Understanding Supply Chain Management And Value Propositions

Globalization and its Impact on Customer Demand

The policy of globalization and liberalization has changed the economic market of the world by giving customers a variety of alternatives for most of the products and services (Sbragia, 2010). This not only make customer expertise in buying but also the customer now is more aware of and demand for the products they want to purchase. As due to the globalization and increase in the competition, the business firms are not just competing on price, product and services but they are also focusing on positive value creation from the side of customer for the purpose of long-term sustainability (Cuñat & Guadalupe, 2009). To meet the customer demands on the timely manner, these business firms are redefining their products and related value-added services. They are doing this through the tight integration with the suppliers by aligning their business processes with the various activities of supply chain management. This shows that the effective control of the supply chain is important for the survival and growth of the businesses.

In a business context, a supply chain is a network of corporate, individuals, activities, data and resources implicate in the manufacturing and supply of a product. For example, in the supply chain, there is a stream of commodity and services from resources manufacturers, intermediate and component manufacturer, final commodity manufacturers, wholesalers and distributors and in last, retailers and consumers (Srivastava, 2007). These all activities are connected with the many activities like transportation, storage, information sharing and planning.

At the end point of the supply chain, a value is created with the customers through the organization products or service. A value proposition is a set of benefits that satisfy customers after being delivered. The value proposition is promised by every brand before the selling of the product or services so that the customer satisfaction can be equal to their expectations (Tajima, 2007). The benefits of the value proposition can be of any type i.e. functional benefits, emotional benefits or symbolic benefits. Every organization try to produce value proposition more than the expectations of the customer so that they can make feel delight to them. 

The research objective of doing this exploration is to analyse and identify –

• Value proposition at the last stage of supply chain.
• Approaches that determine value.
• How various business enterprise in the supply chain shares the costs and the benefits? 

In this research, the data is collected from the secondary sources, which includes internet, newspapers, magazines, books, social surveys and research papers. The relevant information had been fetched from these sources for the purpose of above research objectives.

What is Supply Chain Management?

An implicit promise made by a business enterprise to the customers to supply a specific set of benefits and value is known as a value proposition. Each proposition is packed in a unique set of value that can be supplied to the chosen market (Cartr & Rogers, 2008). In supply chain management, the value proposition creates a mutual value for customer and supplier.

In the organization context, business decisions, plans and strategy are directly influenced by the value propositions. For example, value proposition affects the business market in which they are working, selection of relevant users of the supply chain, and the significances in the financial aspects. The operations of the business enterprises are also affected by the value proposition like the research in the targeted market, a process in the production, relation with customers and the diversification in the product line (Lush, 2011). Therefore, it can be said that the approach of value proposition is getting the attention of many users like business organizations, practitioners, researchers and academics. This particularly includes fields of the supply chain, operations, manufacturing-distribution in organization and performance management.

The value proposition at the end of the supply chain can be identified with the support of value matrix includes three value proposition and align it with the six main value proposition at the customer end. Treacy and Wiersema gave this value matrix in 1996 and those three-value propositions were – product leaders, operational excellence and customer intimacy. This identifies value propositions by Treacy and Wiersema are applicable to both conventional businesses as well as the new global operating business. In addition, the other six important value propositions are simplifiers, innovators, brand manager, socialisers and technological integrators (MacBryde, Paton & Clegg, 2013).

In operational excellence, the business enterprise tries to focus on cost leadership so that to provide the customer best quality products at effective prices. For achieving this objective, the company do make control of various errors and achieving an economy of scale. Many companies like Walmart, Dell and Federal Express are the best example of this value discipline. The next example of value matrix (discipline) is the Customer Intimacy (Liu, Guo & Lee, 2011). In this discipline, the organization treat customer as their first priority and continuously work in meeting their needs and wants. In addition, they use the strategy of Customer Relations Management (CRM) so retain their old customers and attract a new segment of customers. In this discipline, best examples of the companies are Home Depot and Ciba-Geigy. The last discipline of the value matrix is product leadership is Product Leadership. In this discipline, the company use the strategy of continuous product development and improvement so that to be the market leader of the specific segment. They fulfil continuous demand of both loyal and new customers with the tool of innovation by heavily investing in research and development. The characteristics of these new and innovative products are that they are better, faster, smaller, trendier and cheaper as compare to their previous products. The major companies come into this discipline are Apple and Phillips.

Value Proposition and its Importance

The key operational elements build by the business enterprise for offering a particular set of value are aligned with these six value propositions so that to fulfils the expectations of the customers.

The broad description of the above mentioned six value propositions of the value matrix can be analysed in two dissimilar angles – customer perspectives i.e. “what customer get” and organization perspective i.e. “what the company needs to do” (Grönroos, 2009). 

