Lecture Four: Outline

1. Lecture Four: Outline • The Supply Chain • The Demand Chain • A ‘Value-Based’ Demand Chain • Value Benefits and Costs (upstream and downstream) • Demand and Supply Chain Processes: The Value Chain • The Value Chain

2. The Supply Chain • Supply chain management has been defined by members of ‘The International Centre for Competitive Excellence’ in 1994 as: “Supply chain management is the integration of business processes from end-user through original suppliers that provide products, services and information and add value for customers”.

3. The Demand Chain • The Demand Chain is, as one would suspect, the mirror image of the supply chain. the demand chain is a sequence of backward-reaching processes, initiated by the end-customer, that enable companies to anticipate demand characteristics within a given market

4. The Demand Chain (cont’d) • Fisher cited in Walters (2002) identify the problem of demand uncertainty as being the major driver for establishing a demand chain model for a company.

5. The Demand Chain (cont’d) • Other problems that are caused by demand uncertainty include inventory obsolescence and holding costs.

6. The Demand Chain (cont’d) • The increasing frequency of new product introductions also contributes to demand uncertainty.

7. The Demand Chain (cont’d) • Fisher cited in Walters (2002) suggests the main problem of demand uncertainty and all of the sub-problems associated with it, can be rectified through incorporating demand uncertainty into a company’s production-planning processes

8. The Demand Chain (cont’d) • Outcomes of this methodology include ‘accurate response’ and ‘quick response’

9. A ‘Value-Based’ Demand Chain Source: Walters (2002)

10. Value Benefits and Costs (upstream and downstream) Source: Walters (2002)

11. Demand and Supply Chain Processes: The Value Chain

12. Demand and Supply Chain Processes: The Value Chain (cont’d) • Beech (1998) argues for an integration of the supply and demand chains: “The challenge can only be met by developing a holistic strategic framework that leverages the generation and understanding of demand effectiveness with supply efficiency.

13. Demand and Supply Chain Processes: The Value Chain (cont’d) • First, organisations must bring a multi-enterprise view to their supply chains. They need to be capable of working cooperatively with other organisations in the chain rather than seeking to outdo them.

14. Demand and Supply Chain Processes: The Value Chain (cont’d) • Secondly they must recognise the distinct supply and demand processes that must be integrated in order to gain the greatest value”.

15. Demand and Supply Chain Processes: The Value Chain (cont’d) • He suggests three key elements:

16. Demand and Supply Chain Processes: The Value Chain (cont’d) • The core processes of the supply and demand chains, viewed from a broad cross-enterprise vantage point rather as discrete functions

17. Demand and Supply Chain Processes: The Value Chain (cont’d) • The integrating processes that create the links between the supply and demand chains; and,

18. Demand and Supply Chain Processes: The Value Chain (cont’d) • The supporting infrastructure that makes such integration possible

19. The Value Chain Source: Walters (2002)

20. The Value Chain (cont’d) • Gardiner (2000) identify value congruence as essential to operating a successful value chain.

21. The Value Chain (cont’d) • Pohlman and Gardner (2000) describe eight value drivers, based on the assertion that “what people value drives their actions”.

22. The Value Chain (cont’d) • External cultural values

23. The Value Chain (cont’d) • Organisational cultural values

24. The Value Chain (cont’d) • Individual employee values

25. The Value Chain (cont’d) • Customer values

26. The Value Chain (cont’d) • Supplier values

27. The Value Chain (cont’d) • Third-party values

28. The Value Chain (cont’d) • Owner values

29. The Value Chain (cont’d) • Competitor values

30. The Value Chain (cont’d) • Kotler (2002) colloquially refers to this process as

31. The Value Chain (cont’d) • Identify the value

32. The Value Chain (cont’d) • Deliver the value

33. The Value Chain (cont’d) • Communicate the value

34. Discussion Questions • What problems do the use of the demand chain attempt to solve? Do you think such a concept is successful at achieving these goals? Explain • How would you use the demand chain in a cyclical industry? Give examples. • What are the essential differences between the supply chain, the demand chain and the value chain?