Electric Business War: Price war Bluff supply chain war lurking murder

Preamble

In recent years, with the vigorous development of E-commerce, China's retail industry after experiencing the traditional department stores, chains, supermarkets, category supermarkets and other industries, into a new business model-e-commerce business. A new form of production, inevitably accompanied by a group of new enterprises flocked into, these enterprises, including the new E-commerce enterprises, but also from the traditional mode of business transformation from the electric business. The entry of these enterprises will inevitably trigger a series of brutal competition, and then the fittest. And the most direct means of competition between them is price. The electric business enterprise hopes through the price war, impels the market share the division.

Can the electric business enterprise only obtain the advantage by the price PK? In fact, the real competition between them is not necessarily the price.

The beginning and the beginning of electricity price war

August 14, Jingdong CEO Liu to a micro-blog high-profile launch price war, muzzle pointed at Su Ning, while involving other electric companies, Su Ning, Gome, when the announcement of all-out efforts to take, quickly evolved into domestic electricity industry price melee.

This drastic price war seems to be the electricity dealers frequently reduce prices, consumers most benefit, but the consumer in the actual process of shopping, found only 4.2% of the price of goods is over half out of stock, slow delivery, price steal up and model different prices and so on. After this farce, the reputation of the Beijing-east and other electric dealers failed to improve, but exposed many weaknesses in the supply chain, even endanger the integrity. More trouble came, the electric dealers were investigated by the NDRC, was identified suspected price fraud.

Despite the post-war result "a feather", but carefully think, the electricity dealers to carry out price war also has its helplessness and consideration.

On the one hand, jingdong pull the trigger or its IPO rhythm adjustment, to improve performance and visibility for the market paving the way; On the other hand, the macro-economic impact of home appliance exports slowed significantly, many home appliance companies have suffered a severe decline, coupled with the financial crisis in China to expand domestic consumption policy expires this year Home appliances companies need to take new action to boost consumption.

However, in the current economic situation, the price war is the only way to attract eyeballs and improve the performance of electric business enterprises?

The key to the success of electric business enterprises

People who have studied economics know that price strategy is a magic weapon for enterprises to attract consumers ' consumption. But the electric business enterprise is in the homogeneous product market, the competitor's response to the price adjustment is opposite type--you reduce prices, I also reduce prices; you raise prices, I also increase prices, and the same or small price difference does not change the consumer habits. Therefore, the price strategy does not play a substantial role in acquiring market share and improving performance for the electric enterprises.

However, in addition to the price strategy, the quality and reliability of the service is listed as another great magic weapon to attract consumer consumption. Here may wish to talk about a small experience of the author.

The author has been in Jingdong Mall, Suning and Gome shopping mall ordered goods, the purchase price is not too big difference, but the supply efficiency and quality of service is quite different. From the point of view of logistics, the shortest delivery period, the next day to receive the goods ordered, and the order detailed records of the distribution of the entire distribution process; Suning second, take two days, and the United States the worst, 32 days after the system to show the library, but did not show the library and distribution time, three days before arrival. From the return link, only Jing-dong accept unconditional return. Relatively speaking, regardless of the price, the author is willing to spend in Beijing east.

To this end, even if many of the company's performance is still on the decline, the price is not the key to the success of electric business enterprises. Electric business enterprises should think more, find a solution to the problem, Noah. The Institute believes that in the future competition in the real invincible power of the electric business enterprises will surpass price competition, but to supply chain management to meet the customer's greatest demand, improve service levels, this is the most fundamental way to win the electricity business.

Supply chain management of electric business enterprises

Supply Chain Management (Supply Chain Management, SCM): Refers to a certain level of customer service, in order to make the entire supply chain system cost to the minimum and the suppliers, manufacturers, warehouses, distribution centers and channel operators effectively organized together to carry out product manufacturing, transshipment , distribution and sales management methods.

Traditional electric business enterprise supply chain management is a kind of marketing mode which is oriented by purchasing cost and production cost, making price strategy according to the stock situation and purchase price of commodity, and selling the goods to the electric trader consumers in a planned way, and ordering the suppliers in time according to the consumption of the goods. There is a competitive relationship between suppliers and electricity dealers, which is the core of "price negotiation", while the consumers are only passive recipients of the types, prices and services of goods.

Based on this marketing model, inevitably, there will be many problems: the various entities in the supply chain operate in isolation, lack of effective information and coordination strategies, low distribution efficiency, high inventory levels and long waiting time for goods supply, however, the hidden costs of these problems will be passed on to consumers, making them the biggest victims.

Nowadays, with the change of consumer behavior, technological innovation and increasing competition pressure, a new supply chain management model emerges. The so-called new supply chain management is a consumer-led business management process, based on consumer demand, products and services are driven by demand, so as to achieve from the end consumer to the supplier of a process.

The new supply chain management expands the concept of traditional supply chain management, its core is to meet consumer demand, create outstanding customer value, the goal is to form an efficient information flow through the integration of the platform, so as to break the supply chain of all aspects of the enterprise boundary, to obtain the synergy of the whole chain and achieve strategic cooperation between enterprises.

The magic of supply chain collaboration

In recent years, the supply chain management strategy Collaboration of the retail enterprises (including The Electric Company) has been widely recognized by the industry, in addition, for example: Wal-Mart's growth as a retail giant is the key to its low-cost strategy, but the efficient supply chain management system for its low-cost strategy to provide the basic guarantee.

