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We help brands to connect with consumers at the point of purchase – driving incremental sales, one2one marketing & face to face marketing agencies creating new consumers and brand advocates.

At Fulcrum, we are experts in the indian retail environment. As a retail and in-store agency with an in depth knowledge of product sampling, retail promotions and product demonstrations – our nationwide teams can drive sales for your brands at the till.

If you’re looking to showcase your brand within existing retailer channels, or build a whole new audience, we can help you get there.

Our expert staff are experienced with grocery, FMCG, consumer electronics, motor, toys, health and beauty brands and all hold relevant Food Handling and food certification. As a specialist retail and in-store agency, Fulcrum holds full FSSAI certification.

We also provide branded sampling stands and merchandise production, uniforms, freight, storage and logistics to ensure a smooth rollout of your campaign.

With a focus on inspiring action in consumers and delivering actual results, we ensure that we build in measurement, reporting and amplification to maximise ROI for clients.

Speak to us about how we can help you deliver in-store sampling, retail promotions, product demonstrations, travel retail promotions, retail staff, brand ambassadors and retail events.

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5 Tips For Taking Your Brand to Market

Part 1 of our Brand Basics for Small Business series, we covered the crucial first steps to setting up your brand. Once you’ve taken those initial steps and got your brand off the ground, the next stage is to start marketing, in order to raise awareness of your brand, build a customer base, and drive sales for your business. To help you get started, we’ve got five important tips for taking your brand to market.

Tip 1: Get your messaging right

In business, first impressions mean a great deal – so what your initial marketing communicates about your brand will shape the (usually lasting) opinion potential customers form about your brand.

Spend time developing clear, compelling brand messaging that succinctly communicates your brand, ties in with your brand identity, and is relevant to your target audience. Bear in mind that as your brand develops and grows, you’ll need to be able to continue delivering this messaging consistently across all platforms, so getting it right in the early stages is essential.

Tip 2: Choose the right channels

Small businesses are faced with a vast array of potential marketing tactics through which to promote their brand. From digital marketing to direct mail, the key is to identify those channels that are most appropriate to your brand – and are most likely to attract the attention of potential customers. This is where thorough market research (discussed in Part 1) is vital, as you’ll need a clear understanding of your target audience and what channels have the best chance of reaching them.

Potential marketing channels include email marketing, brochures and flyers, social media, event marketing and many more. For some ideas on using a selection of these channels successfully, check out our Guide to Becoming Marketing Active.

Tip 3: Provide clear calls to action – and incentives for following them

Whether your call to action is driving traffic to your website, encouraging email newsletter opt-ins, or increasing your social media following, you need to make this call to action as clear and straightforward as possible. Confusion or ambiguity is an immediate turn-off, so make sure you spell out exactly what people need to do and how to do it.

Behind every call to action, you need to answer the question that is inevitably on the minds of your audience: “what’s in it for me?”. By providing compelling incentives for performing the desired action, your audience is much more likely to follow your lead.

Tip 4: Go for the highest quality you can afford

While budget will always play an important role in small business marketing considerations, opting for cheap-looking, inferior quality marketing materials can do considerable damage to your brand in both the short-term and the long-term. At this early stage it’s important to remember that, as mentioned above, first impressions are critical.

Quality doesn’t just extend to the physical materials on which your marketing is delivered. Skimping on components like copywriting or design can be just as off-putting as cheap paper, so avoid cutting costs by doing it yourself. If price is an issue, consider taking a ‘less is more’ approach and focusing on doing a few key tactics well.

Tip 5: Know your goals from the outset

Before you commence any type of marketing, you need to know what you want to achieve from this activity. Once you’ve established a set of clearly defined goals, you will be able to identify the steps you need to take to achieve these targets.

When setting marketing goals, it’s important to choose targets that are achievable, as well as ensuring you are as clear as possible about your goals. Be specific about what each goal involves and outline timeframes for achievement to work towards. In addition, it’s vital to make sure your marketing goals are easy to track and measure.

While there are many other areas you’ll need to consider before embarking on a marketing strategy, taking time to focus on these five areas will provide you with a strong starting point on which to build.

