the general principles of value chain management
DESCRIPTION
value chainTRANSCRIPT
The general principlesof value chainmanagement
Tom McGuffog and
Nick Wadsley
Introduction
Electronic commerce is set to revolutionise
most business and administrative processes.
However, speedy certain value chains are pre-
requisites for delivering both public and
private products and services competitively.
Simple, standard value chains minimise un-
certainty and delay and make the application
of electronic commerce much more cost
effective. The development of value chain
process analysis, supported by collaborative
event management over the Internet, the
structuring and synchronisation of master
data among organisations, and the sharing of
customer focused value chain data, power-
fully enhance the performance of value chains
and of electronic commerce. SIMPL-EDI
global data definitions, codes and messages
lead to simple, standard communications
across the Internet and also support enter-
prise to enterprise communications via EDI.
This leads to simple, standard internal IT
applications ± a virtuous cycle.
These developments are progressing well in
the UK as part of global initiatives in
conjunction with e-centreuk (EAN) and UN-
CEFACT.
Specialisation
In his Inquiry into the Nature and Causes of the
Wealth of Nations, Adam Smith (1776)
describes how the division of labour improves
productivity. `̀ The division of labour occa-
sions, in every art, a proportionable increase
in the productive powers of labour. The
separation of different trades and employ-
ments from one another, seems to have taken
place in consequence of this advantage. This
separation, too, is generally carried furthest in
those countries which enjoy the highest
degree of industry and improvement; what is
the work of one man is a rude state of society,
being generally that of several in an improved
one'' (Smith, 1776, p. 5).
The division of labour reduces costs, which
in turn stimulates demand. As the extent of
the market grows, so can specialisation be
taken further. As the degree of specialisation
increases, so it becomes economic to replace
human skills by machinery. As equipment
becomes more specialised, new departments
are set up to operate these. Indeed specialist
work is then often outsourced to another firm.
The authors
Tom McGuffog is Director of Planning and Logistics at
Nestle UK, Croydon, UK.
Nick Wadsley is Logistics Project Manager at Nestle UK,
Croydon, UK.
Keywords
Electronic data interchange, Supply chain management,
Value chain, Internet
Abstract
Explores the principles of value chain management, as
they apply to both public and private products, and
explores the impact of e-commerce and collaborative
planning through the Internet on reducing costs and
uncertainty in supply chains. Drawing on experience from
global initiatives with e-centreuk, and recent applications
within Nestle UK, makes a plea for simplicity and
standardisation in electronic commerce, to support speedy
and certain value chain management across the globe.
Electronic access
The current issue and full text archive of this journal is
available at
http://www.emerald-library.com
Insight from industry
218
Supply Chain Management: An International Journal
Volume 4 . Number 5 . 1999 . pp. 218±225
# MCB University Press . ISSN 1359-8546
Th
ein
creasi
ng
deg
ree
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ecia
lisa
tion
ap
plies
tom
ost
org
an
isati
on
sin
am
od
ern
econ
om
y.
For
exam
ple
,th
ere
are
som
e40
to50
spec
ialist
skills
nee
ded
toru
na
mod
ern
hosp
ital,
each
wit
hth
eir
ow
nru
les
an
d
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ud
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ile
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ialisa
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uce
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eu
nit
cost
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du
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ice
an
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nb
ean
aid
to
acc
ou
nta
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y,
itca
nals
ob
ew
ast
efu
l.T
his
wast
eari
ses
from
the
op
erati
on
of
`̀th
esi
lo
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dro
me'',
wh
ere
each
dep
art
men
tor
firm
op
erate
sacc
ord
ing
toit
sow
nse
para
teru
les
in
sem
i-is
ola
tion
from
its
cust
om
ers
an
dsu
pp
li-
ers.
Th
isef
fect
was
firs
tid
enti
fied
by
Jay
Forr
este
r(1
961)
inh
isb
ook
Indust
rial
Dyn
am
ics.
The
dyn
am
ics
of
wa
ste
Con
sider
ap
rodu
ctor
serv
ice
for
whic
hth
ere
is
ast
able
dem
and
(Fig
ure
1)
(an
unst
able
dem
and
cau
sed
by
ap
rice
red
uct
ion
or
pro
du
ct
change
wou
ldm
ake
the
inef
fici
enci
esd
escr
ibed
bel
ow
even
gre
ater
).If
one
gro
up
ofp
eop
lese
ll
this
pro
duct
toth
eco
nsu
mer
,sa
yin
ash
op,and
anoth
ergro
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ata
regio
nalw
areh
ou
sed
ecid
e
what
stock
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be
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tto
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mai
nta
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rodu
ctava
ilab
ilit
y,an
danoth
er
gro
up
atth
ere
tailer
hea
doff
ice
pla
ceord
ers
on
the
man
ufa
ctu
rer
tore
ple
nis
hth
ew
are
house
,
only
too
oft
enea
chop
erat
esto
its
ow
nru
les
in
sem
i-is
ola
tion
from
the
oth
ergro
up
s.
Th
isd
oes
not
occ
ur
bec
au
seea
ch
gro
up
is
del
iber
ate
lyig
nori
ng
the
effe
ctof
its
act
ion
s
on
the
oth
er.T
oo
oft
enit
isb
ecau
seth
een
tire
pro
cess
op
erate
sse
qu
en
tially
an
dh
as
not
bee
nsu
ffic
ien
tly
wel
lan
aly
sed
inre
lati
on
to
its
over
all
ob
ject
ive
of
con
sum
er
serv
ice.
Als
o,
ap
pro
pri
ate
over
all
flow
sof
info
rmati
on
,
rela
ted
toa
tim
est
ruct
ure
suit
edto
the
req
uir
ed
react
ion
sof
valu
ech
ain
part
icip
an
ts,
have
not
bee
np
ut
inp
lace
toen
ab
leall
the
gro
up
sto
op
erate
ina
un
ifie
dw
ay
focu
sed
on
aco
mm
on
ob
ject
ive.
Patt
ern
sof
beh
avio
ur
as
illu
stra
ted
ab
ove
have
bee
nd
ocu
men
ted
ina
nu
mb
erof
sup
ply
chain
s.T
he
resu
ltis
aco
mb
inati
on
of
less
than
ideal
cust
om
erse
rvic
e,ex
cess
cap
aci
ties
at
vari
ou
sst
ages,
exce
ssin
ven
tory
,w
ast
ean
d,
ther
eby,
ah
igh
erth
an
nec
ess
ary
tota
lco
stof
sup
ply
.
