Abstract
Supply chain management (SCM) is an important organisational concept that describes all processes connected to developing a product, managing supplier relationships, working with distributors and ensuring that customers are satisfied. The broad scope of tasks and issues that SCM resolves within an organisation implies a need to use the best practices, such as the value proposition, to manage these processes.
Appropriate SCM is essential for any company since it connects all elements of production and aims to increase the value of the offering for a customer. In the case of Voko-Ninja, the fact that this is a startup company makes it necessary to consider the relationship between innovation and SCM, using Foster’s S Curve. Based on the fundamental literature and assumptions about this business, the Business Canvas Model is developed. The recommendations for the company include outsourcing the functions of testing and managing customer relationships. The main focus should be on human resources, or developers, who will help Voko-Ninja complete its artificial intelligence (AI) application.
Introduction
The domain of supply chain management (SCM) encompasses varied tasks that allow a consumer to receive a product or service. In essence, this umbrella term relates to all activities a company such as digital application developer Voko-Ninja has to complete to deliver its final service to the customers. As such, SCM must consider the strategic vision and plan for the development of this startup.
As a technology startup, Voko-Ninja employs developers working on the companies’ digital applications and a management team. Some of the developers and specialists, including marketing and customer support, are employed as freelancers or managed through an outsourcing organisation, based on the needs of the company. The main scope of operations of Voko-Ninja is the artificial intelligence (AI) product that can enhance the presentation process, which is especially relevant for students and educators.
Hence, this report will focus on developing a supply chain management strategy for the AI presentation application for Voko-Ninja based on the best practices of SCM. The objectives of this paper are to define SCM, its concepts and theories and apply these ideas to the business case of Voko-Ninja, to ensure the establishment of a supply chain that will help deliver the AI presentation software to the clients. The purpose of the paper is to review the supply chain management current literature, which examines the SCM, analyse its practices and offer recommendations for the startup Voko-Ninja that will help them introduce their AI presentation solution.
Literature Review
Firstly, one should define the concept of SCM using the existing literature. According to Chopra and Meindl (2016, p. 13), this practice deals with “all parties involved, directly or indirectly, in fulfilling a customer request.” This definition signifies the complexity of SCM since it incorporates all components of operations, including product development, marketing and customer service. It is essential to understand that the supply chain is a dynamic structure, fulfilled with continually changing information, product quantity and allocation of funds during different stages of product development, production and distribution.
Chopra and Meindl (2016) also highlight the importance of the “chain” as the primary concept in the examined domain, since the process of product manufacturing involves a network of connections between suppliers, manufacturers and distribution companies. Each element of the system contributes to the two main goals – delivering the product to the customer and generating profits. Figure 1 illustrates the connection between different stakeholders of the SCM in a forwards supply chain model. In general, Chopra and Meindl (2016) provide basic concepts necessary for understanding the SCM.
Next, it is necessary to define some of the key terms and concepts used in SCM. End to end (E2E) supply chain management is based on interoperability or the ability of different elements of the supply chain to work together effectively (Sharma, 2018). The primary benefit of the E2E approach is the ability of the companies, specifically large businesses, to have better control over different operations. According to Connel (2019), the core principle of E2E is the elimination of third-party input within the supply chain.
This presents a company with full control over its operations and product development but can be challenging to carry out. Connel (2019, para. 2) explains the philosophy of E2E as follows – “a holistic E2E Supply Chain integrates all revenue and expense streams.” This SCM strategy is helpful, especially in the cases of startup companies because they allow one to have better visibility of the processes, more specifically the design and customer relationship stages, getting valuable feedback from the latter to enhance the former.
The efficiency of operations within all elements of the supply chain, which allows to lower costs by eliminating unnecessary, is the primary aim of SCM. Moreira, Ferreira and Zimmermann (2018) focus on the specifics of SCM in the context of innovation, which is especially relevant for Voko-Ninja since this company aims to introduce an AI-based product to the market. Innovation is a fundamental element of any industry’s development. In the context of SCM, this means having an initial idea that can introduce a novelty to the consumers and developing a plan that will be used to create the final product.
However, issues with SCM and innovation exist, since, in the first stages of product development, the consumers and the suppliers usually show little interest in the item (Yui-Yip, Adolf and Jorge, 2019; Hugos, 2018). Hence, overcoming this period and reach a stage of high demand is crucial and should be considered when aligning the SCM strategy with the organisational goals. In order to leverage the innovation in the context of SCM, the upstream and downstream business processes should be considered, and the supply chain integration and cooperation have to be improved.
