logistics adds vale tothe supply hain proces inventory is stately stoned to achieve sales. Bu th cst of creating this value is high, According tothe 1th anual “Stat of Lasts Report” by the Coe of Supply Chain Management Profesional published in 2008, United States companies spent 'USS198 billion performing logistical service in 2007 Transportation cost for ‘the sme year an USS8S7 bilion, and that constited nearly 62 percent of total logistics cot ‘As these statisti indicat, the largest comtbutr to logistics cos is ‘eansortatio: the movement ofa materi oa processing plant, arts oa ‘manufacturer, and finished gos to wholesales, retilrs, and customers. But tng the goods from ane point o another requires performing x numberof ‘other functions elated wo shipment. Goods eet be packaged, oid, unloaded, warehouse, distributed, nd paid for whenever they change ands. Supply chun partes must effin and effectively cary ot thes logistical ‘asks to achieve competitive advantage, In an neeasingly global marke, this may require mastery of languages, curensies divergent regulations, and ‘rious sins climates and customs, Defining lites precisely resents challenge. Everyone ares tat logistics managements (or should be) apart of supply cain management. As Douglas Long writes, “Supply chain management is logistics taken to higher level of ‘sophiieaon.” The exae line of demareation between the two management ystems is understandably abit vague. In thei casi ext Supply Chain Logics Management, urs Bowersox, ‘Coss, and Cooper include several functions hat aerated outside the logistics section ofthis couse, suchas forecasting and inventory management Some torte may place those two functions within the sope of logistics, while others may no, but al gree that inventory and forecasting mast be considered ‘when designing and managing an effective, ficient system for moving goods quickly fom place to place. hn Vain 31,2013 Fon @ ee Raw mati ‘i Logistics functions ‘Seton Loins Fundamental Exhibit 1-41 combines several perspectives illustrate the bad seope of logisties [Exhibit 1-4: Logistic inthe Supply Chain Supply Chain Community — a jm a da fa Bag le | | sectene| [etn | | wnt] | nate | | toe | Proce Disb “The supply chain is about “noving"—or “trasforming”—raw mitral and ideas into products or sevies and getting them to customers Logis i bout roving materials r goods fom one place to anothar. Logis in that sense, ‘the servant of design, poduction, and masketng. But it isa servant that can wing ad vale by uch nd effectively dng ito, The fllwing aeat fogs management contribute oan integrated approach logistics within supply cain management ‘+ Transportation. Many modes of transportation plays role inthe movement of goods trough supply chains: it, al, oad, wate, pipeline Seletng the ‘mos efficient combination ofthese modes can measraby improve the ‘value crated for customers by ct delivery costs proving the speed of delivery, and reducing damage to products. ‘+ Warehousing. When inventory isn't anthe move between locations it may ave o spend some tne ina warehouse, Warchousing i "the activites related to receiving, storing, and shipping materials oa fom production or distribution locations" (APICS Deionary,Lthedtion, ‘+ Third and fourthparty logis Like oer aspect of sappy cain management, the various logit functions canbe ousourced to fms that spcilizein some oral of hese services. Accoding othe APICS Dictionary, Sth eatin, a third-party logistics provider (SPL) i an enity that provides roduc delivery services fora buyer and supplier tum. Tir paty logistics providers actualy perfor or manage one or more logis services. A fourth- 1A Version 31,2019 Eaton @ vernscrne Modi |: Panamera of Supply Chan Management Logistics value proposition ‘leigh ead arty logistis provider (4PL.) i logistics specialist that ply the roe of ‘general contactor by taking over the entre logis funtion for an ‘organization and coordinating the combination of divisions or subcontractors ‘cesar opto the specific ask involved This growing rend incorporates the soply chan management pilosophy of concentrating on coe ‘competenies and partnering with other fms o perfor nares ouside your competence. We'll am more out 3PLs and 4PL ltr inthis eton 1+ Reverse lites or the reverse supply chain). Another growing area of supply hain management is reverse logistics, or how best to handle the return, reuse, recycling o disposal of product that make the reverse journey fom the stoma othe supplier. This business ca be handled at los, o it ean actually become a prot center. Wel also cover this topic in more det inthis scion, Being abe to match key customer expectations and requirements to your fim's ‘operating competency level and customer commitment isthe esenial ingredient in ‘optimizing the value of logistics. The logit vale proposition stems from a ‘unique commitnentof you firm oan individual customer or sleet group of ustomers. The value stems rom your bility to know exactly how to balance ogists costs aginst the appropriate level of eastomer sevice for