Thes
ein
effi
cien
cies
are
cau
sed
by
gro
win
g
unce
rtain
tyu
pth
esu
pply
chai
n(s
eeF
igure
2)
as
each
gro
up
oper
ate
su
nd
erit
sow
np
arti
cula
r
con
stra
ints
and
applies
its
ow
nd
ecis
ion
-tak
ing
tim
etable
s,fo
reca
stin
gm
ethods,
syst
ems
and
com
mu
nic
atio
ns
±in
stitution
alf
act
ors±
and
als
o
mak
esit
sow
nm
ista
kes
or
fails
tod
oth
ings
on
tim
e±
random
fact
ors
±to
get
her
wit
hth
eu
sual
leads
and
lags
bet
wee
nea
chst
age.
Th
ein
effi
cien
cie
sca
nb
eev
en
gre
ate
r,an
d
als
om
ore
dif
ficu
ltto
iden
tify
,as
dem
an
dan
d
sup
ply
pass
not
just
bet
wee
nd
epart
men
tsin
the
sam
eorg
an
isati
on
,b
ut
als
ob
etw
een
dif
fere
nt
org
an
isati
on
s±
man
ufa
ctu
rers
'fo
re-
cast
ing
of
sale
sord
ers
from
reta
iler
sor
wh
ole
sale
rs,
pro
du
ctio
np
lan
nin
gat
fact
ori
es,
mate
rials
pla
nn
ing
at
inte
rmed
iate
an
dra
w
mate
rial
sup
plier
s(o
rG
Ps
lin
kin
gto
clin
ics
an
dto
hosp
itals
).
For
man
yyea
rs,
on
eof
the
main
solu
tion
s
toth
ese
pro
ble
ms
has
bee
nto
try
toim
pro
ve
fore
cast
ing
of
dem
an
dfr
om
on
ed
epart
men
t
(or
org
an
isati
on
or
`̀si
lo'')
by
its
sup
plier
(s).
Th
ish
as
too
rare
lyb
een
succ
essf
ul,
main
ly
bec
au
seit
isb
ase
don
am
isu
nd
ers
tan
din
gof
the
natu
reof
both
the
pro
ble
man
dth
e
solu
tion
.If
dep
art
men
tsor
org
an
isati
on
sin
a
valu
ech
ain
do
not
un
ders
tan
dth
eco
nst
rain
ts
un
der
wh
ich
each
op
erate
an
dare
not
op
erati
ng
toa
com
mon
,q
uan
tifi
edob
ject
ive,
itis
all
toea
syto
mis
inte
rpre
tsi
gn
als
an
dall
too
dif
ficu
ltto
fore
cast
futu
react
ion
s(b
e-
cau
seth
ere
are
too
rare
lyco
nsi
sten
t
ind
epen
den
tvari
ab
les)
.
Ifvalu
ech
ain
part
icip
an
tsd
on
ot
beh
ave
as
`̀p
art
ners
''an
dh
ave
ash
are
dvie
wof
un
der
-
lyin
gco
nsu
mer
or
base
dem
an
dan
dof
each
oth
er's
con
stra
ints
,th
eyare
con
dem
ned
to
suff
er
the
con
seq
uen
ces
inp
oore
rse
rvic
ean
d/
or
gre
ate
rto
tal
cost
.T
his
isn
ot
toarg
ue
that
each
fun
cti
on
can
or
shou
ldb
ehave
exact
lyin
lin
ew
ith
the
base
dem
an
dp
att
ern
.It
isra
ther
that
share
daw
are
ness
of
that
base
dem
an
d,
an
dof
each
oth
er'
sco
nst
rain
ts,
red
uce
s
flu
ctu
ati
on
salo
ng
the
valu
ech
ain
an
dals
o
focu
ses
tota
lse
rvic
eat
each
stage
on
the
ult
imate
con
sum
er(w
ho
can
be
the
pati
ent
in
ah
osp
ital,
the
citi
zen
req
uir
ing
ap
ub
lic
serv
ice
or
the
con
sum
erof
ap
rod
uct
).
Un
cer
tain
ties
are
red
uce
db
yvalu
ech
ain
part
icip
an
tsagre
ein
gw
hat
data
nee
dto
be
share
dacr
oss
part
icu
lar
tim
eh
ori
zon
san
d
makin
gsu
chd
ata
ap
pro
pri
ate
lytr
an
spare
nt.
Ma
xim
isin
gn
et
ad
de
dva
lue
Valu
eor
sup
ply
chain
man
agem
ent
has
trad
itio
nally
focu
sed
on
maxim
isin
gth
eop
-
port
un
itie
sto
ad
dvalu
ew
hile
min
imis
ing
219
The
gene
ral
prin
cipl
esof
valu
ech
ain
man
agem
ent
Tom
McG
uffo
gan
dN
ick
Wad
sley
Supp
lyC
hain
Man
agem
ent:
An
Inte
rnat
iona
lJo
urna
l
Vol
ume
4.
Num
ber
5.
1999
.21
8±22
5
tota
lco
st.
Net
ad
ded
valu
eis
incr
ease
db
y
com
pre
ssin
gth
eti
mes
wh
enn
ovalu
eis
bei
ng
ad
ded
an
dco
sts
con
tin
ue
tori
se.t1
isre
du
ced
tot2
and
net
valu
ead
ded
has
bee
nsu
bst
an
-
tially
incr
ease
db
ecau
seit
has
bee
np
oss
ible
to
cut
the
tim
esan
dh
ence
the
cost
sin
volv
ed
in
test
ing,
stori
ng,
cou
nti
ng,
pro
cess
ing
an
d
con
trollin
gm
ate
rials
an
dp
rod
uct
s.T
he
cost
s
of
cap
aci
tyan
dof
wast
eh
ave
usu
ally
als
o
bee
nre
du
ced
.A
fun
dam
enta
len
ab
lin
gfa
ctor
isth
ere
du
ctio
nin
un
cert
ain
tyam
on
gtr
ad
ing
part
ner
s(s
eeF
igu
re3).
