Agriculture Reference
In-Depth Information
to employees. The level of capital intensity signifi cantly impacts production costs. Customer
interaction is also impacted. For example, Wal-Mart and other retailers are shifting to self-
checkout by customers. These systems allow one employee to oversee as many as eight cash
registers at once. Although increased computer sophistication, labor shortages, and costs
drove the change, customer acceptance and ease of use were critical success factors.
Resource fl exibility
Resource fl exibility can be defi ned as the ease with which employees and equipment can
operate a wide variety of products, functions, and levels of output. Shorter product life cycles
require more general equipment and a broader range of employee skills. Thus, more job
training may be required for employees. However, the benefi ts of a fl exible workforce are
real: improved productivity, higher morale, and a wider product offering to customers.
Vertical integration
Vertical integration is associated with owning some or all of the various steps that are taken
to produce a product from start to fi nish (i.e., from raw materials to the delivery of the fi n-
ished product). The more processes a fi rm in the chain owns, the more vertically integrated
the fi rm is said to be. Vertical integration can be advantageous to a fi rm if the fi rm has the
relevant skills for each step it controls and if the company views the industry into which it is
integrating as being important to its future success. One challenge with vertical integration
is matching the capacity of your manufacturers with your retailers. If manufacturing plant
size compared to retail demand is too large, you end up with excess capacity. This means
that you either run your plant at less than full capacity or you sell the extra production to
competitors.
For example, Kroger company, the largest food retail chain in the United States, has pur-
sued vertical integration aggressively. Kroger's operations include 2,468 supermarkets, 777
convenience stores, and 40 manufacturing plants producing store branded products from
water to spaghetti sauce, dairy products to peanut butter.
Customer involvement
Customer involvement is the degree with which the customer is allowed to interact with the
process. Particularly in service industries, customer contact is critical to customer satisfac-
tion. Customer involvement can take the form of interaction with self-service options, prod-
uct selection, product design, time, and location of service. High levels of customer
involvement tend to be found in processes that are less capital intensive and more fl exible.
Customer involvement in business management decisions has increased as more informa-
tion is provided on the Web. A good example of customer involvement is a farm equipment
manufacturer's web page that allows a farm producer to search and access parts inventory.
When used in the evening, the producer can check stock, order the part, and pick it up the
next morning. The system also allows the producer to cross-reference over 400,000 com-
petitive equipment parts that correspond to the manufacturer's parts. This allows the pro-
ducer to consolidate parts runs into one stop.
The self-service level of customer involvement extends from the fuel pump (pay at the
pump), to grocery store self-checkout. Automated teller machines (ATMs) involve the cus-
tomer interaction through the selection of menu items. Through technology advancements,
 
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