Question

AWP uses information technology extensively to support its business. For example, AWP has been an industry leader in using electronic ordering techniques to reduce paperwork and overhead costs. Presently, many of AWP's customers submit electronic orders. These orders are almost instantly received by AWP's sales department and AWP’s finished goods warehouse. If the requested items are in stock, the order is filled and shipped immediately with a copy of a billing invoice. An electronic copy of the billing invoice is also sent to AWP's accounting office. If the requested items are not in stock, then an electronic message is sent from the finished goods warehouse to AWP's production shop so that the items may be produced.  

In the Albany Wood Products scenario, lines three and four imply the following involved in an external value chain (VC) linkage. Please note that the answer choices use Michael Porter's Value Chain terminology.

a) Customer and Inbound Logistics

b) Supplier and Sales

c) Supplier and Outbound Logistics

d) Customer and Sales

e) Accounting and Sales

Answer 1

According to Micheal Porter Their are 5 Primary Activities for value chain analysis

Operations

Inbound Logistics

Outbound Logistics

Service

Marketing & Sales

a) Customer and Inbound Logistics

Customer is any person who is willing to purchases goods or purchases goods for a price. Customer is one of the most important parts in achieving value addition of business. Because Profits and Sales of Businesses are directly dependent on and effected with customers. Inbound logistics is a value chain comprises of the accepting and warehousing of crude materials and their appropriation to assembling as they are required. Instances of inbound logistics are transportation, material taking care of, material stockpiling, interchanges, testing, and others. These are for the most part the procedures identified with getting, putting away, and appropriating inputs inside. Your provider connections are a key factor in making value here. Tasks – These are the change exercises that change contributions to yields that are offered to clients. Number of Customers Depends upon the Good or Bad Inbound Logistics. If Inbound Logistics are good then the Number of customers will also increase and vice-versa.

b) Supplier and Sales

A supplier may be a person or business that gives a product or service to a different entity. The role of a supplier during the business is to supply high-quality products from a manufacturer at an honest price to a distributor or retailer for resale.

Supplies are making available of the required stock in the owners' godowns or premises or warehouses as the case may be so that customer's requirements can be fulfilled on time. Demand and Supplies both are very integral parts of Value Chain. Sales are the total turnover which a business achieved by fulfilling the requirements of each customer of its business. For Example, if Some Customer Demands 10000 kilograms of electricity from XYZ company and XYZ company fulfills the demand of 10000 kilograms of electricity for any specific price per KG which both parties agree on let's say at here that price is $10 per KG. Then it is said that XYZ company had made a sale of 10000X10 Per Kg = $100000.

The bonding between a seller and a customer after a purchase has been made determines the customer’s choice when the customer has got to buy next time. this is often very true with products and services which are bought repeatedly as within the case of monetary services, consulting, and capital equipment.

In such cases, a company’s most precious asset is its relationship with its customers. Buyers of capital equipment, as an example, expect installation services, application aids, repair, and maintenance to stay the equipment effectively.

Products are getting increasingly complicated, and it's going to take years for the vendor to deliver the merchandise. Repeat negotiations are an excessive amount of a hassle and too costly. Under these conditions, a sale decision isn't a choice to shop for a product but a choice to enter a stretched relationship with the vendor.
The customer needs assurance at the outset that the 2 parties can work well together, during the long period during which the merchandise is going to be delivered, and therefore the period during which the merchandise is going to be functional. the guarantees and therefore the behavior of the vendor before the sale is formed, determine the customer’s expectations.

Most of the time people that make the guarantees aren't liable for delivering them. Somebody has got to take responsibility for the entire process when marketing plans, salespeople make deals with customers, manufacturing fulfills it, and therefore the service department services it.

The problem is compounded by the very fact that the selling, the marketing, the manufacturing, and therefore the servicing have varying incentives and views of the customer. The departments work to maximize their own interests which can not be within the best interests of the customer.

The natural tendency of relationships is toward a decline of sensitivity and attentiveness. A healthy relationship requires a conscious and constant struggle to stem the forces of abrasion. the vendor should regularly and seriously consider whether the connection is improving or deteriorating, whether the guarantees are completely being fulfilled, whether he's neglecting anything that's of importance to the customer, and the way he stands as compared to competitors.

The most convincing sign of a deteriorating relationship is the absence of customers’ complaints. No customer is ever satisfied, not a minimum of over an extended period of your time. The customer is either not candid or isn't being contacted. the vendor should step in to stem the rot if he has not heard from a customer for an extended time.

In a strong relationship, the partners are heavily hooked into one another . the vendor has got to create this dependency by volunteering to try to more things for the customer. a corporation puts computer terminals in its customers’ offices to enable them to order directly.