Ad
ded
valu
ean
aly
sis
can
be
ap
plied
equ
ally
wel
lto
ad
min
istr
ati
ve
an
dso
cial
pro
cess
es.
For
exam
ple
,th
etr
eatm
en
tofa
pati
ent
can
be
mad
eb
oth
more
effi
cien
tfr
om
his
or
her
stan
dp
oin
tan
dm
ore
cost
effe
cti
ve
for
the
hosp
ital,
by
an
aly
sin
gth
eev
ents
wh
ere
real
valu
eis
ad
ded
an
dco
mp
ari
ng
them
wit
hth
e
tim
es
wh
ere
cost
sco
nti
nu
eto
rise
bu
tn
o
valu
eis
bei
ng
ad
ded
(Fig
ure
4).
Th
iste
chn
iqu
eca
nals
ob
eap
plied
to
mea
suri
ng
the
imp
act
of
gover
nm
en
tal
re-
qu
irem
ents
on
pri
vate
pro
cess
es.
For
exam
ple
,in
ass
oci
ati
on
wit
hex
port
ing,
the
acq
uis
itio
nof
exp
ort
cert
ific
ate
san
dth
e
insp
ecti
on
of
good
s,ev
enw
hen
stri
ctly
nec
ess
ary
,ad
ds
no
valu
e.H
ence
,n
ewm
eth
-
od
sn
eed
tob
eso
ugh
tto
min
imis
eth
eti
me
an
dco
stin
volv
ed
tom
axim
ise
net
valu
e
ad
ded
valu
e.
Fig
ure
2D
egre
eof
unce
rtai
nty
inth
esu
pply
chai
n
Fig
ure
1Su
pply
chai
nin
effic
ienc
ies
220
The
gene
ral
prin
cipl
esof
valu
ech
ain
man
agem
ent
Tom
McG
uffo
gan
dN
ick
Wad
sley
Supp
lyC
hain
Man
agem
ent:
An
Inte
rnat
iona
lJo
urna
l
Vol
ume
4.
Num
ber
5.
1999
.21
8±22
5
Re
du
cin
gu
nce
rta
inty
Th
ekey
elem
ents
invalu
ech
ain
un
cer
tain
ty
are
bes
tan
aly
sed
inte
rms
of
how
they
con
trib
ute
toin
effi
cien
cie
sin
both
dem
an
d
an
dsu
pp
ly:
Dem
and:
.T
imin
gof
an
act
ion
or
ord
er±
how
pre
dic
tab
leis
this
?.
Siz
ean
dco
mp
osi
tion
of
an
act
ion
or
ord
er±
are
there
un
exp
ect
edel
emen
ts,
an
dis
itsu
bje
ctto
chan
ge?
.T
he
deg
ree
tow
hic
hin
term
edia
ted
e-
man
ds
are
infl
uen
ced
by
inst
itu
tion
alan
d
ran
dom
fact
ors
rath
er
than
by
fin
al
con
sum
er
dem
an
d.
.D
ata
acc
ura
cyon
pro
du
cts
req
uir
ed
,
pri
ces,
del
ivery
poin
tsan
dti
min
gs.
Supply
:.
Lea
dti
me
tosu
pp
ly±
how
pre
dic
tab
leis
this
?.
Qu
an
tity
sup
plied
±ca
nth
ed
eliv
ery
be
acc
epte
dw
ith
ou
tb
ein
gco
un
ted
?.
Qu
ality
of
sup
ply
±ca
nth
esu
pp
lies
be
use
dw
ith
ou
tte
stin
gan
dw
ith
ou
tsu
bse
-
qu
ent
wast
ean
din
effi
cie
ncy
?
Fig
ure
4A
dded
valu
ean
alys
isca
nbe
appl
ied
equa
llyw
ell
toad
min
istr
ativ
ean
dso
cial
proc
esse
sas
wel
las
man
ufac
turin
gpr
oces
ses
Fig
ure
3M
axim
isin
gne
tad
ded
valu
e
221
The
gene
ral
prin
cipl
esof
valu
ech
ain
man
agem
ent
Tom
McG
uffo
gan
dN
ick
Wad
sley
Supp
lyC
hain
Man
agem
ent:
An
Inte
rnat
iona
lJo
urna
l
Vol
ume
4.
Num
ber
5.
1999
.21
8±22
5
.D
ata
acc
ura
cyon
pro
du
cts
sup
plied
an
d
pri
ces
.
Valu
ech
ain
man
agem
ent
aim
ssy
stem
ati
cally
tore
du
ceth
ese
sou
rces
of
un
cert
ain
ty
thro
ugh
the
act
ive
co-o
per
ati
on
of
the
key
pla
yer
sin
each
valu
ech
ain
.B
yre
du
cin
g
un
cert
ain
ty,
tota
lse
rvic
eis
imp
roved
an
d
over
all
cost
isre
du
ced
(McG
uff
og,
1997).
Th
isre
qu
ires
ast
ruct
ure
dap
pro
ach
wh
ich
isn
ot
on
lyaid
ed
by
elec
tron
icco
mm
un
ica-
tion
s,b
ut
isals
om
ad
em
ore
esse
nti
al
by
them
.F
or
exam
ple
,if
an
ord
eris
goin
gto
be
au
tom
ati
cally
pro
cess
edan
dact
ion
edw
ith
min
imu
mle
ad
tim
eit
mu
stb
eacc
ura
tein
all
resp
ects
an
dit
mu
stco
nta
inn
ou
nexp
ecte
d
elem
en
ts.
Th
isca
non
lyb
each
ieved
by
the
syn
chro
nis
ati
on
of
mast
erd
ata
bet
wee
nd
e-
part
men
tsan
dorg
an
isati
on
sp
rior
toth
e
exch
an
ge
of
ord
ers.
Each
gro
up
nee
ds
tob
e
usi
ng
the
sam
eco
de
nu
mb
ers
for
the
sam
e
pro
du
cts
an
dse
rvic
es,
pri
ces,
cost
s,sp
eci
fi-
cati
on
s,p
roce
sses
an
dtr
ad
ing
loca
tion
s.If
,
for
exam
ple
,ord
ers
an
din
voic
esare
ex-
chan
ged
ever
yd
ay,
then
mast
erd
ata
shou
ld
be
syn
ch
ron
ised
inad
van
ce,
say,
on
cep
er
wee
ku
sin
gel
ectr
on
icd
ata
inte
rch
an
ge
of
file
s
or
via
ash
are
del
ectr
on
icca
talo
gu
e.
