channel effectivness questionnaire

Channel Effectiveness Risk Questionnaire

Table of Contents

What is Channel Effectiveness Risk?...............................................................................3

A Shift from the Industrial Age to the Information Age.....................................................4

Business Risks related to Channel Effectiveness..........................................................10

Management Practices and Performance Measures.....................................................12

Lessons Learned............................................................................................................13

Questions.......................................................................................................................15

2Source: www.knowledgeleader.com

What is Channel Effectiveness Risk?

Channel effectiveness risk is the risk that poorly performing or positioned supply chains, or distribution channels, may threaten a firm's capacity to effectively and efficiently interact with suppliers and inhibits the ability to access current and potential customers and end users.

An organization’s supply chain and distribution channels encompass the network of resources and processes involved in producing and delivering final products; from procurement of raw materials, their transformation through manufacturing, to distribution of finished goods to end customers. The supply chain and distribution channels are considered a company's link to its suppliers and access pathways to both current and potential new customers. Control over these channels in many cases amounts to control over the business relationships with the firm’s suppliers and ultimately, consumers.

To succeed, an enterprise must commit to product availability, price, and delivery date at the time of order entry. If the raw material is not immediately available to be processed and later shipped in the form of finished product, the enterprise must know when it will be available and allocate it appropriately to the customer.

Another challenge in the current digital economy is performance. The competition likely has an online presence and the barriers to switching vendors almost instantaneously are rapidly eroding. To deliver at this level of performance, all participants in the supply chain and distribution channels must act collectively as one seamless fulfillment process.


A Shift from the Industrial Age to the Information Age

Supply chain and distribution channel management has been evolving for decades. The tools to achieve efficiency gains have often been available long before mainstream adaptation. Often, the reason for the postponement of their adoption has been high growth rates, which can substitute for inefficiency in bringing results to the bottom line.

Today however, the economy is driven by the customers of global and virtual markets, and has dramatically changed the rules. Companies have started focusing on implementing entire suites of solutions (including customer relationship management, supply chain management, and supplier relationship management) designed to optimize each phase of the supply chains and distribution channels. These solutions enable companies to streamline and transform key business processes into one dynamic, fully integrated, end-to-end channel, the “Value Chain.”

Before the Internet, the value of an enterprise was generally based on its physical assets. Such companies controlled inventory costs through vertical integration, owning everything from raw material to finished goods, with a large chain of intermediaries along the distribution channels.

Due to such practices, they were also more supplier-oriented, meaning that the supply chain was more focused on the supplier relationships and their requirements (make-to-stock), as opposed to the customer relationships and their requirements (make-to-order). The focus on suppliers resulted in the establishment of better contracts. However, many companies failed to closely align themselves with what customers truly wanted and when they wanted it.

Using network technology innovations, value chains are enabling significant restructuring of the traditional enterprise, as well as the time dimensions of these channels. Concurrent information sharing models are being used to improve inter-enterprise process planning and execution.

These models work by using Internet technology to join together multiple enterprises. These enterprises share access to systems to support inter-enterprise process planning and execution. Robust application-to-application decision making, which will be the hallmark of the leading and commercially scalable partnerships, will require the closed-loop collaborative capabilities concurrently available only through the value chains powered by the Internet technologies.

These collaborative ventures are beginning to enter contingency planning, which enables more efficient multi-enterprise responses to potential upsets in demand and in the value chains. As enterprises move from small-scale collaborative prototypes to full-scale inter-enterprise initiatives, the capabilities of the infrastructure must also become more robust.


Meaningful collaboration starts with the alignment of strategic decisions among all involved parties and continues seamlessly to the end-consumer’s purchase. This new paradigm must support a spectrum of relationships that have advanced beyond using the purchase order and invoice as the primary documents of commerce. The following table summarizes some of the changes mentioned above:

FocusArea

Industrial AgeSupply Chain

Information Age

Supply Chain(Value Chain)

Comments & Observations

Business Focus Vertical Matrix

The business focus moves from a vertical perspective, which entailed owning every process of the production line, to a matrix approach which implies a supplier web adding value by sharing processes and information.