Stay tuned for the final part of our Brand Basics series, in which we’ll be looking at how to maintain your brand in the long term.

We’d love to hear your experiences of taking a brand to market – if you’ve got your own tips, why not share them with the MIH community? Get in touch by leaving your comments below…

 

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CLOSE AND FOLLOW UP THE SALE

CLOSE AND FOLLOW UP THE SALE – If the sales appointment has gone well and the client is interested, signing the order may almost be a formality. Likewise, at the end of the appointment you may realise that the client is unlikely ever to agree to a deal.

However, there are times when the client is still unsure or they may be nervous about signing a big order. This is understandable, given that they may not have used your product or service before. In this situation, the use of certain closing techniques may help them decide.

Once the order has been signed, it is your chance to prove that you can match your words with actions. Exceeding expectations by adopting a professional approach to delivery and after-sales service can help to establish a lucrative and long-lasting client relationship.

This guide will take you through the steps required to close and then deliver on an agreed sale.

  • Asking for the business
  • Methods for closing the sale
  • Negotiating the sale
  • Following up the sale
  • Building the client relationship
  • Referrals and testimonials

ASKING FOR THE BUSINESS

It is very likely that you will find it more productive to sell in a ‘consultative’ way rather than using pressure tactics, which are now outdated. This involves conducting research and structuring your sales call to help make closing the sale straightforward.

However, you still need to gain the client’s commitment, and the best way to do this is just to ask for the business in an assertive but polite manner.

Spotting buying signals

The best time to ask for the business will vary depending on the type of person you are dealing with and how the sales appointment has progressed. Many buying signals are obvious, e.g. the client repeatedly nodding in agreement or a positive tone to their questions. However, some buying signals may be less easy to spot and are often hidden amongst objections.

It is therefore important to be enthusiastic about forming a relationship with the client, but not to get too excited and appear desperate. The client may not be quite ready to buy, so be prepared to resolve further issues if they still have objections to agreeing on a deal. Ask them about the objection and explain how you can overcome it.

Taking the order

You should be prepared to take an order on the day, even if you were told this was unlikely when you made the appointment. Have the necessary paperwork ready to take the order or agree on a contract.

Many businesses have pre-printed order pads/contracts that contain all the standard terms and conditions. If you use a standard order pad, you may still need to leave space to write down any additional terms you have agreed that are particular to that deal.

Ensure that you have drafted your paperwork with the help of a lawyer and explain any non-standard terms clearly to the client, including the procedure for cancelling the contract. Once this has been done, ask the client to sign the agreement and give them a copy.

If they ask for time to go through all the terms and conditions before signing, consider asking them to sign a ‘letter of intent’, or even your meeting notes, to confirm their commitment.

METHODS FOR CLOSING THE SALE

Sometimes it may be necessary to try different ways of getting the client to agree to buy your product or service. The reasons for their initial reluctance may be varied, but often it could be as simple as nerves or the fear of making the wrong decision.

It is important to reassure the client that they will be in safe hands and to go over the benefits they will experience once they sign up. Show them any testimonials you have from your other clients – particularly if they are a well-known company.

Variations in closing

If you sense that directly asking for the business won’t work, you could try:

  • giving them an alternative – e.g. do you want the green or the red one?
  • assuming they will sign – e.g. what day is best for us to deliver the goods?

In all cases, make sure you allow the buyer time to say “yes”. If there is a pause after you’ve tried a closing question, let the potential client speak first. The client often needs a few moments to confirm to themselves that they are happy to go ahead, so speaking first could interrupt this thought process.

If you can’t close on the day

If you are convinced that the client will not sign an order at the meeting but they still seem interested, offer to return with a tailored proposal. This can be risky as they may cancel once they are out of the atmosphere of the sales meeting, so make sure you confirm a date and time for a second meeting – ideally within a few days of the current meeting.

Take this opportunity to write down any unresolved objections and explain that you will return with a firm proposal. It is a good idea to gain an idea of their budget if you haven’t already done so.

You may decide that the client is not ready to buy and may never be a serious prospect. If this is the case, politely thank them for their time and offer to keep in touch. It is better to invest your time in more serious prospects.