Supply chain management relating to startup technology companies differs since much attention should be dedicated to the aspect of delivering the final product to the client and highlighting the value proposition. Moreira, Ferreira and Zimmermann (2018) point out the specifics of innovation and its connection to the SCM, which is a critical element of any startup enterprise. The concept of the “S Curve” developed by Foster highlights the fact that any new technology introduced to the market emerges below the existing one in the S carve graph. Through development and improvement, this innovation exceeds the capabilities of the current product.
Figure 2 presents the S curve that explains the change in connection with the performance, time and costs. The main idea displayed through this curve is that each technology innovation proceeded to its near-peak position until a newer and more convenient product was introduced, which initially appeared unattractive for the businesses.
Next, it is essential to note that there are several key concepts of SCM, including the Business Canvas Model and the value proposition. Bland and Osterwalder (2019), Imke (2016) and King (2017) explain the application of the Business Canvas Model, an alternative to a business plan, which outlines critical activities and components necessary to produce a specific item or service. Bland and Osterwalder (2019) point out the need to focus on the team, which will be working on the final product, as the main element of the production process.
These individuals must be dedicated, funded, and autonomous, and since Voko-Ninja is a digital application company, adequate human resources practices should be the key focus for this business. This is also substantiated by the research from Angappa, Nachiappan and Shams (2017), who state that the effectiveness of the supply chain relies on the management practices and people engaged in product delivery. Human resources and their management is, therefore, an essential component of SCM.
The value chain is an essential notion for the SCM since the main goal is to enhance the value of the offering from the consumer’s perspective, which in return benefits the business because it allows a company to be more competitive. Other fundamental works that help understand the importance of the value chain are by Huggos (2018), Mangan and Lalwani (2016) and Deloitte Insights (2019) will be used to analyse Voko-Ninja. This notion refers to all actions and operations that an enterprise performs to manufacture or create its products.
As was mentioned in the paragraph that defined SCM, the primary purpose of this practice is to satisfy the customer by providing them with the necessary product or service. In the context of a technology-focused company, several key challenges arise, such as the need to keep up with the continuous innovational development and decrease the speed to market (Supply chains for high-tech companies no date). Moreover, the complexity of the product and the novelty of solutions offered by startups such as Voko-Ninja suggests that supply chain managers have to focus on lowering costs and maximizing return on investment (ROI).
Additionally, the speed to market, which is a concept that explains the time necessary to deliver the final product to the consumer (Deloitte, no date). This is a crucial challenge of many companies, which can be resolved with a focus on product management.
Analysis
Notably, the case of Voko-Ninja has several specifics, which determine the supply chain methodology and concepts. This is a startup company that has already worked on several digital applications but currently wants to explore the market of AI and presentation software. This suggests that Voko-Ninja already has an established team with experience in delivering a technology product to the market, however, in this case, the novelty of the product is the primary challenge to supply chain management.
Current State
The business canvas model presented in Figure 3 below displays the main elements that the company should consider in its SCM plan. There are two primary customer segments that Voko-Ninja focuses on – educators, such as teachers, professors, instructors and students who have to carry out the presentation as part of their job or education process. In the context of the E2E model, it is better for Voko-Ninja to use its own team for the development, marketing and management of customer relationships. In regards to critical activities – Voko-Ninja has to employ a team of mobile application developers and experts in the field of IT, as well as Business Analysts, Project Manager and QA testing team to address all stages of developing the application.
Once the product is introduced to the market, Voko-Nonja will be responsible for supporting customers, creating updates and eliminating bugs that do not allow the software to work effectively. Therefore, the critical activities for this startup relate to the provision of a platform and AI-based service. The value proposition, in this case, is the ability to conduct presentations more quickly, without focusing on the process of displaying slides. This also includes minimizing the amount of equipment necessary for a single performance which overall results in a more cost-effective service.
The most consistent revenue stream for Voko-Ninja would be a subscription for several reasons. Firstly, customers using digital applications are used to this approach since a large number of well-established technology companies use it – including Google, YouTube, Apple and others. Secondly, this allows Voko-Ninja to receive revenue on a monthly or annual basis and work on customer retention. For instance, students who need Voko-Ninja’s service will be able to purchase a subscription for three years without having to pay a large amount of money that will provide them with access to the software they will only need for the mentioned three years while they are studying. Finally, this approach will help Voko-Ninja sustain the platform for its service and continue working on updates.