How
ever
,fo
rord
ers
tob
esu
cce
ssfu
lly
met
,
agre
at
dea
lof
pri
or
pla
nn
ing
nee
ds
tota
ke
pla
ceam
on
gvalu
ech
ain
part
ner
sse
ver
al
wee
ks
or
mon
ths
ah
ead
.T
rad
itio
nally
mu
ch
of
the
com
mu
nic
ati
on
wh
ich
took
pla
ce
bet
wee
nco
mp
an
ies
pass
edb
etw
een
the
sale
sman
an
dth
eb
uyer
.E
ven
ass
um
ing
that
each
fully
un
der
stood
an
dco
mm
un
icate
dth
e
sam
ed
etails
of
thei
ragre
em
ent,
an
dea
chh
ad
the
au
thori
tyto
act
ion
the
agre
emen
tw
ith
in
thei
rorg
an
isati
on
s,th
ere
rem
ain
edth
eu
n-
cert
ain
ties
cau
sed
by
each
inte
rnal
dep
art
men
tal
silo
inb
oth
com
pan
ies.
To
avoid
thes
ep
rob
lem
s,th
ere
nee
ds
tob
e
avig
oro
us
def
init
ion
of
the
overa
lljo
int
pro
cess
of
dec
isio
n-t
akin
gan
dco
mm
un
ica-
tion
.
Imp
roved
pro
cess
esca
nn
ow
be
pow
erfu
lly
sup
port
edb
yth
eap
plica
tion
of
Inte
rnet
tech
nolo
gy
toco
llab
ora
tive
even
tm
an
age-
men
t(C
EM
)sy
stem
s,su
chas
the
EQ
OS
soft
ware
dev
elop
ed
join
tly
by
Nes
tleÂ
an
d
J.S
ain
sbu
ry.
All
those
wh
on
eed
tore
ach
agre
emen
tto
ach
ieve
the
succ
essf
ul
ou
tcom
e
of
avalu
ech
ain
even
tca
nb
uild
up
share
d
data
on
scre
ens
seek
ing
elec
tron
icau
thori
sa-
tion
as
req
uir
ed,
track
ing
each
stage,
each
pro
vis
ion
al
an
dco
nfi
rmed
act
ion
,an
dan
y
chan
ges
top
lan
as
they
occ
ur.
As
pla
ns
an
d
mast
erd
ata
are
con
firm
ed
,th
eyca
nb
e
au
tom
ati
cally
an
dco
nsi
sten
tly
dow
nlo
ad
ed
into
each
collab
ora
tor'
sin
tern
al
com
pu
ter
ap
plica
tion
s.In
this
way
both
the
qu
ality
of
the
pla
nan
dth
ejo
int
com
mit
men
tto
both
the
pro
cess
an
dth
ep
lan
are
gre
atl
yim
pro
ved
.
Th
esi
losy
nd
rom
eis
am
elio
rate
d.
Ith
as
tob
eem
ph
asi
sed
that
the
firs
tp
riori
ty
isto
make
the
pro
cess
acr
oss
ash
are
dvalu
e
chain
as
sim
ple
an
dst
an
dard
,an
dh
ence
as
speed
yan
dce
rtain
,as
isp
ract
icab
le.
Th
e
seco
nd
pri
ori
tyis
togain
com
pre
hen
sive
com
mit
men
tto
the
share
dp
roce
ss,
an
dth
e
thir
dp
riori
tyis
toap
ply
elec
tron
icco
mm
u-
nic
ati
on
sto
the
pro
cess
.A
llth
ree
are
vit
al.
Sta
nd
ard
valu
ech
ain
pro
cess
es
an
dm
ess
ag
es
Th
em
ore
sim
ple
an
dst
an
dard
can
the
join
t
pro
cess
esin
avalu
ech
ain
bec
om
e,th
em
ore
speed
an
dce
rtain
tyw
ill
be
ach
ieved
,w
ith
all
the
con
com
itan
tb
enef
its
(McG
uff
og,
1999).
Most
firm
san
dorg
an
isati
on
sh
ave
dev
el-
op
edd
iffe
ren
tw
ays
of
doin
gth
ings
for
his
tori
cal
reaso
ns.
Th
ey
have
mad
esu
ch
pro
cess
esm
ore
dif
ficu
ltto
chan
ge
by
com
-
pu
teri
sin
gth
em,
bu
th
ave
failed
toget
the
full
ben
efit
sof
com
pu
teri
sati
on
bec
au
seth
eyh
ave
not
sim
plifi
edan
dst
an
dard
ised
thei
rvalu
e
chain
s.
Fu
rth
erm
ore
,an
ord
erto
del
iver
isb
asi
cally
the
sam
etr
an
sact
ion
as
an
ord
erto
move
som
eth
ing,
or
top
roce
ssa
met
al,
or
totr
eat
a
pati
ent,
pro
vid
ed
that
the
det
ail
ish
an
dle
dvia
mast
erd
ata
an
dn
ot
inth
etr
an
sact
ion
,i.e.
all
valu
ech
ain
ord
ers
are
ines
sen
cep
erfo
rmin
g
the
sam
efu
nct
ion
,alt
hou
gh
hit
her
toth
ish
as
rare
lyb
een
recogn
ised
eith
er
inin
tern
al
pro
ced
ure
sor
exte
rnal
com
mu
nic
ati
on
s.
Th
ere
nee
ds
tob
ean
agre
edti
me
stru
ctu
re
det
ailin
gh
ow
an
even
tis
tob
ep
lan
ned
an
d
man
aged
±w
hic
hfu
nct
ion
sor
dep
art
men
tsor
ind
ivid
uals
nee
dto
be
involv
edacr
oss
all
the
con
cer
ned
org
an
isati
on
sin
rela
tion
toea
ch
dec
isio
nth
at
nee
ds
tob
eta
ken
.T
he
ap
pro
ach
ou
tlin
edin
Tab
leI
(th
isex
am
ple
isa
pro
du
ct
pro
moti
on
wit
ha
fou
rm
on
thle
ad
tim
e)h
elp
s
tod
efin
ecl
earl
yw
hic
hgro
up
sre
ally
nee
dto
be
involv
ed,
com
mu
nic
ate
dw
ith
,w
ho
nee
ds
toau
thori
sew
hat,
the
req
uir
edle
ad
tim
esan
d
the
flow
sof
data
an
din
form
ati
on
.In
this
way
pro
cess
esca
nb
esi
mp
lifi
edan
dcl
ari
fied
.