Remember, however, to ask them if they know of anyone else who may be interested in your product or service. For more information, see the page in this guide on referrals and testimonials.

NEGOTIATING THE SALE

Even if you manage to gain the client’s commitment to signing an order, there may be a period of negotiation required to agree on the details.

Remember not to get carried away by the fact that you have potentially secured an order – you may still have to walk away if the deal doesn’t suit your profit margins or your ability to deliver.

Negotiating on price

It is tempting to end up in a negotiation on the final cost of the deal, as it is almost certainly one of the elements that the client will try to negotiate on.

However, it is one element that is rarely advantageous to give ground on.

Provided you have set your price realistically, taking into account the cost of creating and delivering your product or service, lowering your price may:

  • result in an unacceptable profit margin
  • create an expectancy that you will lower it further
  • indicate that it was too high in the first place
  • affect your ability to deliver to the required standard

For more information, see our guide on how to price your product or service.

If the client insists on a price reduction per unit, offer to give them a discount based on a larger order. You could also offer to agree on a particular price if you can alter some elements of the proposed package, e.g. to a cheaper version or a later delivery time.

Take your time

Whatever happens in the negotiation, remain assertive but polite at all times. Don’t be put off by comments designed to destabilise your position, e.g. “that’s far too expensive”. Outline the benefits and why it is worth the cost.

Consider all sensible offers but don’t agree to a condition too quickly – this can make the buyer think you are desperate and that there could be more room for manoeuvre.

If the negotiations break down, outline the sticking point and your final offer to resolve it. If this still doesn’t work, it may be best to thank them for their time and agree to keep in touch.

FOLLOWING UP THE SALE

Once the negotiations are over and the order has been signed, make sure that you continue your professional approach by taking the client through the next steps – called consolidation. Remember to thank them for their business before you go any further.

Confirm what has been agreed, including delivery dates and times as well as payment procedures, where appropriate.

If necessary, write down a schedule of the next steps for them, as well as clear contact details in case they have any queries during the process.

It is preferable to give the client your cell phone number to avoid a long delay in answering any query they may have. Sometimes a client may suffer “buyer’s remorse” – a negative response to making a big decision – and failing to answer a query quickly and efficiently could lead them to cancel the whole order.

Once back at the office, confirm all the details in an email or letter. Avoid using standard templates for this communication – you need to maintain the friendly rapport generated in the meeting, and a standardised letter could appear too clinical.

Follow this up with a regular call at key stages to keep them informed as to progress, and once again after they have taken delivery. Check that they have received exactly what was agreed and on time. Be on hand to answer any queries once the client starts to use the product, perhaps offering to demonstrate it at their workplace.

BUILDING THE CLIENT RELATIONSHIP

Once you have fulfilled the client order, it could be tempting to think of this as the end of the sales process. However, it can be very rewarding to build on this initial order and establish a mutually beneficial client relationship. You should arrange a further meeting to discuss future business at the earliest possible opportunity.

Building relationships takes time and is based on trust. The ultimate aim of your approach should be to create a relationship whereby the client refers to you for consultation on certain matters. This relies on honest advice, but you should always be ready to spot an opportunity to sell your products or services where appropriate.

For example, you might advise your client to buy a cheaper product if this will satisfy their requirements, instead of trying to push them to buy the most expensive version. They will start to respect your advice and be willing to discuss bigger orders in future.

Request feedback

Another way of establishing a good working relationship is to request honest feedback. Once you have fulfilled your first order, ask the client if they would complete a short feedback form.

It could be more helpful to ask the client’s staff to complete certain sections, as it is likely that they will be the ones who actually use the product in practice.

Send them a small gift to thank them for their time and ensure that you inform them of any measures you are taking to improve their experience for the future.

Adopting this approach will be extremely helpful in tailoring your product or service to your client’s needs and will show that you really care about their business.

You can also use the feedback to alter your product or service before approaching other customers.

Increase your knowledge of the market

You should build on the research you conducted before visiting the client about their industry and the issues that affect them. Consult their trade press about forthcoming changes in the marketplace and ask them what steps they are taking to prepare their business.

It is possible that the client may not have had the time or resources to monitor such developments and they will be very grateful if you help them exploit any opportunities.

