16 PART 1 The Foundation

The Value Chain

\

MotherEarth

Converters(Suppliers)

OriginalEquipment

Manufacturer(OEM)

Marketers End ConsumerDistributors (the source of

the funds)

ExtractorsMiners

Harvesters

---------- MATERIALS & SERVICES •

oil( INFORMATION •

oil( FUNDS •

oil( RELATIONSHIPS •Figure 1.5 I A firm's value chain includes all internal functions plus external suppliers involved in the identifi-cation and fulfillment of needs for materials, equipment, and services in an optimized fashion. Also included inthe value chain are the firm's distribution channel and end consumers.

In comparison to integrated supply and value networks, the traditional approach to supply chain man-agement is more linear in concept. This approach features independent decision making as a result of gapsbetween the entities that constitute the supply chain. Those gaps are caused by lack of communication andinformation sharing and can result in excess inventories, inflated lead times, and increased costs through-O]Jt the value chain. Michigan State University (MSU) has long been regarded as one of the leaders inpurchasing, supply management, and logistics research and education. Nick Little of MSU observed thaithe individual players in the chain are all seeking to deliver value for the end consumer. However, thereare a number of elements in that value:

• Value Creation-through the innovation, development and launch of new products and services,• Value Delivery-through the order fulfillment process.• Value Maintenance-through processes to provide after sales service, SUPP()J'Imutntcnancc and HOfOl'l'I1,

"These three value processes need to span your company, your slJPpll~\I's IIlId yOlll'l'UsI0J1101'Sin o I'd1.lI'to successfully meet the needs or end C0J1SlII1l0I'S,,,12II is in seckin/) 1Ilis vIIIIIII l!illl Hllllpic llncur supplychains evolve into InOI'Olilthlly kul] supply lInd vutuo nctwork«,

CHAPTER 1 The Progress

nded Enterprise

11'11'\Ilyol' carries the concept of supply networks one step-Ithllllllllvl1 Industry, Dyer observes that when a group or L

11111111111)i'uNhion, this is sometimes referred to as a strategi1/lllw,1 \ "When the group of firms views each other as j

1I1111111111mleffectively for the good of the larger group, then thili IIIInl/,ud by virtual integration.v'"

Imllinmenting Strategic Supply CII VIIIIIllil) benefits of its supply chains, senior managernenhlll1ll1l1ll1ll~l.lmcntand support the required transformation to sIill'IIIIIIINI.'uling its support of this transformation is to appoim

/1'\1,1 Ihlll IN equal to that of marketing, engineering, and op1I'I!Iijili 11Il!fh'I11's internal resources with the objective of enab.h\' 1IIIIINi'()J'J11utionmust be planned and executed carefully. Chlillillilf,l everyone's involvement are the keys to success. The11'1"lid, numngcrnent will be addressed in Chapter 22_

'jllt'I'IINNl'ul [irrns must know where they are in relation to \.Itll 1i1'INPl'lICllccs and developing metrics or measurements en.h••\ lilli, Ihwclop an appropriate action plan, and then track theil~I'IIHIII, Appropriate action plans and metrics allow the firn111111111\'111111\bottom line. Figure 1.6 provides.a diagnostic whishI' jlIIIUI"NllloJ) to Strategic Supply Chain Management and a1llIl'it'IIII'lIllIllon of Strategic Supply Chain Management. TheIIIIIhltlMwhluh are, or should be, of interest to management. T11,.,11111111'011111reactive clerical focus to a strategic focus. In e11111IIllflply mnnagement function for each of the ten variables

of a Supply Managemen1 111~eph('nvtnato of the Institute of Supply Management proII hlllll\'HNllpply management professionals: "A supply manage:,- ,I II ,"IIIINhlp role in seeking new opportunities in the (supply) )Ihlllill'" Itl 1111,)organlzation." A second role is "being an identifn"Uhl IJlIINllIll'CC,Lind leading the charge to an efficient and effect1111'I111111I11zntlon."

III ('lIvll1ulO's third "management role is also required on a I1111'11111111III'NyHlCl11sand reluttoushlp». Having the proper eyes, eaItlh'II111111vCII1CchuI11slllSIs on OMf/ollllnlvnluc-nddcd need for thehill 11111\wllh bOlh oulsldol's und lJ1sldlll'S,"