Risks and their Impacts On Value Chain

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Risks and their Impacts
On Value Chain
1.
Customer / Market Knowledge
Impacts
Risks
1. Inadequate Data base and Information
2. Non reliable sources of Data and
Information
3. Conflicting / unrealistic expectations
1. Wrong segmentation of Customers /
Markets
2. Misleading input for Concept
Development
4. Long, complicated questionnaires
3. Too small a data for use in extrapolation
5. Research report incomplete or outcomes
4. Product may not meet customer’s
based on partial information
requirements
http://www.greenbook.org/marketingresearch/understanding-market-research-challenges-hm01
Coca Cola lost Millions because of Market Research Mistake
 In the mid- 1980s, Coca Cola made decision to introduce New Coke.
 Almost 200,000 blind product taste tests were conducted in the USA.
 More than 50% of the participants favored “New Coke” over both original formula
and Pepsi.
 The product was introduced and the original formula was withdrawn from the market.
This turned out to be a big mistake!
 They assumed that taste was the deciding factor in consumer purchase behavior.
 Consumers were not told that only one product would be marketed.
 They were not asked whether they would give up the original formula for New Coke.
 No one realized the symbolic value and emotional involvement people had with the
original Coke.
http://www.qualtrics.com/blog/coca-cola-market-research/
Fig. 1 : New Coke, mid 1980s
2.
Concept Development
Impacts
Risks
1) Inadequate Customer / Market
Knowledge
2) Targeting wrong customer segment
and value proposition
3) Non usage of research data for
product conceptualization
4) Changing customer/ market needs
1) Misfit of product in the market
2) Possibility of product non acceptance
3) Technology may not meet customer
requirements
4) Delay in development and recurring
R & D expenses
3. Product Design, Development and Validation
Risks
Impacts
1) DFMEA not robust- all failure modes
1) Less reliable product
not considered
2) Poor performance
2) Wrong input parameters selected
3) Increased warranty cost
for design and validation
4) Increase in Product cost
3) Inadequate Prototyping and Testing
5) Loss of customer confidence
4) Fluctuating Fuel prices
5) Government policies
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
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Ford Edsel’s Design, Development and Validation failure
The Edsel was designed, developed and manufactured by the Ford Motor
Company during the 1958, 1959 and 1960.
Its "horsecollar" or toilet seat grille was disliked by the customers.
The Teletouch pushbutton automatic transmission selector was designed on
the steering wheel hub.
Some drivers inadvertently shifted gears when intended to sound the horn.
Boomerang-shaped tail lamp lenses placed in a reverse fashion/ confusing.
The Company lost about $400 million on the Edsel project.
Fig. 3 : Ford Edsel, 1958 Model
Fig. 2 : Teletouch Pushbuttons
http://en.wikipedia.org/wiki/Edsel#Design_controversies
4. Supply Chain Management
Suppliers
Material
Management
Logistics Providers
Production
process
Manufacturer
Information
Management
Operational Supply Chain Risks
Globalized and outsourced supply chain
processes, enablers and partners
Design
Process
Wholesalers
Demand
Planning &
Forecasting
Partners of
Supply chain
Financial
Management
Key
Processes in
Supply chain
Disruption Supply Chain Risks
Supply Chain Risk Management
Social, cultural, legal, political and
economical
Supply
Risks
Demand
Risks
• Supply Cost
• Supply
Commitment
Process
Risks
Retailers
• Uncertain demand
• Uncertain Product Mix
National / International
Regulatory and
compliance Risks
Intellectual
Property Risks
Downstream partner
Behavioral Risks
Political /
Social Risks
Source: www.metricstream.com › Solutions › Corporate Governance
Elements of Cost for a vehicle
80%
Major contributor
Hence, more focus
required.
70%
60%
50%
40%
30%
20%
10%
0%
Direct Material Cost
(DMC)
Fixed Conversion
Cost (FCC)
Variable Conversion
Cost (VCC)
4. Supply Chain Management
Risks
Impacts
1) Unfavourable supplier locations
2) Poor R & D orientation / emphasis
3) Unreliable manufacturing Supplier
Processes
4) Single Source supplier or
monopolistic situation
5) Unhealthy or “unbalanced”
1) Production Losses
2) Inferior quality of product
3) Inconsistent product performance
resulting in recalls
4) Loss of OE’s reputation
5) High inventories due to unreilable
supplies
Balance sheet
http://www.husdal.com/wp-content/uploads/2011/06/product-design-change-supply-chain-risk.jpg
http://ar2009.daimler.com/en/management-report/risk-report/industry-and-business-risks.html
Boeing 787 Dreamliner took Two-year delay to its Launch

Outsourced 60% of the design and production, 50 suppliers (28 outside U.S.)

To reduce the 787′s development time from six to four years

To reduce development cost from $10 to $6 billion

The new outsourced Supply Chain couldn’t deliver components on time

Due to shortage of fasteners as well as incomplete software

Components won’t fit together when the plane was being assembled

Project results billions of dollars over budget

Three years behind the schedule
Source: http://www.designnews.com/document
Fig. 3 : Boeing 787 Dreamliner
5. Facility Planning and Manufacturing
Impacts
Risks
1) Wrong or inflexible equipments
capacity and hence loss of sales
and mfgg. facilities
2) Inability to deliver new / modified
2) Over / Under capacity
products quickly
3) Inadequate emergency
preparedness – IT and non IT
4) Inconsistent Process capability or
inadequate quality control checks
5) Lack of scalability – both
“upwards” and “downwards”
1) Unbalanced utilisation of manufacturing
3) Increase in rejections – loss of
productivity
4) Production disruptions due to
unforeseen events such as data loss,
fire, disruptions in incoming semifinished goods etc.
(http://www.husdal.com/wp-content/uploads/2011/06/product-design-change-supply-chain-risk.jpg)
http://www.emergency-response-planning.com/blog/bid/37472/Facility-Risk-Management-Planning
6. Dealer / Distribution Chain Development
Risks
1) Long and weak distribution
chain
2) Poor logistics / high cost of
logistics
Impacts
1) Delayed delivery of products to
consumers – loss of sales
2) Cost to consumer or loss of contribution
for OEMs
3) High distribution and PDI cost
3) Migration of customers to competitors
4) Inadequate education and
4) Inadequate product support resulting in
Training to Dealers
dissatisfied customers
(http://www.husdal.com/wp-content/uploads/2011/06/product-design-change-supply-chain-risk.jpg)
7. Marketing
Risks
Impacts
1) Unclear Marketing communication
2) Lack of reach
of customers
3) No communication in untapped
markets
5) Vernacular language / local
references
2) Untapped potential offering
space to competition
4) Communication of USPs and
superiority over competition
1) Risk of product failure and loss
3) Confused consumers – risk of
product failure
4) Reputation and brand value
erosion
(http://www.husdal.com/wp-content/uploads/2011/06/product-design-change-supply-chain-risk.jpg)
8. After Sales Support
Risks
Impacts
1) Poor Network of Customer
Care Centers
2) More Time To Repair /
Replace
3) Lack of trained technicians
and proper tools / diagnostics
4) Unavailability of adequate and
timely spare support
1) Inconvenience to Customers
2) Anxiety of Customers
3) Dis-satisfied customers and hence
no positive referrals and word of
mouth publicity
4) Long term impact on current as well
as future products
http://www.managementstudyguide.com/after-sales-service.htm
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