REFERRALS AND TESTIMONIALS

Using referrals can reduce the amount of advertising and cold-calling you need to do, while testimonials can help you to convert more prospects into solid orders at sales appointments.

Referrals

Referrals are an extremely good source of new business and can provide an alternative prize if you don’t manage to close the sale. Discussing referrals after a sales meeting has been unsuccessful can also provide a welcome change of topic and avoids an awkward end to the proceedings.

You should also ask for referrals when you:

  • are sourcing leads
  • have just agreed on a deal with a new client
  • are at a networking event
  • are contacting an existing client

There are various ways of asking for a referral, but you should start by asking for a straightforward introduction or for their contact details. As a last resort you could ask the contact to pass on your details, but this can be less fruitful as they will never sell your product or service in the way that you can.

You should treat referrals in the same way that you do new leads, by following it up straight away. Make sure that you mention who has passed on their details (if they have given their permission). For more information, see our guide on planning to sell.

Testimonials

Where you are approaching an existing client, you should ask them to provide a written testimonial that you can use in your future sales appointments. Reassure the client that it won’t take up too much of their time and that you will only use the details that they are happy to give you about their business.

Ideally, ask for a photo of the client and use quoted speech to personalise the testimonial. Make sure that you ask them to comment on:

  • why they used your business
  • what problems it helped them to solve
  • the level of service they received

 

Principles of Marketing

Effective marketing techniques

Marketing communication Strategies and Planning

Promotion: Integrated Marketing Communication

Marketing Management and Strategic Planning

Marketing Strategy

ADVERTISING AND PROMOTIONS

 

 

Retail Management

Entrepreneurship and Innovation

Small Business Management

Business Plan Development Guide

Small Business and Entrepreneurship

Human Resource Management

Introduction to Business

Principles of Management

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Services marketing Activity Solutions Marine Drive, Mumbai 

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Experiential Marketing | Feet On Street marketing business Marine Drive, Mumbai

We power the mechanics behind your promotional marketing. Providing fully integrated fulfilment services that are intelligent and flexible enough to manage your ideas, growth and promotional objectives. Our multi-channel solutions provide a solid infrastructure for your project, whilst our history and experience allows you to benefit from what we have learnt over the last 10 years. Experiential Marketing | Feet On Street marketing business Marine Drive, Mumbai

Consumers have changed, media has evolved and so have our solutions.

Our solutions to your activity include:
Ecommerce
On-pack promotions & competitions
Loyalty & Reward programmes
Customer helplines
POS – Collation & Distribution
Product Sampling
Contract packing
Database Management
Kitting & relabeling
Digital services

 

About Us

At Fulcrum, we consider ourselves the home of marketing logistics solutions, and have done so since we were established back in the ’s. As specialists in promotional marketing, large volume contract packing and customer service, we pride ourselves on our ability to help brands connect with their customers.

we are able to deliver agile, flexible and dynamic solutions for our clients. It’s for these reasons that we have maintained long-standing relationships with some of the mumbai’s leading brands. Our clients come in all different shapes, sizes and sectors which include retail, public sector, cosmetics & personal care, beverage, financial services and travel to name just a few. However, it’s our culture and values that set us apart from the rest, as working with Fulcrum means you are doing business with a trusted partner who puts your brand integrity at the forefront of everything we do.

At Fulcrum, we truly believe that having an empowered workforce helps us to deliver the best possible service for our clients, which is why we set up the Fulcrum Academy. The academy supports our employees in their quest for personal and professional development, it gives individuals who are ambitious and want to further their own skills and careers the opportunity to gain further qualifications. We offer a wide range of learning opportunities f to professional body qualifications, as we believe our staff are at the heart of the business and its success.

We’re more than just a marketing logistics partner, we’re your brand ambassadors. Working with you to ensure you deliver a customer experience to be proud of.

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The Benefits and the Risks of Participating in a Supply Chain

11.3 The Benefits and the Risks of Participating in a Supply Chain

LEARNING OBJECTIVES

  1. Understand the major benefits to be derived from adopting a supply chain management system.
  2. Understand the challenges of creating such a system.
  3. Understand the technical and managerial risks associated with supply chain management.
  4. Recognize the benefits for a small business in adopting supply chain management.