It creates a replacement link that ties the customer to the seller. during a strong seller-buyer relationship both parties share relevant information and are conscious of each other’s plans and expectations. Since the buyer’s expenses don't end with acquisition costs, the vendor should convince the customer of his long-term profitability if he bought the seller’s product rather than struggling to urge rock-bottom prices.

Unless the prices of the expected post-purchase services are reflected within the price, the customer will find yourself paying extra cash for mediocre products and delays. The financial health of the vendor should be important to the customer if he has got to continue getting good services from it after the sale has been made.
A company should require its engineering and manufacturing people to spend time with customers, not just to urge the merchandise or design ideas but also to urge to understand and to reply to customers in deep and abiding ways so on build relationships that last. Employees of the vendor organization need to listen and communicate with customers continuously and vigorously.

Trust between the 2 partners is that the confidence that one party won't exploit the other’s vulnerabilities. Building trust is well well worth the higher risks and lost flexibility that goes alongside it.

Relationships with higher levels of trust have substantially lower costs because the partners spend less time of their face-to-face communication time in negotiating prices or contracts or assigning blame for problems and that they have smaller purchase departments.

Companies which have low trust level spend nearly half their face-to-face time with suppliers on unproductive transaction-oriented matters, while the manufacturer with highest trust rating uses only 1 / 4 of this point on such matters.
Purchasers at the foremost trusting companies don't check materials of the suppliers and handle more goods per person, than companies that don't trust their suppliers. Companies that take an aggressive stance i.e., people who don't build trust with suppliers may have lower component costs than their less aggressive counterparts because they pit suppliers against each other.

But aggressive buyers lose call at the end of the day because they're going to miss out on potentially valuable information from suppliers. Suppliers and buyers who trust one another are willing to share tips.

The suppliers who trust their customers are more likely to supply ideas on designing and manufacturing components than those that have little trust. In turn, the manufacturers are more willing to share ideas about how the suppliers could improve their own manufacturing and distribution processes.

Trust, by keeping one side from taking advantage of the opposite is quite just an alternative to contracts and other rigid governance mechanisms. It actually adds value to the connection because it encourages the sharing of resources. In industries with uncertain environments, making an attempt to treat suppliers or customers as partners can bring substantial competitive advantage.

c) Supplier and Outbound Logistics

A supplier may be a person, organization, or other entity that gives something that another person, organization, or entity needs. During transactions, there are suppliers and buyers. Suppliers provide or supply products or services, while buyers accept them.

We commonly use the term ‘vendor’ with an equivalent meaning as ‘supplier.’

In business, for instance, every company has a minimum of one supplier. Suppliers supply or provide corporate with materials, products, and services.

Outbound logistics is "the process interlinked with the movement and storage of goods from the pinnacle of the assembly line to the topmost user," and it plays a critical role during a supplier's overall customer relationship management process.
Outbound logistics is the process of moving goods out of the business. The movement of material is associated with storing, transport packaging, and distributing goods to its end customers. The sales division first receives a sale order from the client.

d) The relationship between customer and sales:-

The Relationship Between Sales and Customer Support. ... For any business to achieve its highest levels, sales and customer support should work together in a cohesive existence. For Achieving Value Addition aims also there is extremely necessary as there should be a good relationship between customers and their sales.

e) Accounting and Sales

The business’s financial strength also will make a difference within the way sales and accounting work together, adds Oliver. There’s a really different approach when a business is asset-rich compared to a corporation with high debt levels and onerous banking covenants.

“This affects the strength of the business’s desire to realize its income goals,” he says.

Business structure is another factor. Entities with an easy structure, as an example, those operated by an owner-founder, will take a special approach from professional services businesses. Hierarchical organizations tend to possess more formalized interaction and reporting between sales and accounting.

“In a replacement organization, the entrepreneur might be sales-oriented and hire employees who sort of a challenge. In contrast, during a skilled business people’s actions and behaviors tend to be guided by their job descriptions and KPIs,” says Oliver.

Embedding commercial accounting roles during a business
Frieda Maher CPA, the principal consultant of sales consultancy SalesPod, agrees the structure of the business may be a determining factor when it involves the link between the accounting and sales teams. She suggests embedding commercial accounting roles within the business to assist achieve shared goals. this needs accountability around achieving leading metrics, prospective activities, and behaviors that drive sales.

“While accountants don’t generate leads, they will ensure lead metrics are fit to purpose, by backtracking from the revenue target,” she says.

Some of the info that it's essential to live includes leads coming through the pipeline and sales conversion rates. Measures like these are essential inputs to targets.

“Accountants can help sales managers understand how these metrics work and the way they could measure their team’s behaviors to realize their target revenue,” Maher explains.

AWP should consider above principles of Micheal Porter for achieving its Value Chain and Value Addition Purposes.