Supply Chain Management …..the Netflix way

July 13, 2012 by

As a loyal customer of Netflix since 2008, or whenever it became available to stream on Xbox, I have been completely satisfied with my subscription…..until…..the whole Qwikster fiasco.

As was probably the case with almost every subscriber at the time of the price and company changes, I was extremely upset.  I was very happen with the product I was getting and I was extremely happy with the price I was paying for it.  One factor i never noticed until taking Operations Management was how it directly influenced Netflix’s business decisions.

Please check out this article by CNET, http://news.cnet.com/8301-1023_3-57468798-93/netflixs-lost-year-the-inside-story-of-the-price-hike-train-wreck/?tag=mncol;morePosts

…I know it is kind of lengthy, but it really gives the inside look into why Netflix’s CEO did what he did.(regardless of if he was wrong or right)

Netflix success was founded on there efficient structure of Supply Chain Management.  They became the best at delivering movies straight to the customer.  Netflix, with the help from the internet, can claim that they killed the retail movie rental business(anyone remember Blockbuster).  But with success comes ego!  The very strength of Netflix was also going to be its demise for the future.  The CEO Reed Hastings recognized this and wanted to make steps to prepare Netflix to change with the future.

The article does a great job of hammering home the fact that Reed Hastings failure was how and when  he chose to implement his plan for the future.  The greatest threat to Netflix’s strength, its Supply Chain Management, is that Netflix has no real Supply.  Netflix’s product is produced by other companies.  These other companies are starting to steal Netflix’s online model and cut Netflix out or raise its prices.  This reason drove the CEO to want to be the first in providing all online streaming content, because if your first then your the best, right?

When you read every decision, or mistake, Netflix made with a focus on Operations Management, you can sympathize with the CEO’s decision to rush Netflix’s changes.  Reed Hastings wanted to eliminate the biggest cost to Netflix’s Supply Chain, the DVDs, and along the way incidentally got rid of most of their own Management talent.

Do you agree or disagree with CEO Reed Hastings vision for Netflix?

and Is it too late for Netflix?…..are they the new Blockbuster?

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References:

http://news.cnet.com/8301-1023_3-57468798-93/netflixs-lost-year-the-inside-story-of-the-price-hike-train-wreck/?tag=mncol;morePosts

http://matthewmolinari.wordpress.com/2012/02/29/netflix-loses-a-star-supplier/

 

Posted in 1 Business Topics 1, 11-Supply-Chain Management, 2 Operations Strategy, 7 Sustainability, MGT301-Sum12 | 9 Comments »



9 Responses to “Supply Chain Management …..the Netflix way”

  1.   nicolasm301s12 Says:

    I believe that Netflix has made a lot of recent decisions that in the long run will pay off. The mot noticeable being the late price hike and doing away with the DVDs and going into the streaming movies across the web. I belief that the CEO saw a problem and after weighing his possible solutions that he choice the most strategic decisions for the company as a whole. While they may have oct a few of their customers and have many other kinks to work out the company is still innovative and has a huge percentage of the business for this market.

    Reply

  2.   markm301s12 Says:

    In today’s world people want their products instantaneously. The original plan for Netflix of making giving them list of movies you would like to watch and they send them to you via the mail is a great idea. It removed the need to leave your house and provided new better option that going to blockbuster and hoping the movie you wanted to see was available, then paying the 5-7 dollars to rent it and have to have it returned within a couple days. The idea to stream this service over the internet made it even easier. The price hike that some are complaining about I feel comes with the territory. You are paying for a premium service so you should pay a premium price. Netflix may not be the powerhouse it once was with television providers such as Comcast offering services like OnDemand, yet they are still the industry leader. I do not see the company falling anytime soon, as long as they continue to be innovative. The rush to market of there service in Canada should show them though that they need to work out the kinks before rushing to market.

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  3.   tijoj301s12 Says:

    I’m supirsed that Netfix lost 800,000 subscribers from a $6 price increase. It’s still considerably cheaper than Comcast or AT&T. If you had asked me 2 years ago, I would have said Hastings made the right move. He probally would have succeeded if fast, realiable Internet was widely used. By fast, I mean at least 12 megabits per second download time (which currently only Comcast and Version offer). Some consumers still perfer DVDs or Bluy Ray over streaming since it loads faster. When ISPs offer faster Internet more subscribers will return to Netfix.

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  4.   Matt Says:

    I think it just goes to show that no one is immune from bad business decisions. It really makes companies that maintain long term success all the more impressive really. Nice piece and thanks for checking out my blog as well http://www.matthewmolinari.wordpress.com

    Matt Molinari

    Reply

  5.   ekaterinar301s12 Says:

    Netflix has saved me a lot of money on cable for the past few years. I think Netflix will only become more and more popular because it is cheap and has a great selection of movies. I think Hastings makes good moves and learns from bad moves. It is very important to make quick decisions, especially in the business, such as Netflix.

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  6.   maxn301s12 Says:

    I think he made a great move but people are just moving on not everyone can wtch movies over and over agian and tv shows are actually more funny but you got the internet today but not everyone wants to set and watch on a computer, labtop or iphone. I still prefer t.v over all media becuae it is just more user friendly except when it rains of course.

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  7.   jenniferro301s12 Says:

    I was surprised at how much people were outraged at the price increase for Netflix. I am personally not a user of Netflix, but I know many people who are and they all seem to be satisfied with the service. As with most products in today’s society, you cannot expect Netflix to never raise their prices. Even with the price increase, it still seems to be a cheaper route than other options, therefore I do not see the company going anywhere soon.

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  8.   shanat301s12 Says:

    Many people do not know the severity Netflix has impacted the retail movie rental business stores, especially blockbuster. In fact, my local video rental store has recently gone out of business after 25 years.

    When Netflix’s came out, it really came out with a bang, really changing our entire way of being able to watch movies at our convenience. I have been a Netflix user since 2009 and have been pretty satisfied with their services, expect for the rise in pricing that has significantly went up. But, that only makes sense with any company that grows. It is only realistic that if the consumers demand a product, the company should rise there prices for a larger profit, because you know that many consumers will stay pay for it, know I would and I still am. Netflix and the many ongoing developed online movie rentals, such as Redbox have really made a turn around in the movie rental industry.

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  9.   brookem301s12 Says:

    I know many people are very upset with how Netflix split into two different businesses. I was one of them. I was not using Netflix very much when I had it so when they split with Qwikster I ended up just canceling my account. When Netflix started they took over Blockbuster, but there is also Redbox that effected Blockbusters profits also. I do think the CEO of Netflix did the right thing for the future of the company no matter how many members of Netflix it made upset. If someone is a loyal customer and uses Netflix enough to not cancel their membership then they will not effect the company. Which many of the members probably are loyal customers or else they would not have signed up for Netflix in the first place.

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