The Benefits of Successful Supply Chain Management

For any small business, a commitment to developing a supply chain management system is not a small undertaking. It involves the commitment of significant financial resources for the acquisition of appropriate software. Policies and procedures must be changed in accordance with the needs of the new system. Personnel must be trained in not only using the new software but also adapting to new ways of doing business. Small businesses accept these challenges of adopting supply chain management systems because such systems are viewed as being important for long-term survival and because businesses anticipate substantial management and economic benefits.

The management benefits of supply chain management system include the following:

  • Silo busting. By their very nature, supply chain management systems improve communication across all functions within a business. This leads to employees having a better understanding of the entire operations of a business and how their work relates to the overall benefits of the business.
  • Improve communications with suppliers and customers. Improved communications with customers enhances the overall value provided to those customers. The improvement in customer satisfaction leads to longtime relationships, which yields significant economic benefits. Improved communications with suppliers improve the overall operational efficiency of both participants, reduce costs, and improve profits.
  • Supplier selection. Supply chain management systems can help businesses evaluate prospective suppliers and monitor the performance of current suppliers. This capability can lead to strategic sourcing and significant cost savings plus improvement of the when- and where-needed variables.
  • Improvements in purchasing. The automation of purchasing reduces errors and improves the economic efficiency of the purchasing function. Disciplined purchasing can allow for the full exploitation of available discounts.
  • Reduction of inventory costs. Supply chain management systems can produce significant cost savings across all levels of inventory. Improved forecasting and scheduling will lead to increases in inventory turns and a corresponding reduction of costs.
  • Improvements in operations. Improved quality control reduces the scrap rate, which in turn can have significant cost savings. Better production scheduling translates into producing what is needed when it is needed. The business does not have to spend additional money trying to expedite the production of particular orders to customers. The cost of goods sold is reduced in this manner. An additional benefit of supply chain management systems is that they lead to better utilization of plant and equipment. Great utilization translates into less likelihood that unneeded assets will be acquired, which has major financial benefits.
  • Error reduction. By automating processes, billing errors and errors associated with purchasing and shipping quantities can be reduced. This not only saves money but also improves satisfaction with both suppliers and customers.
  • Improvements in transportation operations. Accurate deliveries reduce returns and their associated costs. Sophisticated shipping models can reduce the overall cost of transportation.
  • Additional financial benefits. Such systems can improve the collections process, which impacts customer relations, reduces bad debts, and improves cash flow.

The Risks Associated with Supply Chain Management

The major risks associated with a supply chain management system fall into two categories: technical and managerial.

Michael Porter’s five forces model is a model of the major factors that contribute to an industry’s overall structure. It also points to factors that might affect the overall profitability of the particular business within that industry. The greater the strength of these forces, the greater the challenge to make above average return profits for businesses in that industry. It is useful to review two of those forces—the power of suppliers and the power of buyers—and reexamine how they might influence the profitability of any business in the supply chain.

Porter identifies the following factors that might contribute to the overall strength of each force. He argued that suppliers are powerful (see Figure 11.3 “The Core Elements of a Supply Chain Management System”) when the following occurs:

  • They are concentrated. When an industry is dominated by only a few suppliers, these suppliers generally have a greater ability to dictate terms to their customers. The mining company DeBeers, which controls more than 50 percent of the world diamond production, is able to set the selling price of diamonds for most of the world’s jewelers.Mason A. Carpenter and William G. Sanders, Strategic Management and Dynamic Perspective (Upper Saddle River, NJ: Prentice Hall, 2008), 108. It should be pointed out, however, that in some cases concentration, particularly a duopoly, provides an opportunity for customers to force the two competing firms to compete more readily against each other. Think of the situation of Boeing and Airbus and their relationship to their customers—various airlines. At present, there are only two major producers of commercial aircraft, and airlines sometimes obtain better deals from one manufacturer because of their desire to maintain parity in market share.
  • The size of the suppliers is large relative to the buyers. Suppliers are powerful when they are large and sell to a set of fragmented buyers. Think of the largest oil companies that sell gasoline to independent stations. The power in this scenario lies with the large oil companies.
  • Switching costs are high. Suppliers have power when the cost of switching to an alternative supplier is expensive. Many businesses stay with Microsoft products because to do otherwise means that they would have to repurchase new hardware and software for the entire organization.

