Value chain profitability full

Yet this has not always been the case. Historically, most of the attention paid to product management has focused on the introductory phase or on the volume-shipping portion of the product life cycle.

Value chain profitability full

Comment Segmentation lets companies boost profitability by tailoring their supply chain strategy to each customer and product in their portfolio.

Here are 10 key practices that will ensure success. In the s Dell revolutionized both the computer industry and supply chain management with its direct-to-consumer business model. For the past several years, however, the company has been transforming its supply chain into a multichannel, segmented model, with different policies for serving consumers, corporate customers, distributors, and retailers.

Dell is one of a number of enterprises that are benefiting from supply chain segmentation, a process by which companies can create profitable one-to-one relationships between their customers and their supply chains. Under this model, different customers associated with different channels and different products are served through different supply chain processes, policies, and operational modes.

The goal is to find the best supply chain processes and policies to serve each customer and each product at a given point in time while also maximizing both customer service and company profitability.

Article Figures [Figure 1] Return on assets ROA equation Enlarge this image [Figure 2] One physical supply chain, multiple virtual supply chains Enlarge this image [Figure 3] Ten keys to successful sementation Enlarge this image [Figure 5] Moving toward differentiated fulfillment Enlarge this image [Figure 6] Multi-dimensional allocation and order promising Enlarge this image [Figure 7] Example of segmented service Enlarge this image By understanding the profit profiles of their customers and products, companies can tailor a more profitable supply chain strategy to each of them and thus increase the overall profitability of their portfolios.

Many companies today, however, still use "one size fits all" supply chain processes and policies, overserving some customers and underserving others—a practice that leads to significant profitability and cash-flow leakages and potentially lost sales.

Segmentation can also help supply chain managers address some of their biggest problems. One example is demand variability, cited by respondents to a recent survey of chief supply chain officers as the biggest challenge driving the supply chain agenda.

For a look at how one manufacturer used segmentation to reduce the impact of demand variability, see the sidebar. Another significant challenge for supply chain managers is to simultaneously provide high levels of responsiveness and efficiency.

Again, segmentation can provide a solution. In order to maximize sales and profits, some products within a portfolio could be served through an efficient supply chain while others are served through a responsive supply chain.

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For example, companies that make both basic and fashion clothing will want to deliver their basic products through an efficient supply chain and deliver their fashion products through a highly responsive supply chain. This creates one segment for standard predictable products and another for fashion unpredictable products.

Each segment will have different forecasting and stocking policies. For many companies, then, supply chain segmentation would offer significant financial benefits. This article will outline the general principles involved as well as offer 10 recommendations for achieving supply chain segmentation and its goals.

The portfolio management approach The overarching challenge faced by supply chain managers—providing excellent customer service while reducing the cost of goods sold COGS and minimizing investment in new fixed assets and inventory—can be summarized in a return-on-investment ROI equation that considers such factors as return on assets ROAreturn on invested capital ROICor economic profit EP.

Segmentation provides a means by which supply chain managers can tailor service agreements with customers to increase sales while reducing operating costs and both fixed and inventory assets. It does this by aligning supply chain policies to the customer value proposition as well as to the value proposition for the company as a whole.

Value chain profitability full

Segmentation is driven by a unique value proposition offered to a given customer for a given product. The supply chain must be aligned to this value proposition with different policies, as shown in Figure 2. This may include unique policies for one or more of the following: It will also be reflected in the supply chain network and transportation design.

This essentially means that there will be multiple, virtual supply chains running against one physical supply chain. Segmentation shows that supply chain management is evolving toward a process similar to portfolio management. Companies have a portfolio of customers and channels, a portfolio of products, and a portfolio of suppliers and supply modes.

By matching those portfolios based on the best way at a given time to reliably and profitably serve each customer, companies will see tremendous value potential.

Key practices in supply chain segmentation Segmentation is not just a network strategy, or an inventory strategy, or a fulfillment or manufacturing strategy. Rather, it is an end-to-end strategy for the supply chain that has implications for many areas, from the customer through to the supplier.

Figure 3 summarizes 10 key practices that support a successful segmentation strategy. The discussion that follows describes these practices and their importance in aligning the supply chain to the unique value propositions offered to customers.

Perform regular demand and cost-to-serve analysis The foundation of segmentation is data-driven analysis of demand dynamics and the profitability of customers and products.© AGCO® Corporation • River Green Parkway • Duluth,GA • • GL (08) 20 DISCLAIMER:The information contained herein is general in nature and is notintended for specific application NER reserves the rightto make changes in specifications herein or to add improvements atany time withoutnotice or obligation.

Value-added food production has great potential for communities as well as individual entrepreneurs, in part, because food production can be profitable even at rather small scales. Companies and their supply chain managers can no longer afford to treat reverse logistics as an afterthought.

Value chain profitability full

There is just too much at stake in terms of brand protection, sustainability requirements, and ultimately profitability. In short, reverse logistics needs to become a core competency.

The practical insights offered here will help you develop that competency. Barry is Director of the Industrial Distribution Program and Founder of the Global Supply Chain Laboratory at Texas A&M University.

He is a Fellow of the NAW Institute for Distribution Excellence, and an author of eight books on distributor competitiveness. Anshuman Singh pioneered the concept of 'Value Chain Transformation' in India.

Having unlocked value worth billions by transforming the the 'Value Chain' for some of the biggest corporations in India, his vision is to now unlock value for the Indian Economy using the same proven principles of 'Value Chain Transformation' and bring India into the top five in the Global Logistics Performance Index.

The only value a company will ever create for its shareholders and owners is the value that comes from its customers–current ones and new ones acquired in the future. To remain competitive, companies must determine how to keep customers longer, grow them into bigger customers, make them more.

Value Chain Analysis: Definition and Examples