each of your So you'll need to determine the exact recipe and proportion of ingredients in onder ‘o meet a particular customer’ logistical expectations and requirments. Hos wll _yu know when you've got the ht blanc? Ifyou kee in mind tha ogists most be managed as an integrated efoto achieve customer satisfaction atthe owes total cost, then it makes sense that service and est minimization ae the key clement in this proposition, ‘What company hast ha to pay a pinflly high price to ship a product overnight ‘to meet deadine of some sor” Itcan be doe, but it's nt fiscally pradent. athe same manner any level of logistical service ean be achieved ia company’ willing and abl to pay frit. So technology isn't the Limiting facie for ops ‘or most companies—is the economics. For instance, what des ites to keep the service lve igh ia im keep Net of racks na constant sate of dlivery realness o it keeps dedicated inventory fra high vlume customer hat can be evened within minutes of reciving an ode. How do you decide i well pent? “The key ito determine howto outperrm competitors na cos-fetive manne. Ifa table manufacturer needs a specific type of wood to proce a Lan ‘Version 31,2019 Eon @ mimreener ‘Cost minimization Logistics goals and strategies ‘eee Section BLepias Padomentls table legs but that wood type isnt availabe itmay fre the lant stp oF lose down unt the materia asvs, hereby ineuring expensive dels, potential los sales, and decrease customer sisfction. In contrast, fa home iampovement tore experiences a one-day dey in inventory replenishment of 20 att nigh-lght bulbs a its warehouse, the aya on roi and operation performance is key to be very low and insignificant. Inthe majority of itvatons, the cost-benefit impact of logistical flue is Airway related othe importance ofthe service othe customer When a logistical flue wil have signa impact ona customer’ busines, eorfee logisties service should receive higher priority Such servic implies that the customer corer was complete, delivered on tine, and consistently coret over ti, The second elemento the value proposition, cost minimization, should be literpcted as the total cost of logis in der to be accurate, The APICS ietonary,Ltheitio, describes the atl cost concept of logistics 8 “the idea that tht all lgitcal decisions that provide equal service levels should favor te option that minimizes the total fl logistical cost and not be wsed ‘on cost eductions in on are lon, such slower transportation charg.” For many decades, the accounting and nancial departs in onganizations sought the lower ple cst or each gel nc, wh Isle 0 tention psi to integrated otal cost tradeoff, As they les lr, tht did ‘work very wel So today’s lading supply chain companies develop functional ost analysis and ativty Based costing activities that accurately measure the total cost of logistics. The pol now is ar lgistes to be cost-effective as determined by a cost-benefit analysis, taking into account how a logistical service failure would impact custom's business. ‘You wl elearning much more abou loge and des between warchousing and ansportation ia Module 2, Seton D,Logistis. Ath ight level logistics shares he gol of supply cain management “to mee customer requiem.” That are a number flies goals that most expt agree upon ‘Respond rapidly o changes inthe market or astomer ore Minimize variances in logics servic. 1+ Minimize inventory to race cot + Consolidate product movement by grouping shipments. ‘Maintain bih quality and engage in continous improvement Suppor the ete product ie eyele and the rovers logistics supply chan, bis Version3 @ vososcrne 2013 Eon Modul 1: Fanamental of Supply Chain Management Coordinating functions ‘igh eared Note tat these objectives are explored farther in Module, Seton D, “Logistics” ‘An efetive logis strategy depend upon the following tats: Coordinating finetions (ranspration managemeat, warehousing, picking, to create maximum value fo the customer 4 Inegrating the supply chain + Subsitting information fo inventory ‘+ Redocng supply chain partners to an fective minimum number + Pooling risks Weil analyze each ofthese ats. Logit canbe viewed asa system made up of interlocking, interdependent parts. From this perspective, improving ay pr ofthe sytem mst be done with ull avareness ofthe effets on other parts ofthe sytem, Before the advent ‘of mer logics management, however, the various operations comtibutng to he movement of goods were usually assigned to seprate departments of divisions, such asthe wafic department, Each area had its om separate management and pursue its own rategies and tacts. Decisions made in any one functional area, however, re very likely oat performance in other areas, and an improvement in one ara may very well have rnepative consequences in another nless decisions are coordinated anong all logistics areas. Adopting more efiieat movement of goods, for example, may ‘require rethinking the number and placement of warehouses. Different packaging wll almost certainly affect shipping and toage. You may improve some servic toa