Problems may also arise from a heavier reliance on one customer in the supply chain. Even large companies need to be aware of their relative strength in the supply chain. Rubbermaid is the most admired corporation in America, as voted by Fortune magazine in 1993 and 1994, yet it had significant difficulties when dealing with one of its major customers—Walmart. In the early 1990s, Rubbermaid found that the cost for a key ingredient—resin—had increased by 80 percent.Mary Ethridge, “News about the Wal-Mart Struggle,” accessed February 2, 2012, www.dsausa.org/lowwage/walmart/Dec17_03.html. Walmart’s almost total focus on lowering its prices led it to drop many of Rubbermaid’s products. This began a downward spiral for Rubbermaid, which led to its acquisition by Newell Inc. Rubbermaid went from the status of the most admired corporation to being a basket case because it failed to recognize its excessive dependence on one customer.

Web Resources

The Benefits of Supply Chain Management

A list of benefits from SAP, a software company.

searchsap.techtarget.com/feature/Checklist-Quantifying-Supply-Chain-Management-benefits

The Risks of Supply Chain Management

A Forbes article on the risks associated with supply chain management.

www.forbes.com/2006/11/15/risks-supply-chain-strategies-biz-logistics-cx_rm_1115strategies.html

Risk and Rewards in Supply Chain Management

A Harvard working paper.

hbswk.hbs.edu/archive/4971.html

KEY TAKEAWAYS

  • There are significant benefits for businesses that adopt supply chain management systems.
  • The benefits stem from improved customer relations, cost cutting, and increased operational efficiencies.
  • The adoption of a supply chain management perspective can pose risks.
  • Businesses must consider the relative power of both their suppliers and their customers.

EXERCISES

  1. Interview the owners of local businesses who say they have some form of a supply chain management system and ask them if they believe they have benefited from the system.
  2. Ask them how they have benefited.
  3. Ask them to identify the major problems they had with implementing and using the system.
  4. Ask them if they believe they have the “power” in their supply chain or if the “power” is in the hands of their suppliers.

11.4 The Three Threads

LEARNING OBJECTIVES

  1. Understand how customer value is enhanced by supply chain management.
  2. Understand how cash flow can be increased, in the long term, by using supply chain management.
  3. Understand the various computer programs that make up a supply chain management program.
  4. Recognize the risks that can stem from adopting a single supplier program.

Customer Value Implications

Throughout this text, we have emphasized the importance for small businesses to constantly focus on the notion of improving value for their customers. Successfully implementing a supply chain management system offers tremendous possibilities for not only improving value to customers but also significantly enhancing the capabilities and profitability of the small business itself. Supply chain management improves customer value in the following ways:

  • Reduced inventory. A well-executed supply chain management system means that customers receive orders when they need them. Further, this does not necessarily imply that the supplier will be holding the inventory for the customer—although that might occur. It refers to the fact that better communication and better scheduling may enable the supplier to produce the item exactly when it is needed.
  • Improvement in the order accuracy. Supply chain management should guarantee that when orders are shipped, the right items are shipped in the right quantity. This does not disrupt the production of the customer and eliminates product returns, which results in economic benefits for both the customer and the supplier.
  • Reduced cycle time for product development. To ensure success, the customer and the supplier must develop new levels of trust. This trust will evolve into a long-term relationship. Both parties begin to know each other better, including each other’s needs and capabilities. As this evolves, the supplier is in a better position to help the customer develop new products far more rapidly. It greatly reduces the product cycle time.
  • Financial benefits. These value improvements all translate into significant cost savings. Cost savings experienced by the supplier can be transferred into cost savings for the customer. Relatively modest improvements in inventory reduction, reduced safety stock size, reduce stockouts, improved order fill rates, and reduced transit time can yield surprisingly large financial benefits to both parties.
  • Peace of mind. Having a supplier that one can trust to accurately deliver items in a timely low-cost fashion, which has also developed contingency plans to cope with potential problems, is relatively unique and provides the customer with a high level of comfort. One may be unable to place an economic price on such peace of mind.