So what is the magic of strategic collaboration in supply chains? Why make Wal-Mart a retail giant? Why is it so sought after?

One is to achieve efficient customer response. In the internet age, consumers are prone to mutiny. Can the supply chain collaborate in a timely manner to understand the changes in consumer demand? Which consumer shopping frequency has changed? Is this the promotion strategy right? Then the targeted analysis, and then set up efficient consumer responsiveness, so that consumers demand signals and enterprises back to the supply chain synchronization, so as to effectively avoid out of stock, commodity surplus, distribution errors, high inventory level problems.

Second, can enrich the content of cost management, bring the potential to reduce costs. The efficient supply chain cost includes not only the traditional storage management cost, transportation and distribution cost, financial cost, but also the cost of information technology system, internal process and cross enterprise cooperation, through enriching the content of cost management, compressing the cost and guaranteeing more profit space. International experience shows that overall supply chain collaboration brings the cost reduction potential of 3.4% of the retail price of goods, including logistics cost savings of 2.5%, marketing opportunity cost savings of 0.9%.

Three is, can form a "win more" result. In addition to cost management, it is also important to win over the supply chain management of electric business. Electric business enterprises are becoming more and more aware that as the upstream and downstream of the industrial chain of suppliers and electrical business, mutual support can grow together. Europe's empirical figures show that efficient supply chains reduce the order cost, transport costs, inventory costs, inventory management costs and inventory capacity requirements of manufacturers and retailers by 80%, 40%, 60%, 3% and 60% respectively, with profit increases of 20% and 42%, and the ability of goods services to be increased from 97.5% to 99.7 %。

Supply Chain Design

The ultimate service target of the electric business Enterprise is the consumer, the consumer considers is to want in the appropriate place, at the right price buys the suitable product, but three appropriate but involves the supply chain management all aspects. Therefore, in order to establish a consumer-led efficient supply chain, we need to focus on three aspects.

First, take the consumer's demand as the starting point. "Customer" has replaced the "commodity" as more and more electric enterprises in the mouth of the key words, consumers are both the terminal supply chain, but also the supply chain of all business source power. Therefore, the electrical business enterprises to determine consumer-oriented products and services, production and sales in demand-driven supply chains, in other words, the need to understand what products and services are needed for consumers and markets, and then design supply management, order sales processes, electronic mall delivery frequencies, and manufacturer's distribution structure, So as to effectively avoid the phenomenon of inadequate or surplus service.

Second, the supply chain management Synergy plan as the core. To provide rapid response to consumer demand is the key to improve the competitiveness of electric business enterprises, common purchasing plan, production plan, inventory planning, out of stock plan, distribution plan, to improve the agility response to demand change and to achieve a virtuous cycle of inventory and demand through CPFR (collaborative supply chain inventory management) and suppliers. Reduce cost and supply time, effectively control inventory level, achieve minimum inventory, improve the entire supply chain process reliability, flexibility.

Finally, the integration and optimization of supply chain. The aim of the electric business to optimize the supply chain is to reduce the cost of supply chain, speed up the market reaction and improve the service level. Transaction integration, process integration and organizational integration are the three key actions of supply chain optimization.

Transaction integration is the foundation of the whole supply chain integration, the coordinated operation of supply chain is built on the basis of high quality information transmission and sharing in every link, the driving force of the supply chain is the consumer, the electric Business Enterprise collects the consumer's demand information through the data exchange and the customer order information, the Customer preview webpage Quickly reflect the changes in customer demand and deliver the information to the supplier in an accurate and timely manner.

Process integration is the key point of supply chain integration, the standardized process can better meet consumer demand and increase revenue. For example, in order to prevent the phenomenon of the frequent occurrence of goods, the establishment of a "continuous replenishment system", timely understanding of the sale of goods and inventory situation, and then adjust the procurement and replenishment plan, to prevent unsalable goods inventory or selling goods off the goods, improve service levels, but also reduce the cost of inventory preparation

Organizational integration is the highest level of supply chain integration, supply chain management is the key to upstream and downstream enterprises seamless connection and cooperation, suppliers are the interdependent strategic partner of electric business enterprises. The Electronic Business enterprise should determine the partnership with value chain, promote the cooperation among the members of the supply chain, and also manage the value-added assets of the enterprise, improve the return on assets and reduce the risk.

Conclusion

For the electric business enterprise, according to the customer demand, based on the long-term, establishes the new supply chain management pattern is conforms to the situation the strategic action. We can think of price war is the electric business enterprise "win eyeball" the short-term market behavior of eyeball, for long-term maintain market position, but it is not wise.

Looking at the development of electric business with strategic vision, in the changeable consumer market, the electric business enterprise should establish the consumer-centered supply chain management system, study the consumers ' real demand, master the consumer's consumption dynamics, establish effective collaborative relationship with the value chain partners, and effectively reduce the supply chain cost, To high-quality services to the goods easily delivered to the hands of consumers, and ultimately achieve a more win situation.

Author: Wu Dysprosium is a senior management consultant, Dr. Tsinghua University. He has served as senior partner of Xinhua Letter Management consulting company, the first Vice president of Asia Logistics Technology company, Director of Han Pu Management consulting company, senior manager of IBM, senior manager of CA Company of USA, etc.

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