level nea erection But incur so many aoa expenses inthe proces hat the company a whole ges broke. ‘You ned cross fans approach in logic, just as yu don supply chain ‘management as whole. Teams that ross function are als very likly to cross company boundaries in a word of international supply chains with diferent ims focused on diferent fection. “The overall gol of logistics management i not beter shipping or more ecient Tocation of warchouses but more value in the supply network as mesure by «ustomer satisfaction, return to sharcoldrs, ete. There is no pont, for iastance, in ‘ising the cost of shipping—ths, the price tothe ewstomner—fo make deliveries {ister han the customer demands. Paying more fo have a computer delivered today 1176 ‘Version 3.1, 2013 Eton Q meta renee Integrating the ‘supply chain Anes send rather than tomorow muy not bea ado customers want to make, Getting sil ‘war pizza delivered in les than 20 minutes, however, might be worth a premium rice andi) Fas diver, in ther wor, snot an ead in itself, and the same is teve of any aspect of logistics or supply chain management, Invgrating the supply cain requires aking series of steps when constructing the logistics network. na dynamic system, steps may be taken ot of order and retaken continously in pursuit of quality improvements; the following ist pus the stops in logical nde. 1. Locate in the right countries ‘+ entfyall geographic loaton in the forward and reverse supply chins ‘Analyze the forward ad reverse chins ose if seletng diferent s20graphic locations could make the logistics Faction mor efficent and effective. (Not al countries are equal in terms of relevant concems such 1 infinite labor, regulations and taxes.) 2. Develop an effective export-import strategy. + Determine the volume of feght and number of SKUs (stoskkeoping units) that are imports and expos. ‘+ Decide where place inventory for strategic advantage, This may involve Aecing which onder ers and which to avoid when importing and ‘exporting as well as determining where goods shouldbe stored in relation customers. (Some shipping companies nw add a "war isk surcharge” if ‘they're required to pass dhrough oe near a nation with cv unrest or twa) ‘Bih geographic location and distance rom te custome en affect evry lead times, 13. Selet warehouse locations, Determine the opinal umber of warehouses, ‘+ Calculate the optinal distance rom markets ‘+ Estab the most effete placement of warehouses around the word. 4. Select transportation modes and carvers ‘+ Desermine he mix of transportation modes that wil most ficiently ‘conncet supplies, producers, warehouses, distbutrs, and customers Sees specifi cates, '. Select the right number of partners. ‘Selet the minimum numberof fems-—feight forwarders and 3PLS ora 4PL— ‘to manage forward and reverse lois. nseletng logistics pater, also ‘conser ther knowlege ofthe local markets and regulations. un Version 31,2019 Baton @ vm Mode Fsdamenals of Supply Chan Management Substituting information for Inventory {6 Develop state-of-the-art information systems. Rede inventory casts by more accuse and rapidly tacking demand information andthe location of gods. Developing state-of the-art information systems may be difficult in some region. Such situations snake defining the processes and information lows even more vital Physia inventory canbe replaced by beter infomation athe following ays: '+ Improve communications. Talk with supplies regularly and discuss plans with them, pliers. Use JIT to coordinate deliveries from supplies. Remove obsolete inventory. Use continuous improvement als and share observations about trends ‘+ Track inventory precisely, Trick the exact location of inventory using bar codes andor RFID (radio equeney identification) with GPS (global stoning systems). ‘+ Keep inventory in transit ls posible wo reduce systemwide inventory ots by hecping inventory in transit Oe method of Kein iventny in ‘motion the maximum amount of ine ia dstibutin strategy called cossdocking According to the APICS Dictionary, 13th eon, erase docking is the proces of packing products on incoming shipment 50 they cam be easily sorted at intermediate warehouses or foe outgoing shipments based on fal destination. The items ae cred fom the incoming vehicle docking point othe outgoing vehicle docking point without being stored in inventory a the warehouse. ‘Used with paicular sucess by Walmart, coss-dockng involves moving incoming shipments diretly across the dock to ouwand-bound cates. ‘The inventory tus transfered may tealy never be at est ia the warehouse. Another example o rssdcking can be ake fom the line industry. When a passenger travels fom Seattle o New York, he ‘or she might be crss-dcked in Chicago. The tine as configured thie networkin this way as opposed to having diet ih frm iy to city. Passengers are not warchoused pers bt simply pass thou he airport nan hour o¢ two, geting of of oe plane and onto another. At the end of the day, isl the nirport should be empty, as should al eros-docking locations une ern 3,203 Bin @ resp Seton