222
The
gene
ral
prin
cipl
esof
valu
ech
ain
man
agem
ent
Tom
McG
uffo
gan
dN
ick
Wad
sley
Supp
lyC
hain
Man
agem
ent:
An
Inte
rnat
iona
lJo
urna
l
Vol
ume
4.
Num
ber
5.
1999
.21
8±22
5
Collab
ora
tive
even
tm
an
agem
ent
can
be
ap
plied
ben
efic
ially
toall
valu
ech
ain
even
ts±
des
ign
ing
ap
rod
uct
or
serv
ice,
engin
eeri
ng
pro
ject
s,ad
min
istr
ati
ve
chan
ges
,gover
nm
en
t
cam
paig
ns.
Co
-op
era
tio
na
nd
com
pe
titi
on
Ad
am
Sm
ith
(1776,
p.
102)
als
oco
ntr
ibu
ted
gre
atl
yto
econ
om
icd
evelo
pm
en
tb
yen
-
cou
ragin
gco
mp
eti
tion
at
the
exp
ense
of
rest
rict
ive
pra
ctic
esan
dtr
ad
eb
arr
iers
.In
his
fam
ou
sp
hra
seh
esa
idth
at
`̀p
eop
lein
the
sam
etr
ad
ese
ldom
mee
tto
get
her
even
for
mer
rim
ent
an
dd
iver
sion
,b
ut
the
con
vers
a-
tion
end
sin
aco
nsp
iracy
again
stth
ep
ub
lic,or
inso
me
con
triv
an
ce
tora
ise
pri
ces'
'.H
ow
can
both
com
pet
itio
nan
dco
-op
erati
on
be
fos-
tere
dw
ith
ou
tth
eon
een
dan
ger
ing
the
oth
er,
wit
hth
eco
nse
qu
ent
loss
of
overa
llb
enef
itto
the
fin
al
con
sum
er
of
the
pro
du
ctor
serv
ice?
Sim
ply
pu
rch
asi
ng
from
sup
plier
son
the
basi
sof
ten
der
sw
ith
ou
tu
nd
erst
an
din
gth
e
op
port
un
itie
sto
pro
vid
eb
ette
rto
tal
per
for-
man
ceat
alo
wer
tota
lco
stth
rou
gh
valu
e
chain
man
agem
ent
isn
olo
nger
the
way
to
ach
ieve
worl
dcl
ass
stan
dard
sof
op
erati
on
.
Eq
ually,
gre
at
care
has
tob
eta
ken
tosa
fe-
gu
ard
com
pet
itio
nan
dfo
ster
inn
ovati
on
an
d
ente
rpri
se.
Com
merc
ial
com
peti
tion
nee
ds
to
be
enh
an
ced
wh
ile
stim
ula
tin
gth
esi
mp
lifi
-
cati
on
an
dst
an
dard
isati
on
of
valu
ech
ain
s
acr
oss
both
the
pu
blic
an
dp
rivate
sect
ors
.
Valu
ech
ain
man
agem
ent
an
d,
inp
art
icu
lar,
collab
ora
tive
even
tp
lan
nin
gan
dm
an
age-
men
t,su
pp
ort
ed
by
elec
tron
icco
mm
erce
,
enab
lesu
bst
an
tial
imp
rovem
ents
toto
tal
per
form
an
cean
dco
stw
ith
ou
tin
hib
itin
g
inn
ovati
on
an
den
terp
rise
.
Ele
ctro
nic
com
mer
ceis
alr
ead
yre
volu
tio-
nis
ing
the
mea
ns
by
wh
ich
mark
ets
are
dev
elo
ped
,p
ote
nti
al
cust
om
ers
att
ract
ed
an
d
valu
ech
ain
part
ner
sco
-ord
inate
d.
Valu
e
chain
rest
ruct
uri
ng
nee
ds
top
rece
de
the
ap
plica
tion
of
elec
tron
icco
mm
erc
eto
ach
ieve
maxim
um
com
pet
itiv
enes
s.
The
ord
er
Th
em
ain
valu
ech
ain
mes
sage
isth
eord
er.
An
ord
ersh
ou
ldon
lyb
efo
rth
ed
eliv
ery
of
on
eor
more
item
sto
on
ep
lace
at
on
ed
ate
/
tim
e.
Th
isis
bec
au
seea
ch
del
ivery
of
a
pro
du
ctor
serv
ice
can
on
lyb
eto
on
ep
lace
at
on
ed
ate
/tim
e.
An
invoic
eca
nth
enb
eea
sily
matc
hed
tob
oth
del
iver
yan
dord
er,
thu
s
align
ing
all
the
key
valu
ech
ain
tran
sact
ion
s,
an
dlo
gic
ally
rela
tin
gth
ese
tob
oth
op
erati
on
al
an
dfi
nan
cial
info
rmati
on
.
Most
firm
san
dorg
an
isati
on
sh
ave
dev
el-
op
edd
iffe
ren
tw
ays
of
doin
gth
ings
an
d
Tab
leI
Poss
ible
time
stuc
ture
for
even
tm
anag
emen
t
Cu
sto
mer
fun
ctio
ns
Sup
pli
erfu
nct
ion
s
Mar
keti
ng
Op
erat
ion
sD
istr
ibu
tio
n
Sup
ply
chai
nB
uyi
ng
Sale
s
Sup
ply
chai
nM
arke
tin
gP
rod
uct
ion
Pu
rch
asin
g
Oth
er
agen
cies
4m
on
ths
3m
on
ths
ÛÛ
ÛPr
ovis
iona
lpl
an(I
nter
net)
ÛÛ
Û
2m
on
ths
Prod
uctio
n/Su
pply
plan
ÛÛ
Û
1m
on
thÛ
ÛÛ
Del
iver
ysc
hedu
les
(ED
I)Û
4w
eeks
3w
eeks
2w
eeks
1w
eek
ÛÛ
Mas
ter
file
sync
hron
isat
ion
(ED
Ior
cata
logu
e)Û
Û
7d
ays
6d
ays
5d
ays
ÛD
eliv
ery
orde
rs(E
DI)
Û
4d
ays
3d
ays
2d
ays
1d
ay
0d
ays
ÛC
onsu
mer
sale
+1
ÛÛ
ÛEP
OS
anal
ysis
(Int
erne
t)Û
ÛÛ
Û
+2
+3
ÛIn
voic
es(E
DI)
Û
...