Competition Company vs. Company Supply Chain vs. Supply Chain

Competition is no longer simply one enterprise versus another, but also encompasses partners and strategic alliances along the entire value chain. Cooperation among partners along with seamless technical integration is the winning mix.

Competitive Advantage

Physical AssetsCost

Speed and Knowledge

Industrial Age advantage came from owning inventory vertically to reduce cost. Efficiency along the entire supply chain, regardless of ownership, is now the basis for competitive advantage.

Demand Focus

Direct (Closest) Customer End Consumer

Instead of focusing only on the demand of the closest customer, the end consumer’s order now drives the overall replenishment of that order through tiered suppliers. In other words, a purchase by a consumer kicks off a number of transactions in a make-to-order enterprise. Additionally, the flexibility of these systems allows offering customized products cost-effectively.

FocusArea


Information Age




Market Presence Domestic International or

Global

Globalization highlights the need to maximize supply chain efficiencies to gain advantage or remain competitive. In addition, the appearance of virtual Business-to-Business (B2B) marketplaces/independent trade exchanges is accelerating globalization even more.

Scope of Supply Chain

Management

Multiple Processes (Functional Silos);

Several Isolated Value Chains

Multiple Enterprises,

A Shared Value Chain

The Industrial Age Supply Chain could never achieve the highest level of efficiency from an overall perspective due to the fact that it was primarily focused on improving intra-enterprise processes in functional silos. The requirement to move to an inter-enterprise context highlights the necessity of addressing overall efficiency at the shared value chain level.

Supply Chain Focus

Cost and Asset Utilization Customer

The approach to managing the supply chain shifted from being focused on assets utilization and cost to adding value to processes concerned with fulfilling the Customer’s needs and expectations timely and efficiently.

Supply Chain

Process Behavior

Predictable;Consistent;

Many Intermediaries;All Processes

Performed by the Company;

Paper-Based Workflow;Manual Controls

Ad Hoc; Experimentation;

Channel; Disruption;

Few Intermediaries

The process is no longer driven by paper-based activities that hinder speed and integration. Web-based workflows are capable of extending supply chain processes across enterprise borders -- in some cases up to the end customer. The integration capability of an enterprise’s processes is a factor in taking advantage of outsourcing strategies because companies may easily access and monitor outsourced processes through their own information systems.


FocusArea


Information Age



Customer Service

Low Customer Expectations;

Reactive;Rigid Processes

High Customer Expectations;

Anticipatory and Responsive;Flexible and Adaptable Processes

The Internet has shifted power to the buyer from the seller. Supply chain-related systems must integrate with Customer Relationship Management (CRM) applications, so a full picture of the customer’s relationship with the enterprise can be considered when responding to their needs and wants. Additionally, CRM systems enable an enterprise to anticipate the needs of the customer and suggest solutions.

Planning

Staff Manager and Analysts;

Clear Delineation between Planning and

Execution; Spatial Integration

Entire Trading Community;

Simultaneous Supply Chain Planning and

Execution;Inter-Temporal

Integration (Hierarchical

Planning)

Planning activities were performed by staff, managers and analysts using mostly internal information and clearly separated from supply chain execution. The focus of planning being the management of the physical inventory. The New Economy model requires a simultaneous process of planning and executing the fulfillment of orders almost real-time. Additionally, given that the entire supply web is affected, they are all involved in planning.

Decision-Making

Standalone;Periodic;

Person-to-Person;Executional/Operational;

Sequential

Integrated;Real-Time;Process-to-

Process;Strategic/Tactical

Concurrent

The decision-making process shifted from a stand-alone mode that was based on person-to-person relationships to an integrated mode whereby decision-making is embedded in sophisticated automated processes. These inter-enterprise supply chain processes are synchronized to achieve strategic goals.


FocusArea


Information Age



Internet ChannelE-Mail

MediumConsumer-

Business Alerts

From a technology standpoint, the Internet was at first only considered to be a new sales channel. Unfortunately, the opportunity to integrate was missed. Over time, it became clear that the Internet is a new communication medium through which to integrate and communicate.

