Widget maker

But the pharmaceutical industry isn t like any other industry. By virtue of what it produces—and the respect it demands for what it produces—it does carry some social service obligations. The public expects drug makers to be more ethical than the proverbial widget makers prescription drug commercials prompt public outrage in a way that McDonald s ads do not. If the industry is ever to gain the public s trust, more companies will have to behave like the old Merck. In fact, Merck will have to behave like the old Merck. 

The forecast of 100,000 units is accurate. 100,000 units are sold and the product result matches the plan. The supply chain and product managers are heroes. The result is shown in Table 6.3. Sales falter only 70,000 units are sold. The widget maker must dump 30,000 units of inventory in a bulk sale at a 50 percent discount. The product manager is reprimanded the supply chain manager is okay because distribution costs for full-priced units are within the 10 budget. The result is shown in Table 6.4. The cost of the inflexible supply chain, the market mediation cost, is 300,000. This is calculated as the 10 loss per unit for the 30,000 units sold at discount. 

Sales falter only 70,000 units are sold. The widget maker must dump 30,000 units of inventory. The inventory must be sold at discount prices. The product manager is a goat the supply chain manager is okay, since distribution costs are within budget. 

So making money out of the supply chain, applying Fisher s model, has two branches. For the functional product, it means innovations to reduce the supply chain cost associated with distribution. For the innovative product, it means reducing total costs, including market mediation. This is a more complex equation as we demonstrate in the widget example. It involves not only the traditional costs but also those associated with mismatches in demand and supply. Companies like our widget-maker have to decide if the extra... 

Like conventional systems, proactive systems center on major processes. What proactive systems add is a focus on decision-maker needs in those processes. Decision makers fulfill roles in the process based on customer needs. Thus, where decisions are required, such as the case of our large widget order, the proactive system uses preset rules to process information. This processing then routes information to decision makers, following those rules. 

In Figure 30.2, the decision maker is at the center. Extending the example of our widgets, this decision maker is a planner buyer. Inputs from the external environment of suppliers, customers, and other departments either pass through existing applications such as the order entry system or go directly — by e-mail, for example — to the decision maker. The arrows represent data transactions within the system. 

For example, the rules could notify the planner buyer by sending a message about the large widget order. They would assume that the decision maker would know what to do. The workstation would signal the planner buyer about the order. This automated contact makes it proactive. ... 

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