Market Turbulence
Market Turbulence is the rate of change in the
composition of customers and their preferences.
The Cause of Market Turbulence
An
unstable economic climate, ever changing customer needs, and up-and-coming
technology continually stirs up market turbulence. The driving force in this
new marketplace is the consumer. The driving factor is technology.
Our world
is changing; customers are more demanding they want: new, innovative products,
increased availability, shorter lead-times, and increased differentiation of
product/service, better quality and most of all, at the same price!
A new
survey commissioned by a San
Jose company highlights
how wide-ranging customer's dissatisfaction can become in today’s marketplace.
The results show that consumers
are so steadfast about the quality of service they receive over the telephone
that 59 percent would stop doing business with a company that delivered
unsatisfactory service. It does not stop there!
“The survey says 53 percent of
them would make a point of telling friends and family members not to do
business with the company; 48 percent of them would take the time to complain
to a company representative and 16 percent would actually contact consumer
advocacy groups to file a complaint.”
The quality of customer
interactions with companies have been highlighted by the result of the survey
to be the deciding factor irrespective of whether company fortunes rise or
fall.
The environment also plays a role
in provoking market turbulence. The impact of War’s results in consumers wanting to spend less.
Globalisation aided with the
commutation of the European Union as member states rather than countries and a
single currency is the emergence of regional
trading Blocs.
The Internet provides the platform
for a local business to compete on a global market.
With the onset of globalisation
developed countries such as the United Kingdom, have outsourced manufacturing and industrial processes
to third world countries as a cost cutting measure. However business are now
realising that competition is also on a global level and so there is nothing to
stop foreign business to set-up branches here in the UK. Politicians have
realised the desperate need to protect local
companies with stiff regulations to prevent foreign business trying to enter
local markets.
Supply Chains
Example 1
The Mobile phones industry
illustrates a market where turbulence exists. The European
Market of mobile phones is saturated. Nokia the Finnish mobile communications
giant may be its own biggest competition with none of its competitors ready to
mount a serious challenge.
There are also thousands of
tariffs and dozens of mobile phone handsets to choose from. Every six months
there are new mobile phones available with new features and functions.
There is no customer loyalty as
consumers tend to opt for brands that offer the best features at the right
price.
Example 2
The Travel industry currently has
a lot of turbulence. The major environmental issues causing turbulence in the
travel industry were:
- The 9-11 attack on the World Trade Centre.
- Concorde just outside of France killed 113 people (August
16th 2000)
Ryan Air and Easy Jet have offered
cheaper prices compared to British Airways which has forced British Airways to
rethink their strategies to win back customers.
Why is it difficult to match
supply with demand and how may supply chain try and overcome the problem?
It is difficult to match supply
with demand for many reason(s) these include:
Resources:
The availability of stock with
respect to part (A) of this assignment, lack of human recourses, skilled
workers, and poorly managed supply chain networks all play a role in the
difficulty to match supply with demand.
Lack of Market Analysis &
Research:
Lack of Market analysis would mean
that a company or organisation would be misled in their strategic approach and
would thus be subjected to being reactive to market change rather than the
desired proactive stance.
Overcapacity:
Overcapacity in the market place
is at the opposite end of the scale to the lack of resources. The motor
industry supplies 40% more than the demand requires.
Solution to Lack of Resources
A company or organisation may
investigate into investment by larger corporation’s or may even qualify for
government grants or even European grants to help fund more resources. In some
cases the business may become more specialised and narrow their product lines
to concentrate on promoting their star products.
Solution to Lack of Market
Analysis & Research
Please refer to “Solution to
Lack of Resources” which the author feels also applies for this section
respectively. An EPOS system, Electronic Point of Sale
can be utilised in a retail environment to gather up-to-the-second accurate
data for interpretation for forecasting product sales and any trends that may
be arising.
Solution to Overcapacity
Car manufacturers may adopt a
strategy Magma International Inc, have discussed in a recent media briefing “using existing auto assembly
plants rather than building a greenfield site. With the current overcapacity of automaker plants,
the strategy makes sense”, says Siegfried Wolf, president and chief executive
officer of the newly created Magna Steyr.
Some
of the difficulties that can occur in smoothing the flow of material along a
supply chain?
Logistics
Good logistics are of paramount
importance and are directly linked to smoothing the flow of material. This is
a universal concept throughout all supply chains.