ÛÛ
ÛÛ
ÛEv
alua
tion
(Int
erne
t)Û
ÛÛ
ÛÛ
223
The
gene
ral
prin
cipl
esof
valu
ech
ain
man
agem
ent
Tom
McG
uffo
gan
dN
ick
Wad
sley
Supp
lyC
hain
Man
agem
ent:
An
Inte
rnat
iona
lJo
urna
l
Vol
ume
4.
Num
ber
5.
1999
.21
8±22
5
dif
fere
nt
`̀cu
ltu
res'
'over
man
yyea
rsas
they
have
gro
wn
insi
zevia
mer
gers
an
dta
ke-
overs
,
an
das
aco
nse
qu
ence
of
dev
elop
ing
new
pro
du
cts
an
dse
rvic
es.
Most
man
agem
en
t
an
aly
sis
goes
dee
ply
into
new
pro
du
ctd
evel-
op
men
t,or
acq
uis
itio
ns,
or
fin
an
cial
con
trol.
Lit
tle
goes
into
sim
plifi
cati
on
an
d
stan
dard
isati
on
,an
dle
ssin
toh
ow
toach
ieve
thes
eacr
oss
the
wh
ole
valu
ech
ain
incl
ud
ing
cust
om
ers
an
dsu
pp
lier
s.In
this
fast
chan
gin
g
an
dco
mp
lex
worl
d,
sim
plifi
cati
on
an
dst
an
-
dard
isati
on
may
wel
lh
ave
more
tooff
erth
an
sop
his
tica
tion
.T
oo
litt
leed
uca
tion
an
d
train
ing
isre
late
dto
the
effe
ct
of
ind
ivid
ual
act
ion
son
oth
erp
art
sof
the
valu
ech
ain
.
Ind
eed
,re
ward
syst
ems
wh
ich
focu
ssi
mp
ly
on
gro
win
gsa
les
or
on
gro
ssm
arg
ins,
rath
er
than
on
overa
llse
rvic
e,p
erfo
rman
cean
dco
st,
enco
ura
ge
the
silo
men
tality
.
How
ever
,it
isn
ot
on
lyp
oss
ible
tod
oth
is,
bu
tals
oes
sen
tialfo
rco
mp
etit
ive
surv
ival.
Itis
the
firm
san
dorg
an
isati
on
sw
hic
hca
nm
ake
thei
rvalu
ech
ain
sm
ost
sim
ple
,st
an
dard
,
spee
dy
an
dce
rtain
wh
ich
will
be
ab
leto
pro
vid
eth
eb
est
cust
om
er
serv
ice
at
the
low
est
tota
lco
st.
Th
isw
ill
be
ach
ieved
by
com
bin
ing
valu
ech
ain
man
agem
ent
wit
h
elec
tron
icco
mm
erce
±d
irect
elec
tron
icco
m-
mu
nic
ati
on
wit
hco
nsu
mer
san
dvalu
ech
ain
part
ners
allie
dw
ith
low
cost
valu
ech
ain
s.F
or
exam
ple
,b
ookse
llin
gover
the
Inte
rnet
allie
d
tod
irec
th
om
ed
eliv
ery
of
books
from
the
pu
blish
ers
or
even
the
pri
nte
rs(o
rd
irec
t
del
ivery
toth
ere
ad
erin
elec
tron
icfo
rm),
wit
hou
tb
ook
wh
ole
salin
gan
dre
tailin
g,
can
sup
erse
de
Hig
hS
tree
tb
ook
reta
ilin
g.
Wh
en
ther
eis
no
ph
ysi
cal
pro
du
ct
tod
eliv
er,
as
in
fin
an
cial
serv
ices
,n
ewvalu
ech
ain
sca
n
ap
pea
rev
enm
ore
qu
ickly
an
dp
ow
erfu
lly.
To
ach
ieve
low
cost
,si
mp
lean
dst
an
dard
valu
ech
ain
san
del
ectr
on
icco
mm
erc
e,th
e
follow
ing
mu
stals
ob
esi
mp
lean
dst
an
dard
:
(1)
the
key
pro
cess
es
(2)
the
sup
port
ing
flow
sof
info
rmati
on
±
bu
sin
ess
an
dad
min
istr
ati
ve
mes
sages
(3)
the
def
init
ion
sof
each
data
elem
ent
(4)
the
def
init
ion
sof
each
mast
erfi
lew
hic
h
will
be
bu
ilt
collab
ora
tivel
y,
wh
ich
will
be
syn
ch
ron
ised
bet
wee
norg
an
isati
on
s,an
d
wh
ich
willb
eu
sed
top
roce
sstr
an
sact
ion
s
(5)
the
cod
esor
nu
mb
erw
hic
hw
ill
lin
kth
e
data
an
dm
essa
ges
toth
em
ast
erfi
les
Valu
ech
ain
sare
dri
ven
most
effi
cien
tly
by
the
shari
ng
of
kn
ow
led
ge
inth
em
ediu
mor
lon
ger
term
,an
db
yst
ruct
uri
ng
this
into
share
dp
lan
s
an
dm
ast
er
file
su
sin
gco
llab
ora
tive
syst
ems.
Wh
ensu
ch
mast
er
data
have
bee
nsy
nch
ro-
nis
edin
an
erro
rfr
eefo
rmin
the
nea
rte
rm,
usi
ng
com
mon
acc
ess
cod
es,
the
key
valu
e
chain
mes
sages
such
as
ord
ers
an
din
voic
es
can
be
au
tom
ati
cally
pro
cess
edan
dro
ute
d
an
dact
ion
edw
ith
ou
td
elay.
