The following chapter provides discussion on managerial decision model developed in this research.
Developed model is based on the following principles:
holistic approach to business process improvement;
solid framework of specific instruments;
system of specific measures and modeling tools for success evaluation.
After the model is implemented and corresponding analysis is done a company receives a set of improvement initiatives that can be used to increase OFP-, company- and supply chain performance.
Initiatives developed with help of the model take into account interfaces between key business processes and, thus, OFP is improved taking into consideration trade-offs between customer satisfaction and company and supply chain costs. Improvement initiatives in this case suggest optimal OFP configuration for the whole company as a system of business processes rather than aim at local optimization of OFP. Key business processes CRM, IM and SRM which are used as dimensions providing input information for OFP improvement ensure that developed initiatives secure customer satisfaction and cost reduction. In addition model provides some means to manage supply chain complexity and facilitates decision-making process when it comes to the development and choice of specific OFP improvement initiatives due to its holistic character. However, managerial decision model in its current state does not include all the processes that influence OFP in an industrial distributor. One of the most important dimensions demand management is analyzed by using analysis of inventory structure by revenue and demand variability. Therefore OFP improvement initiatives are only to some extent influenced by the demand nature but influence of demand management process on OFP requires further analysis.
Managerial decision model contains set of specific instruments, measures and modeling tools which facilitates OFP improvement in the company and provides a solid business framework for process improvement. These analytical instruments, performance measures and modeling tools are relatively easy to implement and therefore improvement team does not need any special training except basic simulation modeling techniques. However, some companies may consider instruments and metrics used in the model to be oversimplified and may opt to use more sophisticated analytical tools in order to receive higher degree of precision.
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Besides, some instruments used in the model receive controversial assessment by business practitioners and scientists. For example some of the researchers consider analysis of customers by profitability an important tool that provides management of the company with critical information about how to treat various customers (Sabath and Whipple (2004), Pfeifer, Haskins, and Conroy (2005), Andon, Baxter, and Graham (2001), van Raaij, Vernooij, and Sander van (2003)). At the same time other researchers consider customer analysis by profitability to be very limited (Giltner and Ciolli 2000). Based on case company analysis this research supports the former point of view. Customer profitability analysis is considered to be an important step in OFP improvement, however it should be combined with customer segmentation be customer requirements.
In the case study part of this paper customer segmentation according to service requirements was done with help of graphical method offered by Aleskerov (2013). Method offered by Aleskerov (2013) initially developed to define buying behavior of customers in retail stores was adapted for the purpose of this paper to segment industrial customers. This simple method provides relatively precise results and allows effective and fast grouping of customers into segments. However, this method has been used in business and research to a limited extend and therefore might have some errors.
In addition, what concerns instruments suggested by the model, inventory analysis and classification instruments provide mainly statistical assessment of the inventory and demand without taking into account complex nature of products sold. There are other techniques that can be used by companies to receive more precise inventory input information for OFP improvement.
The application of the model was demonstrated on an example of a case company and received set of improvement initiatives is expected to foster OFP-, company and supply chain performance according to simulation tests. This allows to assume that model may be implemented in a real life by business practitioners. However, a real case application of managerial decision model is conducted by means of single case study. Due to that fact this research is not able to conclude with high enough degree of certainty that managerial decision model developed is appropriate to use for industrial distributors in WME&S industry. Besides, managerial decision model has some limitations concerning case study performed for the purpose of the research. These are mainly connected to the data analysis, first of all, related to the received internal data of a case company which required some cleaning before analysis could be
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performed (all the data that were considered suspicious based on the common sense were excluded from the data set). Therefore received results could lose some degree of precision compared to the real life data.
Another limitation connected to case study is that customer survey was used to collect information about customer service requirements. Conclusions about customer service requirements or satisfaction that were made may have all typical limitations of the survey such as dependency of conclusions on subjective opinion, possibility to receive sampling errors and/or invalid information due to respondent inhibitions, indifference to the topic of the research. In order to receive more reliable results amount of customers participating in the survey should be increased, some questions should be modified and statistical analysis of responses should be performed.
Besides, simulation model built in the case study could not be considered as complete one (like any model in principle) as far as it includes only parameters that are relevant for the present research. It contains very simplified model of OFP that represents the process in general. Amount of managerial decisions that could be tested using current modification of the model is quite limited. The model includes inventory management process simulation by using only decision making parameters without representation of actual inventory level. Also from the side of supplier and customer OFP is represented in a highly generalized manner. The model is functioning under conditions of “normal” demand. It means that it does not reflect demand fluctuations during Christmas, Easter and so on (but in reflects demand fluctuations during the week). Also the model does not reflect delivery of some products according “delivery solutions”.
For more realistic reflection of OFP it would be important to develop the model by implementing products delivered according “delivery solution” as well as demand fluctuations within a year.
Taking into account both strengths, weaknesses and limitations of a model this paper concludes that developed managerial decision model can be implemented in a real-life by business practitioners. In spite of some weaknesses the model can be valuable for company implementing it provides a set of improvement initiatives which increase OFP-, company- and supply chain performance.
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