Information Technology

ERP Competitive Advantage;

Non Integrated Systems ;Proprietary

ERP Systems is the Backbone of

the Infrastructure;

Truly Integrated Systems;

Cheaper and Open

Technologies;Data Intensive

Communications

As most enterprises operate with Enterprise Resource Planning (ERP) systems, they become less of a competitive advantage. The next plateau of competitive advantage comes through networking. Network technologies enable integration among the ERP, Supply Channel Planning (SCP) and Supply Channel Execution (SCE) systems. This infrastructure enables efficient knowledge sharing at low communication cost.

Application Value Focus Transaction

Decision Support/

Optimization

Pre-Internet, the value of SCM was execution of transactions faster and with fewer mistakes. The value of eSCM is better business decisions based on optimization of supply chain operations.


FocusArea


Information Age



Information Exchange

Communication(the information flows

with products);Rigid Industry-Oriented

Business Standards

Collaboration;Flexible; Global

Business Standards

Pre-Internet, the exchange of information among participants in the supply chain was just for communication purposes, not for transacting. Every party in the exchange was only concerned about its internal functional performance, resulting in a value-chain for each company. Today, creation and sharing of supply web knowledge is the hallmark. Consequently, selection of the right business standard plays a key role in cost savings.

InventoryHigh-Levels;

Controls Focus on Carrying Costs

Low Levels;Controls Focus

on Price Protection; Exposure

Since inventory has always been a requirement in the face of uncertain demand, the use of information sharing and inventory management techniques, such as Just In Time (JIT), may shrink inventory levels to the minimum. Since less inventory is on hand in this scenario, the focus of management control shifts to price protection as opposed to minimized carrying cost.


Inefficiencies or lack of productivity may add unnecessary costs to the bottom line as a result of poorly designed or inappropriately planned infrastructure of the value chain.

Under-utilized resources (or systems) may be present within an organization, resulting in significant overhead costs but minimal productivity.

Dependence on a relatively costly or hard-to-manage franchised dealer network may occur in a period when customer preferences are changing rapidly or alternative distribution channels are opening up.

The process can be inefficient in satisfying valid customer/policyholder requirements, resulting in higher costs than competitors.

Inefficient distribution processes or mechanisms will greatly inhibit distribution channel effectiveness in the overall value chain.

If the underwriting process and interface with distribution channels are ineffective, production success may be impacted.

Poor or inadequate policy and endorsement issue processes may deter production.

Business Risks Related to Channel Effectiveness

Sources of channel ineffectiveness, and their corresponding impacts, are as follows:


Visibility, velocity, and variability, are the foundations of today’s economy value chain. If this is true, the business challenges inherent in the Information Age value chain need to be overcome by organizations and can be stated as follows:


Visibility Velocity Variability

• Poor point of sale/use visibility

• Poor line item visibility

• Poor capacity visibility

• Poor business rate visibility

• Poor forecast, event and inventory visibility

• Batch updates

• Point-to point interfaces

• Communication costs

• Information security

• Platform, database, application heterogeneity

• Different syntax, context and notion

• Different planning cycles

• Different planning horizons

• Different “problem” definitions

• Static lead times, capacities, yields, capabilities, costs

Management Practices and Performance Measures

Today, the rules for effective supply chain management and efficient distribution channels have changed. That is, the success of the enterprise will be driven by how efficiently it coordinates the differences in speed from the front-end to the back-end, on a 24/7 basis, while giving as much visibility and variability to the customer as possible.

There is only one way of accomplishing this – tuning the infrastructure and implementing the value chain. The enterprise must develop a technical architecture that supports, in real time, the full range of business interactions from employee, to customer, to trading community, to marketplace, all while providing a framework for content integration. Having the value chain aligned with the business strategy is key.

Excellence in fulfillment operations becomes a critical issue as competition heats up. Especially since they will require as much inter-company integration as possible, as customer retention rates will be a direct reflection of how well it works. Customers will demand instant turnaround on orders. The rate at which they come will vary widely and they will range from very small to very large. Promotions will be boosted by real-time price wars. From the business performance standpoint, customers and suppliers are better at measuring performance, so mistakes are more easily detected and the opportunity for improvement could be identified through new system capabilities.