Distribution channels may involve Voko-Ninja’s website for direct to consumer sales. Additionally, if Voko-Ninja introduces the application for digital devices, it will be able to offer the product through Google Store and iOS store for smartphone users. Notably, the two platforms will handle payments and subscriptions. However, Voko-Ninja will have to pay a commission for the service. In this regard, Voko-Ninja will have to focus on marketing its product to raise awareness about it and on customer support as part of the distribution channel management.
Essential resources are the intellectual property or the code that will underline the work of AI and digital application. The majority of physical resources necessary for developing this product are already available to Voko-Ninja, – including an office building and hardware for application developers. Human intellectual assets are the core elements of this domain – Voko-Ninja employs developers and managers capable of working on this AI project. Financial resources necessary for the development can be obtained from venture capitalists.
The self-service model is the most appropriate one for this AI technology since Voko-Ninja focuses on b2c sales. Within this strategy, the users will be provided with guides and all essential functions and updates will be described in articles. Moreover, customers will be able to contact support in case an issue arises. The cost structure is a crucial aspect of software development since approximately 80% to 90% of spendings is dedicated to testing the application (Using business model canvas, 2018).
The rest is divided between innovation development and supporting the operations, which suggests that Voko-Ninja will have to focus on establishing a sustainable testing department for its application. Staff costs will be the central aspect of spending since as was mentioned, human resources and intellectual property are the critical components of SCM in the case of Voko-Ninja. Finally, the key partnerships include outsourcing of analytics, testing and customer support.
Therefore, currently, SCM is a well-developed discipline widely applied by practitioners in manufacturing and product development. In the context of this, the primary strategies for selling the product to consumers should be identified. This means that Voko-Ninja can benefit from using the best practices when designing its operations for the AI service. The value chain analysis and the business canvas model suggest that Voko-Ninja does not have t cooperate with outside suppliers for developing and providing customer support for this product.
Best Practices and Benchmarks
Supply chain surplus is the customer’s value minus the actual cost of the supply chain itself. Since the objective of the best practices in SCM is to increase value, which refers to consumer surplus (Chopra and Meindl, 2016). In this regard, it is crucial to distinguish between the price of the software and its importance, since the latter refers to the cost, which the customer wants to pay for an item and it can exceed the initial price.
Moreover, if a company fails to administer and enhance its supply chain, it may struggle with the competitive advantage since the only distinct feature of its products will be the price. Payne, Frow and Eggert (2017) examine the issue of value proposition and state that this concept is critical to ensuring that the customers understand the features and benefits of the product. The authors examine varied definitions of this concept, for example, as stated by Muller, “a value proposition describes how value is created for customers and clarifies the kind of value that is delivered through products and services” (cited in Payne, Frow and Eggert, 2017, p. 469).
SCM and value management are connected because both concepts aim to provide customers with high-quality products at a reasonable price. Therefore, the leading benchmark for Voko-Ninja is to deliver an AI-based product at an acceptable subscription price, within the next year to ensure that the company is ahead of its competition.
Future State
The example of Voko-Ninja highlights the fact that in the future, SCM will be not only focused on the logistics of delivering supplies from a supplier to a manufacturer and then to a retailer. Instead, it will focus on a more difficult aspect of the value chain and innovation is an essential element of this change. For example, Kshetri (2018) state that blockchain technology is a critical element in SCM. Kshetri (2018, p. 80) argues that this approach will “affect key supply chains management objectives such as cost, quality, speed, dependability, risk reduction, sustainability and flexibility.” The primary goal of this novel approach is to increase transparency and improve accountability across the continuum of a supply chain.
Blockchain technology allows different elements of the supply chain to establish trust, communicate and cooperate more efficiently when compared to standard SCM because it will enable verifying each stage of the product development. Strategic, operational and tactical activities must be considered when designing an SCM network. Direct to market sales, primarily through e-commerce platforms, are becoming increasingly popular in SCM since they mitigate redundant systems. This strategy implies that instead of cooperating with a distribution company or a retailer, the business develops its own sales channel and uses it for sales.