Laps Fundamentals ‘Atal, rear, or barge canbe considered a kind of mobile warehouse — ‘mote about tha tr in the Modul 2 section on logics, Raling inventory ‘shouldbe closely tacked by GPS ofaeliae rapid ajusiments fa shipment isdelayed o lost ori customer changes an order atthe last minut + Use postponement centers. Avoid fling warehouses withthe wrong mix of Finished goods by sting up postponement centers delay product assembly ‘ntl anata onder as been ceived, “+ Mix shipments to match customer needs, Mach deliveries more precisely to eustomernools by mixing different SKUs onthe same pallet and by mixing pallet from ferent supplies ‘+ Dow't wait in ine at customs, Rese the tne spent in customs by clearing fight while sil onthe water o inthe i Reducing supply Though you have to watch out for tradeoffs in effectiveness when reducing the Shain pares pmb ogee oun gel nee iy a Safe psi kf one chon) oven ohh al ee Exhibit 142: Costs of Multiple Echelons (Tirs) SS “Treteno wartewe 1) Wace ei eam ci est | [Tres ea | ee ee eee ee Rosca] [eectareenenee PY sparen ae | ees serene 360 retaorer | ar ‘The moe partners there arin the chin, the more difficult and expensive the hin to manage. Handofs among partners cost mone and eat uptime. Having many partners means carrying more inventory. Reducing the number of| partners can reduce operating costs ye time, and inventory holding costs. “Thee, however, sme lower lnit below which you crete moe problems than you solve. I90u elininatd al partners other than your own fe, you'd be tack othe vertical integration srategy pursue in simpler marketplace uring the early 208 century by US. automaker Henry Ford. fe aoisanes Lie Version 31,2013 Eton ‘lights reved @ etree rene Mode |: Padamentls of Sapp Chain Management Pooling risks Flow of goods and information ‘Allg ered In regard to inventory managemest, pooling ksi a method of reducing stockous by consolidating stock in contalized warehouses, The risk of| stockous increases as supply hans reduce the salty stck eld at each node and move toward Just in-Timeondring process, With every ety serptng to keep inventory costs down in this manne, the sk of stockous rises if buying exceeds expectations, Saistically speaking, when inventory space in cena warehouse nse fin several salle warehouses, the total inventory necessary to malta a level of service Toe (False 10, What isthe correct nde of atv in the reverse logistics hierarchy, slang from he top ofthe 1 Reeyele, reduce, recover energy, reuse, responsible disposi ani (C) be Reuse rede, eyete, responsible disposal inland, recover () © Reduce, ese rexel, cover eneay, esponsibe disposal n fn () d Redoee revel, ree, cover energy, sponsible depot infil 11, Teor false? Reverse logistics considerations fect primal jus the lst phase of he product ie cele () Twe (False © wanes 95 ers 31,2013 Bion ‘igh @ om Modi: Panamera of Supply Chain Management Progress check answers 1 2 3 4 s 6 1 8 5 X Inventory (p 1-172) 4G. 1173) True(p. 1-174) bop. 179) ap. 1176) do.1179) False (p 1-182) 4p. 1188) Trve(p. 1-184) 0. c(p. 1-189) False (p 1191) aes Section F: Market Segmentation “This section is designed to ‘+ Deserbe reasons oientify and understand market segunents ‘+ Define he marketing concepts behind customer-driven marketing ‘Describe he benefits of market segmentation ‘Describe how markets can be sepmented by demographics, atitudes, or pychologicl profiles ory customer value, customer needs, cr prefered contact hana Describe the Pareto effet in relation to castomer value ‘+ Explain how customer information can he wed to understand the wants id neds ofeach segment ++ Topic 1: Reasons to Identify and Understand Market Segments ‘The primary reason ident and understand market segments iene ‘he rgnizaton's profi (ris qian ve the og tm How segmntition ps accomplish his gal wl be dscused ae inroducng some terms and concep. Accoding tothe APICS Dictionary, 13th eon, customer segments the practice of dividing a customer base ito groups of individuals tha are similar in specific ways relevant to marketing. Taito Sequneatation fecuses on ening customer groups based 09 demographics and attributes sch as atitode and peyhological profiles, ‘When discussing market segment in a supply can, there ay be more than ‘one perspective of who the customer is. Fo example ‘+ Intermediate customers are those customers that rent athe en ofthe ‘supply chain A raw material supplier may count several manuictuers among is intermediate customers, and oe o mow ofthese mnulictrers could be grouped by sin ‘+ Ubiate customers are the ia repens ofthe products or services. The ‘timate customer could be an organization tat is purchasing poods or services Frits employees or constituents, n which ese segmenttion most also dtfrentiate between organizational customers and cad srs x equirement, © aonsarcs, has ‘Version 31,2013 Eon ‘ih ed Modu: Fndanental of ipl Chain Monagonen Customer- driven marketing ‘The remaining discussion of understanding customers and muskets focuses primarily onthe ultimate custome. However, the