Adding Value to the Supply Chain

How can supply chain performance be improved?

Organisations can improve their supply chain performance by reviewing how value is added to their supply chain, for example value can be added from the perspective of removing waste activities to increasing customer experience and engagement.

To review how value is added to your supply chain Value Chain Analysis is a useful strategic tool used to analyse internal business activities and recognize which activities are the most valuable.

Adding value diagram

Porters Value Chain Model, Source: Michael Porter

How can an organisation position itself in the market?

An organisation can look to compete in a market through cost advantage or differentiation advantage.

The business that competes through cost advantage will try and perform internal activities at lower costs than competitors would do. The business that seeks differentiation advantage will try to perform its activities better than its competitors.

The more value an organization creates, the more profitable it is likely to be. And when you provide more value to your customers, you build Competitive Advantage in the marketplace. If you can shorten the Value Chain and satisfy your customers earlier and more quickly, then you can derive even greater advantage

What are the five major supply chain drivers?

The key primary activities within any organisation that support value generation within the supply chain are depicted in Porters Value Chain model

  • Inbound logistics – These are all the processes related to receiving, storing, and distributing inputs internally. Supplier relationships can be a key factor in creating value here.
  • Operations – These are the transformation activities that change inputs into outputs that are sold to customers. Here, your operational systems can create value.
  • Outbound logistics – These activities deliver your product or service to your customer. These are things like collection, storage, and distribution systems, and they may be internal or external to your organization.
  • Marketing and Sales – These are the processes you use to persuade clients to purchase from you instead of your competitors. The benefits you offer, and how well you communicate them, are sources of value here.
  • Service – These are the activities related to maintaining the value of your product or service to your customers, once it's been purchased.

What are the KPIs for a supply chain?

KPI’s for the supply chain can be set and determined by each individual organisation, subject to how they are defining value and what they wish to measure or benchmark themselves to.

Some great KPI’s could be focussed on:

  • Customer satisfaction levels
  • Speed of new products to market
  • Waste reduction within the organisations and its suppliers supply chain, i.e
    • Reduction in rejection rates
    • Reduction in machine downtimes or waiting times
  • System or process improvements
    • Improving manufacturing output
    • Identification of leaner or agile operational activity

There are many more KPI’s that you could consider for your organisation, subject to the information that you wish to measure and the areas of improvement you are looking to achieve.

To find out more on Porters Model and adding value to the supply chain and how to conduct this for your organisation, view the full Knowledge paper. 

 

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For addition reading on this topic visit Supply Chain Management

Knowledge Topics:

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