Cash-Flow Implications

It must be recognized that committing to a supply chain management system from scratch will entail a major investment. New approaches to software can reduce both the cost and the risk of such a commitment. However, businesses will want to recoup most of the investment as quickly as possible—perhaps six months or less. Given the potential for cost savings, the impact on increasing cash flow should be obvious.

What is not obvious is the potential for significant improvements in cash flow from minor improvements generated by supply chain management systems. To illustrate this, let us look at an example adapted from Coyle et al. (2009).John J. Coyle, C. John Langley, Brian Gibson, Robert A. Novak, and Edward J. Bardi, Supply Chain Management: A Logistics Perspective, 8th ed. (Mason, OH: South-Western, 2008), 301. Assume that a firm is in the following situation: It ships orders to customers; if the orders are incomplete or inaccurate, the firm assumes the full cost of the return and follow-up shipping. When an incorrect shipment is made, to ameliorate their upset customers, the firm takes $100 off the bill. However, when some customers find that the order is incomplete or inaccurate, they are so upset that they cancel the order. Here are the data:

Number of orders per year50,000
Number of items per order25
Profit per unit ($)30
Price reduction for incorrect order ($)100
Back order cost per order ($)200
Percentage of totally correct orders90
Percentage of incorrect orders cancelled25

It can be readily seen that the profit per order is $750 (25 × $30). We now examine the lost cash flow from the situation. The lost cash flow has several components. The first component is the back order cost, which is composed of the number of orders that will have to be back filled. The second component is associated with the losses from the incorrect orders that were canceled. The last component is the price reduction for the incorrect order.

lost cash flow = backorder costs + cancelled sales costs + price reduction costs

These can be computed as follows:

lost cash flow = [number of orders × (1 − percentage of totally correct orders) × backordered cost per order][number of orders × (1 − percentage of totally correct orders) × percentage of incorrect orders cancelled × profit per order] + [number of orders × (1 − percentage of totally correct orders) × price reduction for incorrect order]

Now let us substitute the correct values into this equation.

lost cash flow = [50,000 × (1 − .90) × $200] + [50,000 × (1 − .90) × (.25) × $750] + [50,000 × (1 − .90) × $100]lost cash flow = $1,000,000 + $937,500 + $500,000 = $2,437,500

We now assume that an “improved” supply chain management system has been installed. The percentage of correctly filled orders increases from 90 percent to 96 percent. If we substitute 96 percent into these equations, we find that the new lost cash flow would decrease to $975,000. This means that a 6 percent increase in order accuracy leads to a 60 percent decrease in the loss of cash flow.

Implications of Technology and the E-Environment

It should be obvious that contemporary supply chain management cannot be conducted through paper and pencil procedures. The backbone of today’s supply chain management is software. Initially, it would be impossible to think of developing such systems without electronic data interchange. Today, the Internet serves as the basis for sharing communication between suppliers and customers. However, there is more to the technology behind supply chain management system than merely the exchange of data.

Supply chain management requires several types of software packages and the need to successfully integrate them. One can identify several major software components of a supply chain management system (see Figure 11.4 “Schematic for a Supply Chain Management Information System”). One section would be supplier relationship management programs. These programs involve planning and controlling the actions with upstream suppliers. Such programs would cover many aspects of procurement—supplier analysis, order execution, payment, and performance monitoring.Joel D. Wisner, G. Keong Leong, and Keah-Choon Tan, Principles of Supply Chain Management: A Balanced Approach (Mason, OH: South-Western, 2004), 76. There would also be customer relationship management (CRM) software that would handle all interactions with customers. Enterprise resource planning (ERP) would handle the necessary integration of all data. ERP coordinates data flows from finance, accounting, and operations to provide management with a seamless overview of the performance of a business. It may also have a decision support system, which allows for data manipulation or the use of analytical modeling tools to provide a better decision-making environment. It may involve using mathematical programming models to optimize decisions. Another set of modules dedicated to logistics would focus on the optimal use of warehousing and shipping. These functions are sometimes handled externally by either a third- or fourth-party logistics provider.