concep canbe carried back through the supply chai to decisions regarding intermediate customers. Most oganization now recognize tha succes busines state is customer riven and customer driven marketing typialy requires identifying and understanding marke sepments According othe APICS Dictionary, 3th edition, customer-driven is defined 8 company’s consideration of ester wants and desis in deciding what is prodoedand its quality.” Custome-driven marketing is based on several fundamental marketing concepts ‘+Customer requirements must drive product and service design. Rather than designing a producto service with multiple varieties in features, colors, and prices, design should stat with analysis of actual easomer requirement or needs. For example, the resls coud show tat color is fnclvant but a paiculr design feature is wort premium ‘All products and services have more than one market segment. The Primary justification for defining market segments the marketing sscton that n single set of curlomer egurementsdeseibs all poteatiat stom, Each customer will ave unique requirments, but groups of castomes with similar requirements an be dicavered, For example, | homeowner may require tat new eating sytem be delivered as soon a posible to replace a broken unit, while a homebuilder may ode in blk nd aways order wit ead tin, valuing consistency over fist delivery. ‘+ Logistis and marketing strategy must fcus on customer segments, In Audition to designing the form ofa product or service to meet ustomer requirements, marketing most enbl posession ofthe produc or service by providing marketing information in a manner likely o reach and be appreciated by that segment, Logistics mus then make that product or ‘service availble to the customer at atime and place the customer segment finds convenient. This often involves developing multiple supply eins tailored to specific customer segments ability more important than sales volume, All stteic deisons ‘on product oem, marketing expense, and logistical timing and placement have an associated cost, Each adtinal cost must be justified by Incremental increases in profits. An esential benefit of customer ‘segmentation san identification of the sie and va ofeach sgn, 198 ‘Version 31,2019 Eon @ rata What has driven the change toa ‘environment? Benefits of segmentation Section F: Market Segmentation which can elp prot whether a given change in tate wilincease profits. Fr example, many organizations ae foeusing on developing astomer loyalty and lifetime customers dc othe increased proitsbilty of this customer segment over single transaction fr more information, see Section H, "Customer Relationship Management) Basineses ned to understand customer segment, to mpeovev0-Way ‘communication wih customers, and to fll eustomer segment neads because today's customer is Harder and moe expensive to win and to keep. Advances in technology and competition in a workwide fee marketplace have benefited customers by raising thei expectations fr quality, trouble fice product and serves For example tady's automobile may be impossible or an amateur ‘mechani to rep, but itis ako relatively oube-fre compared with the automobile ofthe 1950s, Car buyers today expet tha thir vehicles wil ast at est 10 yeas and will experience only minor problems fo te ist si years. Meeting ‘hose expectations ries the cost of desin and proction, As customers begin oasume that product and services willbe of hh quality, he competitive ditferentatorbesomes price ovale. Technology like the Internet makes it easy for customers to shop for lowes price. The markt expands fom the neighborhood rele toa global marketplace of eager sellers. Ths creates farther rosure a busine's btn neo prof. One wit respond otis res Is 1o “niche marke to develop and market procs to specific easter segments that have shown they value and are wing to pay fr what this producto service offers. This agin raises the costs of doing business since the busines must design roftabl bt customizable prodets while it develops and execs multiple raketng plans "The resulting pressure on profit makes it even more important that companies retain their easomers since customers become more profitable the loge they ae rettined, Cros-slling is imperatve. I occurs when customers buy ational oducts o services after the ntl purchase (APICS Dictionary, 3th ein), “Turning onetime customers into "estomers for i” has hecome a rica business oa. Reaching that goa requires understanding and then sting ester Segment expectation and delivering greater perceived value than the competition Word ike “niche” and customization” refet the fc that customers nceasingly expo the market to come to them rather th or he 0 1 the market, In other words, they expet to have things their way na satelitocable communications world they expect to find 500 channels one of which ie ined pesisely a thir own interests, Runners can expect fo find a unning oe tht exactly matches ther own 99 Version 31,2013 Eton @ retin nrnnenrem ten Madi 1: Panamera of ipl Chan Monagenent level of exercise, running