What prevents the supply chain /
company from a smooth flow?
With respect to part A (ii) of
this assignment the Leeds plant manager makes a decision based on minimum cost
distribution. This damages the collaborative efforts between Leeds and Bristol and Leeds and Glasgow who are left "high and
dry" to seek alternative suppliers. This is one of the crucial factors as
to why products and services do not have a smooth flow from company to company
in the supply chain holistically. Companies should work together and
contribute to a common goal to make improvement to their supply chain.
“True partnerships are long-term
collaborative relationships based on trust and a mutual desire to work together
for the benefit of each partner and the partnership. True partners share
information, plans, schedules, risks, rewards, problems, solutions, and
opportunities through systems integration.”
James A. Tompkins, Ph.D.
Source:
http://www.wgaprc.com/Globe/JTompkins0301.html
The
difficulties that can prevent supply chains focusing their activities towards
the end-customer?
Post World War 2 demand has out
driven suppliers for customers.
Local and global markets are
experiencing turbulence of some sort or another. A business today has to also
cope with the onset of globalisation as well an effective supply chain
management. Globalisation means increased competition, equalling more stress.
With all this anxiety businesses tend to wash their hands of a product as it
leaves their premises, they merely unburden themselves and are of the view that
it no longer of any concern to them. This is completely untrue! Every process
and every company involved along the supply chain whether it is value adding or
not is of crucial importance to the final product and meeting the customer
expectations.
During the 1950’s it was the case
that a company would conduct all the processes itself: processing raw
materials, assembly, testing, research and design, advertising, sales and
marketing etc. During the early eighties businesses such as IBM focused on supply chains and took
a holistic view. These days it can be observed that it is not businesses
competing but supply chains competing with each other.
People have not focused their
activities towards the end-customer before. There may also be cultural issues
at play here. Businesses may be reluctant to allow a member or members of
another company along the supply chain to dictate business practices to improve
the supply chain; because they have become institutionalised in their way of
management and thinking and therefore change management may seem a foreign
concept to them!
It is not easy to stand back and
take a holistic view of the supply chain as separate companies are involved.
An employee of one company in the supply chain has no say what-so-ever in the
activities that takes to the product or service before it arrives or leaves the
company.
Whose
responsibility is it to manage the supply chain, and how do they set out to do
it?
Whose responsibility is it?
The responsibility of managing the
supply chain should be spread across all the parties involved in the supply
chain. Every company that comes into contact with the product or service has
responsibility to participate in managing the supply chain.
How they should do it?
A supply chain regardless of its
size or complexity should have a Management Team to take a holistic view of
operations carried out form earliest to the final stages of the supply chain.
Each company within the supply chain can appoint a supply chain manager to
represent their company in order to air their concerns and proposals improving
the overall supply chain.
A management team would be more
effective as it may prove to be too much work for a single individual to make
sense of the possibly hundreds of companies in the supply chain. A management
team would be sheltered for the cultural drawbacks of individual companies and
would therefore prove to be more poised for success.
A sense of strong leadership is
also required to direct the team and keep the team members motivated and
focused on the tasks at hand. These tasks include:
- Developing strategies to deal
with adversarial attitudes on the part of suppliers, and data integrity
problems when exchanging data with suppliers and customers
- The "shamrock"
structure for making sure managers, contractors, and consultants are
performing the right tasks
- Lessons from Y2K for managing
inventory more effectively
- How a "coordinating
governance structure" can help you manage the phenomenon of
concurrent competition when dealing with former rivals
The following six key initiatives
should form the fundamental aims of the Supply chain management team
generically:
- Developing supply-chain
relationships that promote open collaboration and predictability. Open
collaboration and predictability of a supply-chain member's actions are
prerequisites to many of the other initiatives.
- Stimulating continuous
improvement in systems cost, quality, and cycle times. This is expected to
be an iterative process, not a one-time event.
- Measuring economic
performance, which is essential to tracking our progress.
- Developing processes to
design efficient supply chains. This involves both supplier selection and
chain structure.
- Working to evaluate and
promote technological solutions for real-time communication, measurement,
and decision support. E-business and the Internet are key enablers to this
process.
- Educating and training people
in the techniques and strategies that we have developed. To that end, we
are working to encourage standards for supply-chain management education
and training