Performance Improvement
As one can conclude from the literature review, Voko-Ninja can benefit from an SCM system because it will help decrease the cost of software development and improve operational efficiency. The technologies and practices described below can be used to improve the performance of the SCM for Voko-Ninja. The current state of technology allows collecting and analysing the quantities of information unimaginable before, which is especially relevant for SCM and its optimization. Predictive analytics, as part of Big Data, can help improve both the design and competitiveness of a supply chain.
According to Schoenherr and Speier-Pero (2015, p. 120), the use of Big Data can aid supply chain managers to make “more informed decision-making capabilities, ability to improve supply chain efficiencies, enhanced demand planning capabilities, improvement in supply chain costs and increased visibility.” Therefore, the nature of SCM will change, as this domain will rely more on the statistical information, industry trends and analysis of customer purchasing patterns. Wang et al. (2016) also highlight the connection between BigData and Business Analytics in the context of supply chain management. In general, this approach should help companies lower costs associated with existing supply chains through optimization.
Strategic sourcing refers to the management of supplier relationships, focused on cost-effectiveness. Using computer algorithms, supply chain managers can analyse the spend profiles, procurement, plan and strategic objectives of a company. Next, using data about suppliers, including market dynamics and economics of a specific supplier, the algorithm will be able to detect sourcing strategies that ensure cost-effectiveness. Although the reviewed literature suggests that technology will become an integral part of SCM, currently, these ideas are only based on predictions of industry specialists.
AI is another technological innovation that helps business entities make better and more informed decisions. Additionally, Schoenherr and Speier-Pero (2015) argue that big data and analysis will become essential for SCM. The application of algorithms and the use of analysis techniques that allow collecting and reviewing a broad scope of information can significantly improve the SCM and contribute to the bottom line.
Gap Analysis
In order to determine supply chain management gaps, it is necessary to examine the critical aspects of this project – delivery time, lead time and quality. For Voko-Ninja this includes conducting a customer analysis, establishing a team for the AI-assisted presentation product, carrying out the activities necessary to develop the code for the software, testing it and finally presenting it to the customers. Voko-Ninja wants to develop, test and manage its AI application. However, it does not have the human resources to carry out the task. Therefore, the median gap in performance is the employees responsible for carrying out these tasks. Additionally, Voko-Ninja does not use Big Data analytics, blockchain, or other technology to manage its analytics and supplier relationships.
Roadmap
The supply chain roadmap is a method used to create a cohesive plan for managing all aspects of production and aligning them with the strategy of the business. Considering the strategic vision of Voko-Ninja, the roadmap should focus on completing and presenting the final product – AI presentation software, testing new features and implementing them. Currently, Voko-Ninja is a digital application company, with several successful projects, an established customer base and experience in developing applications. The company wants to become a leader in the industry of presentation software by introducing cost-effective and efficient software.
Also, it employs a team of developers and managers capable of working on the project. However, to achieve the final aim, Voko-Ninja will have to hire several specialists experienced in AI development, work with an outsourcing company for customer support and analytics.
Conclusion
Overall, this report reviewed the main characteristics of SCH and its components. SCH encompasses all the processes that directly impact the process of delivering the product to the consumer, including manufacturing and logistics. The business canvas model and analysis of the value chain allowed determining the essential aspects of the new AI service – the b2s sales model, subscription revenue stream and intellectual property as the leading resource.
Recommendations
The main challenge for a startup is to carry out the move from establishing a product idea to developing it and introducing it to the market, which, due to limited vital resources may be difficult. Voko-Ninja is an information technology (IT) start-up company, meaning that there are several factors, which will be considered when developing the plan for the product launch. Firstly, it is necessary to examine the goals of Voko-Ninja that the company has for its AI presentation project to begin designing an SCM network. Next, the roadmap for the product must be developed, which highlights the main advantages, benchmarks and self-assessments associated with this product.
In accordance with the E2E model, Voko-Ninja can focus on developing its AI software in-house. The main focus should be on hiring a team of developers experienced in AI since although Voko-Ninja already employs coders, the domain of AI is relatively new for the company. To enable the efficient work of these individuals, Voko-Ninja will have to secure an investment from a venture capital firm, since the average salary of an AI developer is estimated at £82,500 a year (Artificial intelligence developer UK, no date).
For the functions of testing the application and provin=ding customer support, Voko-Ninja should partner with an outsourcing company. This should be more cost and time-efficient since the company will not have to focus on hiring, training and managing these specialists. Finally, Voko-Ninja can employ innovational technologies of supply chain management, such as blockchain, Big Data analytics and AI to enhance its performance.
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