styl, tein, and anatomialquiks, The marketplace is more segmented everyday, which could be see as drawback de to its ‘complexity. However, castomer relationship management (CRM) pilosopies and techuology ystems, dscusod ltr, exis help manage hat Segmentation Segmentation also benefits organizations. Lifeime customer relationships are rot key when customers fel that business is cetng their unique nods. ‘This isa mutual dependene/mausl gain reaionship. Customer-diven businesses have the opportunity to lam more about thei individual customers and use that infomation to inorease sales and profit Segmentation als helps ‘businesses get beter return on their promotional budgets. Businesses tha used to avers in daily newspapers hive decreased or eiminse this form of advertising in favor of les expensive but more narrowly targeted channels, ike special interest magazines or banner don Intemet bowser windows. Businesses can he moce confident that they are reaching the right audience with ‘the message thats most meaning to that saience ‘The concept of sepmentaton has existed for some time, ut the ways 0 segment markets have been evolving under casomer driven states, + Topic 2: Ways to Segment Markets Potential customers form a very large group, s may existing customers, but these roups can be segmented based on marke analysis and information fom existing customers. Segmentation can be based on any number of rita selected to suit a ‘tcular purpose, and each clas may be segmented in mor than one wa. ‘Market epmens canbe defined by demographic characteris suchas gender, _eography, age occupation, and wealth, Demographic categories can also be refined or customized. For example, geographic segmentation could be based on ‘he likeliood of vsing a paticular reallocation, by ZIP or are code, or by ‘zones that contain lave egal demand (i, the sie of each zone would var). Castomes can also be segmented by atitudes or psychological profiles, such as wilingnes to engage in sci! media orselidentfication na social group sich ssa biker ora wine aver Daring prt or service design or raesign, marketing ca ask more spesitic questions abou the potential markt, As aways, the basic question ate the best quesions: Who? Where? When? Why? What? How many’? In other words, who sioterestedin the new product and where ar they located? Are they ow income urban aparent dwellers, suburban homeowners, or famers and ‘anchets? The answers to such questions consiute market segmentation @ me teespoeenernentone Historic segmentation vs. customer- driven segmentation ‘Segmentation by customer value ‘i ened Seton F: Market Segmentation isrially, market spments wore sed, in the worst case, on preconceptions about the behaviors or desires of certain groups, ia the best ese on esearch i smal “representative” groups of eustomers. Household cleaning products, for example, were simed at women and emphasized effectiveness and convenience. Coting retailers aimed at pie niches: inexpensive, moderate, lesgner. Entertainment producers sme a age group: children, adolescents, adults. This typeof proce sapmentation ean be inaccurate, Fr example, a large nancial insitation stereotyped young customer as bing more intrested musing the Internet ofl ther banking needs. They dieted mos of thet promotional torts or online banking to this group Int, casomers overage 50 (who tendo wo have more assets and were therefore more valuable to the bank) ere increasingly sing the Intemet for host of wes, including banking. “The bank was missing a more valuable mathe sepa ‘Today, segments can be defined by customers actual buying behaviors, and the results more accurate Segmentation, Customers fr household cleaning Products might be divided bya variety of fcors otber than efectvenes and convenience: users who want ecologically oriented products, who ned products es of sents and dyes fr hell reasons, who wan to bull oftheir products tthe same time fom a distibutor who can offer savings or rewards. Closing reser have subdivided the youth marke no fur ove seems «seh with its own baying habits and preferences, We wll ook now a three diferent ways segmentation might ocurin a usiomer driven stacey: segmentation by customer value othe busines, by customer needs, and by preferred contact chanel Inthe pst, organizations tet customers as they wer all hese, Each received the sme level of service and was charged the stm fees forthe routs they purchased regards of how they affected the organization's Profit Today more and more organizations are treating customers diferent tsd onthe itferences in the customers’ contributions tthe bottom ins A large computer manus, for example, doesnot tet al customers ‘sully. Thee database tls them who ther largest customers are and how ‘much profit they represent The grater the customer's vale, the ber he tweament the casiomer receives, For example, someone who bays multiple servers mor likely tbe offered special package pricing or be set a poster thanking the customer for their busines. The computer manufactree may

    You might also like