Figure 11.4 Schematic for a Supply Chain Management Information System

Not too long ago, the acquisition and the operation of these software packages would have been prohibitive for most small businesses from both a cost standpoint and a technical standpoint. Fortunately, software providers now recognize that small and midsize businesses represent a tremendous market for supply chain management software. It was estimated in 2008 that the demand for business enterprise software applications for small and midsized businesses would grow at a nearly 11 percent annualized growth rate until 2012.“Small and Medium-Sized Business Enterprise Applications Market to Grow to $80.3 Billion by 2012,” Business Wire, June 11, 2008, accessed February 2, 2012, www.reuters.com/article/2008/06/11/idUS117514+11-Jun-2008+BW20080611. Microsoft, Oracle, and SAP have developed systems that enable small to midsize companies to handle all the complexities of global supply chain management.Carol Lawrence, “Enterprise Resource Planning Software Become More Accessible to Small and Midsize Companies,” McClatchy Tribune Business News, August 8, 2010. Large software vendors such as Oracle estimated that the midmarket clientele was approximately 4,500 out of their total client base of 7,000 customers. Several factors can be attributed to this rapid growth in small to midsize businesses. The first was that many software providers were willing to offer in-house installation at a predictable cost. Second and perhaps the most important factor is the increasing move to cloud-based software, where software resides on an external server to which the businesses are connected to via the Internet. It provides several substantial benefits to small businesses: lowers software and hardware costs, installation is significantly easier, maintenance and training costs are lower, and free upgrades may sometimes be available. The use of Internet-based systems also makes it easier to maintain lines of communications with one’s suppliers and customers. Robert LaGarde, president of LaGarde E-business Solution, has stated that “using Internet technology to provide customers with online demand access to supply chain systems is critical to nurturing and growing relationships with customers.”David Hayes, “When Size Doesn’t Matter (in business),” McClatchy Tribune Business News, March 4, 2010. What initially appeared to be a remarkably complex system of programs has now been made available to even very small businesses.

Video Clip 11.16

Impact of RFID Technology on Supply Chain Management

(click to see video)

The impact of RFID technology on supply chains.

Video Clip 11.17

Supply Chains and Information Technology

(click to see video)

Modern-day supply chains are tasked with responding at lightning speed.

Video Clip 11.18

Future Supply Chain 2016

(click to see video)

The main supply chain challenges for consumer products and retail for the next decade.

Video Link 11.1

Japan: The Business Aftershocks

Japan is a small country with a supersized role in the global supply chain (a short ad precedes the video clip).

online.wsj.com/video/japan-the-business-aftershocks/8D24FD7D-5767-4F4C-AC35-7124F8E1F571.html?mod=googlewsj

Web Resources

List of Supply Chain Management Software

A comprehensive list of SCM software with links.

www.capterra.com/supply-chain-management-software

About.com SCM Software

Supply chain management software with links to other sites.

http://logistics.about.com/gi/o.htm?zi=1/XJ/Ya&zTi=1&sdn=logistics&cdn=money&tm=75&gps=191_ 1419_1259_550&f=00&tt=14&bt=1&bts=1&zu=http%3A//technology.inc.com /managing/articles/200805/supplychain.html

The Benefits of Supply Chain Management Software

Identifies benefits and includes option to download a report on the top fifteen ERP providers.

www.business-software.com/erp/supply-chain/benefits-of-supply-chain-erp.php

KEY TAKEAWAYS

  • Supply chain management can enhance customer value in many ways.
  • Cost savings brought about by supply chain management systems can produce amplified improvements in cash flow.
  • Supply chain management systems can be seen as a collection of interconnected software packages.
  • The advent of cloud computing can make supply chain management systems available for small businesses.

EXERCISES

  1. Interview the owners of five local businesses and ask them how supply chain management has or could enhance their customers’ value.
  2. For those small business owners who have a functioning supply chain management system, ask them if they have noticed improvements in cash flow attributable to the system.
  3. Ask them what system(s) they use and why they went with these computer packages.
  4. Ask them if they have contingency plans for the loss of key suppliers.

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