DB Forum 1
Adding Value through Supply Chain Management
Economic Theory of Adding Value through Supply Chain Management
Young (2012) writes that supply chain management (SCM) is a function of collaborating firms working to improve operating efficiency and to leverage strategic positioning. In addition, Young references this function as not only the physical attributes of product distribution, but also to include related information, such as production or delivery status, and the capability to access such information. Such capabilities allow SCM to be an important link in fulfilling customer needs and providing value. Young adds that in the current customer-driven market, ...view middle of the document...
Value-added services include such functions as service, support, maintenance, and information access.
Substantiating Value Added Offerings through SCM
Being able to identify and create value ensures organizations the ability to continuously develop a stream of products and services that offer unique and differentiated benefits to their customers, as well as build long-term relationships that can help lead to continuous growth and profitability (Chahal & Kumari, 2012). As previously mentioned, Young (2012) stated that a supply chain strategy is determined by the types of products and services and the various elements of those offerings that a company’s customer base values. These products and services should be differentiated in a way to add value for the customers. This value can be in the form of one-stop shopping, innovative products, or personal customization (Young, 2012). The determination of the supply chain strategy is also affected when implementing one of Porter’s generic strategies of cost leadership, differentiation, or focus or strategic scope (Akan, Allen, Helms & Spralls, 2006). Just as Young (2012) writes that the supply chain should be considered in a company’s product and sales strategy as it also can help provide competitive advantage and increased customer value; implementing one of Porter’s strategies will lead to a competitive advantage and help earn an above industry return while helping add customer value to the value stream of the supply chain (Akan et al, 2006). Consider the success of Federal Express, as they were able to focus on overnight delivery, and build their brand name and the perception of dependability that it conveys to consumers. Even with cheaper alternatives in the market, the value of their brand and reputation has set Federal Express apart from its competition (Young, 2012).
High-Value Supply Chain
One example of adding value through their supply chain is heavy-equipment manufacturer Caterpillar Inc., who removed major stress on their supply chain operations by incorporating a sourcing strategy that enabled customers to order from readily available options as opposed to responding to customization requests (Katz, 2011). The change and new sourcing strategy reduced the complexity of their supply chain and resulted in fewer disruptions. As demand increased for Caterpillar’s equipment, their supply chain was getting bogged down and operating slower causing orders to be delayed. With their new sourcing strategy, customers were...