Un
fort
un
ate
lym
ost
org
an
isati
on
san
din
-
du
stri
esh
ave
def
ined
thei
rord
erp
roce
sses
dif
fere
ntl
yan
dh
ave
dev
elop
ed
dif
fere
nt
data
def
init
ion
s.T
his
makes
com
pu
ter
ap
plica
-
tion
sw
ith
inco
mp
an
ies
com
plica
ted
,an
d
even
more
soth
eel
ectr
on
icco
mm
un
icati
on
s
bet
wee
nco
mp
an
ies.
Exp
ensi
ve
cross
refe
r-
ence
tab
les
have
tob
em
ain
tain
ed
,an
der
rors
are
com
mon
pla
ce.
Rec
entl
y,
we
at
Nes
tleÂ
UK
an
de-
cen
tre
uk
(rec
en
tly
mer
ged
Art
icle
Nu
mb
erA
ssoci
ati
on
an
dE
lect
ron
icC
om
merc
eA
ssoci
ati
on
)h
ave
att
em
pte
dto
solv
eth
ese
pro
ble
ms
by
dir
ectl
y
lin
kin
gth
ep
rin
cip
les
of
valu
ech
ain
man
age-
men
tto
elec
tron
icco
mm
un
icati
on
svia
SIM
PL
-ED
I±
the
Sim
ple
stV
alu
eC
hain
Mess
ages
for
Ele
ctro
nic
Data
Inte
rch
an
ge
(Fen
ton
etal.,
1998).
Th
ekey
mes
sage
isth
eor
der
,w
hic
hat
its
sim
ple
stco
nsi
sts
of:
(1)
Ord
erty
pe
±to
del
iver,
tom
ove,
to
pro
du
ce,
top
roce
ss,
totr
eat
etc.
(2)
Valu
ech
ain
part
icip
an
t:.
cust
om
er
±ord
ergen
erati
ng
loca
tion
;
±d
eliv
ery
loca
tion
;.
sup
plier
±ord
erre
ceiv
ing
loca
tion
;
±ord
erfu
lfillin
glo
cati
on
.
(3)
Date
/tim
eof
sup
ply
.
(4)
Pro
du
ctor
serv
ice.
(5)
Qu
an
titi
esre
qu
ired
.
Cu
stom
eran
dsu
pp
lier
loca
tion
s,an
dp
ro-
du
cts
or
serv
ices
,are
each
def
ined
by
EA
N
(In
tern
ati
on
al
Art
icle
Nu
mb
er)
cod
es,
wh
ich
cross
refe
rto
mast
erd
ata
file
s,w
her
eall
the
nec
ess
ary
det
ails
are
hel
d.
All
data
elem
en
tsare
def
ined
acc
ord
ing
toan
inte
rnati
on
alst
an
dard
(UN
/CE
FA
CT
).T
he
gre
ate
stb
enef
itco
mes
wh
enth
ese
def
init
ion
s
are
not
on
lyu
sed
for
com
mu
nic
ati
on
bet
wee
n
org
an
isati
on
s'co
mp
ute
rsy
stem
s,b
ut
als
o
wit
hin
each
org
an
isati
on
'sin
tern
alsy
stem
si.e.
wh
enS
IMP
L-E
DI
lead
sto
SIM
PL
-IT
±
Sim
ple
,st
an
dard
com
pu
ter
ap
plica
tion
s.
Mast
erdata
shou
ldb
eca
tegori
sed
as
follow
s:
(1)
Valu
ech
ain
part
icip
an
ts:
.cu
stom
ers;
.su
pplier
s;
224
The
gene
ral
prin
cipl
esof
valu
ech
ain
man
agem
ent
Tom
McG
uffo
gan
dN
ick
Wad
sley
Supp
lyC
hain
Man
agem
ent:
An
Inte
rnat
iona
lJo
urna
l
Vol
ume
4.
Num
ber
5.
1999
.21
8±22
5
.age
nts
±in
term
ed
iari
essu
chas
ban
ks,
insu
ran
ce
com
pan
ies,
frei
gh
tfo
rwar-
der
s,tr
an
sport
ers
etc.
;.
auth
oritie
s±
gover
nm
en
tal
bod
ies,
cust
om
s,lice
nsi
ng
au
thori
ties
,in
-
spec
tion
bod
ies
etc.
;.
peo
ple
±em
plo
yee
s,p
ati
ents
,ci
tize
ns
etc.
;
(2)
Pro
du
cts
or
serv
ices
:.
des
crip
tion
san
dkey
chara
cte
rist
ics;
.p
rice
san
d/o
rco
sts;
.te
chn
ical
spec
ific
ati
on
s;
(3)
Pro
cess
esor
trea
tmen
ts.
Mast
erd
ata
file
sn
eed
tob
en
ot
on
lykep
t
acc
ura
tean
du
p-t
o-d
ate
wit
hin
each
org
an
i-
sati
on
(an
oto
riou
sly
dif
ficu
ltb
ut
esse
nti
al
task
),b
ut
als
osy
nch
ron
ised
bet
wee
nvalu
e
chain
part
icip
an
ts.
Th
isis
bes
tach
ieved
by
collab
ora
tive
even
tp
lan
nin
gan
dm
an
agem
ent
inth
em
ediu
mte
rman
dth
en
ear
term
elec
tron
icex
chan
ge
of
mast
erfi
les
or
use
of
a
com
mon
elec
tron
icca
talo
gu
e.
For
am
od
ern
valu
ech
ain
tofu
nct
ion
wel
l,
its
part
icip
an
tsw
ill
not
on
lyb
eex
chan
gin
g
ord
ers
or
invoic
es,
bu
tw
ill
als
ow
ish
tosh
are
forw
ard
pla
ns
an
dp
ast
per
form
an
ced
ata
.
Dep
en
din
gon
the
natu
reof
the
valu
ech
ain
,
mu
tual
ben
efit
sca
nb
egain
ed
by
join
tly
man
agin
gd
eliv
eri
es,
inven
tory
level
s,se
rvic
e
etc.
by
com
mu
nic
ati
ng
forw
ard
pla
ns
for
dis
trib
uti
on
,p
rod
uct
ion
or
sup
ply
an
djo
intl
y
agre
ein
gth
ere
qu
ired
resp
on
se.
