Supply Dynamics: Problems Identified

Supply Dynamics (SD) was started as a consulting practice aided by metal distributor AIM but AIM’s business faltered in 2003 due to an outbreak of Severe Acute Respiratory Syndrome in Asia and the September 11, 2001 attacks in the U.S. SD broke away from AIM and began offering services such as managing raw materials that go into the finished parts to improve the performance of manufacturers who resell another company's product. Hiring SD, which has state-of-the-art SaaS solution designed to leverage volume for quantity discounts, saves these companies money and reduces risk. In 2003, TS (Trevor Stansbury) sold SD to an affluent individual which resulted in ownership of this sophisticated software by SD. SD was later acquired by O’Neal Steel in 2006. TS is now thinking of growth strategies such as expansion into a new market and introduction of new offerings. With BOM characterization activities, OASIS license fees, effective employee retention strategies in place and opportunities to improve sales and software due to the O’Neal Steel acquisition, SD is perfectly positioned to replicate its business model and monetise the data they’ve gathered over the years.

Problems identified

After Supply Dynamics was procured by O’ Neal Steel, Trevor Stansbury was concerned about diversification. Even though they had initially began aggregating sheet, plate materials, opportunities to carry out the same process for plastic and other materials showed signs of future success. The problem here is that diversifying into aggregating plastics, fasteners might mean that the resources would be engaged in so many activities that one will not be able to perform any of them well. This might further lead to the under-utilization of resources where none of the sectors generate the amount of return that Trevor had initially hoped to achieve. This is a serious concern for the management of Supply Dynamics as they have been successful in generating handsome amount of profit via many streams including consultancy fees.

There is a possibility of competition that Supply Dynamics could face from “home grown” imitators; e.g. they could look to Supply Dynamics as a model and copy it on a more general level but use it to modify according to their specifications. Unless measures are taken to battle the competitors copying their design, Supply Dynamics will lose market share to consumers who opt to purchase their competitors’ products.

Trevor is worried that due to this recent acquisition, his current business model may be changed. Although the business was at its maturity stage before the acquisition, Supply Dynamics products’ may be at the growth stage as it is operating as wholly owned subsidiary. With a change in position, all the features that are involved in the business model like key partners, key activities, value propositions, customer segments, customer relationships, channels, key resources, cost structure, revenue streams may be changed. He needs to fully understand the implications and take actions accordingly.

Stansbury is also worried if the affiliates of O’ Neal will turn into synergies. During a merger, there might be jobs lost, cultural clashes (“us” vs. “them”) and an even lower efficiency rate. He will need to implement strategic decisions to counteract all these above-mentioned possible problems. Hence, they need to be turned into operational synergies.

Recommendations

In order to combat the problem of “spreading resources too thin”, they should look into their financial statements and examine the products that have generated a steady stream of profit. They should then opt for the products and services like MDA and consultancy fees that have been profitable. If they do want to expand into markets such as nuclear, medical, etc. they should carry out a feasibility report to see if it is economically justifiable. A thorough cost-benefit analysis should be executed, as well, in order to make a proper strategic decision.

In order to make sure that Supply Dynamics cannot be imitated, Stansbury should patent the designs of Supply Dynamics. Being a manufacturing consulting practice themselves, they should use a patent to stop others from copying or manufacturing their invention without their permission. This would prevent them from losing their market share to imitators and continue with steady profits.

Although Trevor is worried about his existing model being altered, this new acquisition should bring out more revenue as the merger took place between a distributor and Supply Dynamics, which is a manufacturing consulting company. Hence, their key partners have changed. However, their cost structures and their revenue streams will change, depending on how they continue to run their business.

Trevor Stansbury needs to make sure that the nine affiliates owned by O’Neal be turned into operational synergies. This can be done by making sure that all partners have mutual goals and similar strategies that enable them to work towards achieving them. Moreover, they need to have common interests and pursue opportunities to incorporate all their talents.

As Trevor Stansbury wishes to expand Supply Dynamics, he should come up with an effective data monetization strategy. Most of the data collected by Supply Dynamics is proprietary or subject to data privacy policies and regulations. Therefore, they should hire a company that has experience in data monetization.