The Challenges Of Supply Chain Profitability

Running head: Supply Chain Profitability

The Challenges of Supply Chain Profitability

Graduate School of Management

Procurement and Contract Management

Outline

I. Introduction

II. Value Chain Analysis

A. Definition

B. Importance

C. Redesign

III. Value Chain Reference Model

A. Purpose

B. Use

C. Impact

IV. Conclusion

A. Effects upon organization

B. Impact upon management

Abstract

This paper describes the challenges of supply chains management. It examines the various areas that contribute to and organization's strategic planning operations to enhance its profitability. It identifies the various elements of value to supply chain operations.

More importantly, it provides innovative ideas of forming networks with other organizations and suppliers to mobilize capabilities and resources to run smooth supply chain operations that will satisfy customers in the end. The paper also streamlines the common methods in organizations to evaluate their products and services to determine other approaches to add value to the entire network. Additionally, it stresses the significance of utilizing value chain methods to create value and optimize shareholder wealth.

Introduction

In today’s business markets many companies are making great efforts towards moving away from the traditional operating environments to more strategic operations across familiar boundaries. The concern stems from rapid changes and developments in the marketplace, and companies are mobilizing their efforts to sharpen their competitive advantage.

Traditionally, organizations focused their attention on the overall product. But today, focus involves improving customer relations and satisfying the customers, which includes ensuring the right quality product, at the right time and for the right price. For that reason, companies must strategically evaluate their internal processes and mobilize their external operations for an effective and efficient overall supply chain.

Enterprises are becoming more integrated by automating their business processes, which allows them to focus on the core business aspects, and processes rather than the day-to-day management. Integration allows supply chain enterprises to partner up with other companies or suppliers to run the supply chain. And this enables enterprises to suitably compete in today’s marketplace. Thus, those enterprises that choose not to integrate with suppliers to collaborate information across the board will loose out against their competitors in the end.

It is commonly known that customers wish to buy quality products and services at great prices. Equally, customers require value of the products and services they decide to purchase. Similarly, when organizations focus more attention on “value” as deemed in the eyes of the customers this is what drives competition in the marketplace. When customer requirements of value are not considered companies end up missing the whole picture or concept of competition. Conversely, an organization that consults with its customers to differentiate what they really want in terms of value, performance, accessibility, experience, and costs become more familiar with their clientele. Thus, these approaches tend to sustain customer satisfaction, growth and profitability.

Supply Chain Risks

In order to prosper in today’s marketplace, it is necessary for enterprises to develop ways to structure effective networks and integrate them and other approaches that add value to the products with a network of suppliers and customers. This approach forms a critical element of competition that enhances accuracy and the speed of responding to the end customer.

There are inherent risks involved in supply chain operations. But with the proper knowledge, planning, technology and partnering relationships with other suppliers, managers are capable of reducing supply chain risk. For instance, if managers use flexibility they can coordinate processes to help them achieve high levels of uncertainty, which are inherent in global operations (Mentzer, 2004, p.4). Likewise if managers use organizational learning they promote a stream of dialogue which opens the door to various types of communication, such as questioning, analyzing mistakes, and feedback, which all facilitate the risk management process (p.4).

The Contribution of Value and Economic Value Processes

Wang and Ahmed (2005) defined the value chain as a tactical method or tool of value-added activities that might be common in a firm. The use of this strategy instructs organizations to identify and evaluate “what its precise products are, and to determine exactly what they do. (p. 322).

The perspective (Wang & Ahmed, 2005) of the value chain analysis was developed by Michael Porter, who fashioned the value-adding processes that might be common in an organization. Porter’s theory served to identify and evaluate the value of firms grouped together to form distinctive capabilities and resources (p. 322).

Another perspective of value was theorized by Bowersox, Closs, and Cooper (2006), which they coined as economic value. Economic value builds on economy of scale in operations as the source of efficiency (p. 254). Further, Bowersox et al. perceived that “Economy of scale seeks to fully utilize fixed assets to achieve the lowest, total landed cost” (p. 254). Likewise, economic value operates to create efficiency of product/service, and the end-result is economic value at a high quality and low price to customers (Bowersox, 2006, p. 254).

Importance of Collaborative Networks

In an article, “Collaborate or Die” (2007) “…could well be today’s supply chain mantra. The pace of innovation n collaboration is increasing,