Lessons Learned

Changes brought by the Internet, which must be addressed by the new business model, include the following business critical success factors:Eliminate the redundant and non-value-added steps between demand and fulfillment. Immediacy of demand drives production in the “value web” of today’s business systems, which create an open sourcing environment where the time between demand and fulfillment is measured in seconds or minutes. The enabled enterprise has progressed in its thinking and execution, from establishing a supply chain, to a value chain, to a value web. Emphasis has shifted from a series of serial interactions to “compressed” parallel communication that enables response in real time.

Integrate the supply chains and distribution channels to create value chains. Today’s business must support a spectrum of relationships that have advanced beyond using the purchase order and invoice as the primary documents of commerce. Relationships are established dynamically, leading to JIT collaborations. Enterprises will work together and then disengage. Market exchange sets the stage for dynamic brokering to create custom solutions. Increased global competition is forcing firms to band together to compete more effectively. Enterprises must look to structure new partnerships with the trading community, identify the most-valuable partner relationships, and develop recommendations to improve responsiveness to and from these firms.

Business in real time. The business is a 24/7 operation. Since the next provider of any product or service is only one click way, the enterprise must be poised to transact business quickly, which requires that it must understand its competitive positioning. Consumer, customer and partner inquiries can be answered online for immediate response.

Business-enabled enterprises have begun the process of identifying all the various repositories of data that could and should affect a consumer or customer interaction. They are developing an enterprise-wide process for standardization of content and context, as well as redesigning functions and processes among multiple departments for improved customer relationship management.

An enterprise must develop a technical architecture that supports business in real time. The architecture must support the range of business interactions from employee, to customer, to trading community, to marketplace and provide a framework for content integration.

A singular focus on satisfying client demand is the hallmark of the business. The business also realizes that service has become more important than products (assuming products are fungible). Consumers and customers, as well as employees and partners, are treated individually. The business-enabled enterprise grows continually more capable of serving the “market of one.” As power continues to shift even more dramatically toward the buyer, the enterprise must ensure that business intelligence is equally available to all employees.

Fixed prices transform into dynamic pricing models more reflective of market conditions. In addition, information itself has become a product the business-enabled enterprise can provide


to its customers to help them better manage their businesses, and as a result the enterprise is viewed as providing better service. Employees must be focused on meeting client demand and empowered with the information they need. The enterprise should examine additional services it could provide to its clients and the potential opportunity for providing information as a “product.”

Business is nothing if not agile. As entire industries are restructured, the enterprise must re-establish its position in the value web. To do so, it needs a strategy as a guide for a series of specific projects that will enable it to constantly realize its business vision. With each effort, the enterprise gains valuable insight to modify its course. In building business models, enterprises should be flexible and be able to ensure that the model can accommodate new customers and markets. Keeping track of the competition and watching for new competitors are imperative.


Top Questions to Consider

1. Has the company clearly identified the customers’ and suppliers’ desired service output level, in order to design and manage a value chain?

2. Were all channel alternatives considered in the channel selection process?

3. If the company needs to change channels or change existing channel participant terms or duties, how easily and quickly can it implement the change? Have product changes to address required channel changes been considered (e.g. the need to have more robust customer service applications because travelers no longer carry paper tickets)?

4. How open and effective is the communication between the company and its channel partners?

5. Does the company analyze the trend in distribution costs or other economic criteria (e.g. sales growth) through its current channels? Are alternative channels becoming less expensive or growing faster?

6. Do the channel partner competencies include logistics and marketing?

7. Has the channel conflict increased after the implementation of the value chain? Are there any channels overlapping each other and creating redundancy?

8. Has the company properly addressed the appropriate integration of various network technologies with other systems like ERP packages to enable efficient knowledge sharing at low communication cost?

9. Are the company’s supply chain-related systems properly integrated with Customer Relationship Management (CRM) applications and can a full picture of the customer’s relationship with the enterprise be considered when responding to their needs and wants?

10. Are the company’s Distribution Resource Planning (DRP) modules integrated as part of ERP systems and other analytical IT tools (using operational data and heuristics)?


channel effectivness questionnaire

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