(Th
isap
-
pro
ach
isvari
ou
sly
des
crib
ed
as
ven
dor
or
co-
man
aged
inven
tory
(VM
I/C
MI)
,d
istr
ibu
tion
req
uir
em
ents
pla
nn
ing
(DR
P),
an
dco
nti
nu
-
ou
sor
effi
cien
tre
ple
nis
hm
ent
pla
nn
ing
(CR
P/E
RP
).)
Th
est
an
dard
SIM
PL
-ED
Ivalu
ech
ain
ord
eras
def
ined
ab
ove
can
be
use
dto
sup
port
thes
evalu
ech
ain
man
agem
en
tte
chn
iqu
esb
y
sim
ply
chan
gin
gth
ete
nse
±fu
ture
ten
seis
a
pla
nn
edord
er,
past
ten
seis
afu
lfille
dord
er
an
dth
eref
ore
are
cord
of
per
form
an
ce.
Als
o
the
tim
ep
erio
dto
wh
ich
data
rela
teca
nb
ere
-
def
ined
tosu
itth
evalu
ech
ain
an
dit
s
part
icip
an
ts±
daily,
wee
kly
,m
on
thly
tim
e
bu
ckets
.T
hu
svalu
ech
ain
part
icip
an
tsw
ill
share
forw
ard
pla
ns
an
dob
ject
ives
an
dals
o
rep
ort
son
past
per
form
an
ce.
Co
ncl
usi
on
s
On
ceit
isre
cogn
ised
that
elim
inati
ng
the
cost
pen
alt
ies
imp
ose
db
yth
eop
erati
on
of
the
silo
syn
dro
me
req
uir
esco
llab
ora
tive
pla
nn
ing
an
d
man
agem
en
tan
dth
esh
ari
ng
of
data
ina
stru
ctu
red
man
ner
±in
the
med
ium
an
dn
ear
term
as
wel
las
inth
esh
ort
term
±it
follow
s
that
there
nee
dto
be
com
mon
data
def
init
ion
s
an
dco
mm
on
cod
ing.
Th
ese
req
uir
eto
be
use
dn
ot
on
lyto
sup
port
exte
rnal
com
mu
-
nic
ati
on
sb
etw
een
valu
ech
ain
part
icip
an
ts,
bu
tth
eyca
nth
enals
ow
ith
gre
at
ben
efit
be
use
dfo
rin
tern
al
com
pu
ter
ap
plica
tion
s±
SIM
PL
-ED
Ile
ad
sto
SIM
PL
-IT
.T
hese
def
init
ion
sap
ply
equ
ally
wel
lto
the
Inte
rnet
an
dto
ente
rpri
se-t
o-e
nte
rpri
seb
ulk
data
tran
sfer
s.
As
inm
an
yof
life
'ssi
tuati
on
s,so
invalu
e
chain
com
mu
nic
ati
on
sd
oes
the
80:2
0ru
le
ap
ply
.T
her
ew
ill
be
som
eocc
asi
on
sw
hen
a
part
icu
larl
yco
mp
lex
pro
cess
req
uir
esa
cor-
resp
on
din
gly
com
ple
xco
mp
ute
rap
plica
tion
or
mes
sage.
For
80
per
cen
tof
ap
plica
tion
s
an
dco
mm
un
icati
on
s,si
mp
lici
tyan
dst
an
dar-
dis
ati
on
are
not
on
lyp
ract
icab
leb
ut
des
irab
le
an
dco
mp
eti
tivel
ym
an
dato
ry.
Wit
hth
era
pid
gro
wth
of
elec
tron
icco
mm
erce
an
dth
e
pra
ctic
ab
ilit
yof
sett
ing
up
new
low
cost
valu
e
chain
s,b
oth
toco
mm
un
icate
wit
han
dto
sup
ply
con
sum
ers
inm
ost
corn
ers
of
the
glo
be,
sim
plici
tyan
dst
an
dard
isati
on
of
ap
-
plica
tion
san
dco
mm
un
icati
on
sto
sup
port
speed
yan
dce
rtain
valu
ech
ain
man
agem
ent
may
wel
lb
ees
sen
tialfo
rco
mp
etit
ive
surv
ival.
Never
thel
ess,
no
on
esh
ou
ldu
nd
erest
imate
the
bra
inp
ain
involv
edin
thin
kin
gin
am
ore
sim
ple
an
dst
an
dard
way,
an
dth
ecu
ltu
ral
chan
ges
involv
ed
inim
ple
men
tin
gsu
chp
ro-
cess
es.
An
dof
cou
rse,
even
then
,th
ere
isn
o
sub
stit
ute
for
crea
tivit
yan
dd
rive
ind
evel
op
-
ing
new
pro
du
cts
an
dse
rvic
esw
hic
hth
e
sim
ple
,st
an
dard
,sp
eed
yan
dce
rtain
pro
-
cess
esw
ill
then
sup
port
.
Re
fere
nce
s
Fent
on,
N.,
McG
uffo
g,T.
,W
adsl
ey,
N.
and
Whi
ttak
er,
A.
(199
8),
`̀SIM
PL-E
DI
±Th
esi
mpl
est
valu
ech
ain
mes
sage
s'',
e-ce
ntre
uk .
Forr
este
r,J.
W.
(196
1),
Indu
stria
lD
ynam
ics,
MIT
Pres
s,C
ambr
idge
,M
A.
McG
uffo
g,T.
(199
7),
Man
agin
gth
eSu
pply
Cha
inw
ithSp
eed
and
Cer
tain
ty,
Art
icle
Num
ber
Ass
ocia
tion.
McG
uffo
g,T.
(199
9),
`̀K.I.
S.S.
±K
eep
ItSi
mpl
e,St
anda
rd,
Spee
dyan
dC
erta
in±
The
prin
cipl
esof
valu
ech
ain
man
agem
ent
and
elec
tron
icco
mm
erce
'',e-
cent
reu
k .Sm
ith,
A.
(177
6),
Inqu
iryin
toth
eN
atur
ean
dC
ause
sof
the
Wea
lthof
Nat
ions
,M
oder
nLi
brar
y(1
994
Editi
on).
225
The
gene
ral
prin
cipl
esof
valu
ech
ain
man
agem
ent
Tom
McG
uffo
gan
dN
ick
Wad
sley
Supp
lyC
hain
Man
agem
ent:
An
Inte
rnat
iona
lJo
urna
l
Vol
ume
4.
Num
ber
5.
1999
.21
8±22
5