1. Innovators – A new product offered by the organization to the customers, which they have never used or seen before. It can be unique in terms of its design, use or any other special characteristics. In this segment, the business enterprises always focus on creating good design of the skills in a short product lifecycles so that their old product can become obsolesce and they can launch new products within the time (Martínez-Torres, 2013). For making their product innovation, the company do use the help of technology and create breakthrough with the design and benefits in the markets. Examples – Intel, Microsoft, Sony, etc.
2. Brand Managers –In terms of value proposition, brand managers customers get status when they purchase the commodity so that to fulfil their needs of the feelings include ego, superiority and social acceptance. Therefore, the value that is proposed by the businesses is a combination of a physical characteristic of the commodity, service, brand and price (Urde, 2013). In this context, the company uses the strategy of expanding the market through reinforcement of a solid brand image of the organization or product. The company should also focus on superior control over the quality, style and promotion. Example, Harley Davidson, Nike, etc.
3. Price minimisers – Here, the customer gets value proposition in terms of the products characterised by quality, reliability and conscious prices. The company also get security on their product. For sustaining in this proposition, the business enterprise needs to an emphasis on increasing the strong capabilities to cut various costs, lead times and waste (Giraitis, Kapetanios & Price, 2013). This will help them in optimizing the performance. In addition, the main focus of the company in this discipline is to make effective production by reducing the operational costs. For examples – Toyota, Casio, Honda, etc.
4. Simplifiers – In terms of value propositions, the simplifier customers get convenience and availability to reach the products. For sustaining this proposition, there is a strong focus and automation requires from the company on order generation and order fulfilment. Here, the strategic objective of the company is to make the process streamlined so that the customer life can become simple and easy in a novel, profitable and creative manner (Iyer & Muny, 2009). This also requires conventional and unconventional resources including networking and IT. Example, Amazon, Federal Express, etc.
5. Technological Integrators (TI) – The total solutions are provided to the technological integrators customers. Total solution implies tailored products and services. For supporting this proposition, the customer needs to assist the process of customers, supporting them in identifying and providing new solutions by giving personalised attention like delivery, post and pre-purchase service, maintenance and installation (Garengo & Bititci, 2007). Here, the company strategic objective is to customize definite and uninterrupted resolutions for carefully selected customers based on long-term relationships. The organization should have a capacity to configure any specific needs. Example – IBM, Roadways Logistics, etc.

1. Socialisers – In this value proposition discipline, the customers get reliable and flexible services. For sustaining this proposition, the organization is building the system of tough system of service delivery and long-term relations with customers. The company strategy here is to build trust and confidence by the service provided. Here, the products may not be advanced, low prices, but the type of commodity and its delivery to the users shape the confidence (Lykkegaard & Ulriksen, 2016). For example, Socialisers build trust through persistent interactions with the business of customers or helping them our whenever the customers need them. The companies come under this category are – Home Depot and SCS. 

Supply chain function of the business can be used as a competitive weapon in the market. Due to its following traits, the supply chain can be treated as a partner of the business.

• It effectively aligns with the business strategy, helps the organization to take decisions so that to accelerate the growth, and brings performance.
• It identifies various opportunities in the processes of the businesses and creates value with the help of new digital technologies.
• It continuously identifies customer requirements and meets their needs with predictable performance.

The value in the supply chain brings several beneficial outcomes. Value to be determined in the supply chain depends upon the type of supply chain the company has (Swafford, Ghosh & Murthy, 2008). For this purpose, the businesses can use three lenses to unhide concealed value in the supply chain. These include –

• Along with the basic operational metrics, how is the supply chain performing?
• Cost performance
• Predictableness
• Assets competence
• Nimbleness and flexibility
• Level of service/ Perfect order 

• Are the other parts of the business can be easily well integrate with the supply chain? 

• Point-to-Point assimilation.
• Level of difficulty.
• Value outflow. 

• In the external environment, is the agility of supply chain is sufficient to handle? 

• Stability in the demand.
• Macro surroundings and ecosystems.
• Stability in the supply.
• Legal variations. 

The first lens states that how well the supply chain implements along with the simple output metrics so that to make a competitive edge in the market. These metrics include complete cost, predictability and efficiency of assets (Gerstenhaber, 2018).

In the second lens, there is a statement of integration of supply chain with the other parts and processes of business. Here, the opportunities lie in the hand of management, which includes excessive complexity due to SKUs, stemming of value leakage due to excessive rework as most of the time, high-level metrics hide the basic cost and capabilities needed to gain service objectives (Lumsden & Mirzabeiki, 2008). There is also a need for better integration of the supply chain with the additional processes such as operations and sales planning or sharing capabilities or costs through the product lines. The tighter integration and accountability for sales forecast can be done with the help of digital tools.

In last, the third lens is related to the nimbleness of supply chain to react to variations in the external business environment. Here, the method begins with the evaluation of whether and how profit pools move from one type of customer to another, and whether new products or new countries can able bring any growth in the business. In addition, an organization can use the help of various digital tools or disruptive innovation so that to check the changing behaviour of consumers. These digital innovations can lead to change in new channels or ordering patterns. The legal and regulatory changes can also be anticipated by the company affecting the business.

The Six Value Propositions of Value Matrix

While using the three lenses, the company can unmask many opportunities to create value. This can help the company in reinvention of the supply chain and step-function improvement.

There is a requirement of standardisation in the sharing of cost and benefits in a supply chain by the business firms. The benefit of supply chain collaboration includes the efficiency in the process, rise of business synergy, increase in the quality and the value, flexibility, innovation and improvement in the products. The advantage to the particular activities of the supply chain association includes inventory management, designing of product, new product development, planning and manufacturing, processing of order, transportation and distribution, trades, supervision of continuous demand and customer service (Kanda & Deshmukh, 2008).

The parameters of cost and benefits are categorised as the cost function and benefits function. The cost function includes the cost of advancement, implementation of system, process synchronisation or coordination and data translation. In addition, the benefit function involves of supply chain cost reductions and enhanced receptiveness to the market. The expansion costs comprise of the host computer cost, the equipment related to the network, middleware and applications. The cost of system implementation is divided into administrative costs and maintenance costs (Fawett, Magnan & McCarter, 2008). The process coordination cost involves installation cost, training costs and business process engineering costs. The cost of data translation is the cost function that differs with the amount of information stream.

The function of benefit is the reduction in the time of a cycle of operations, data cleaning, holding of stock, obsolescence, recall of product and counterfeit products. In addition, the advantage of the receptiveness to the marketplace is the advances in market intelligence and service levels.

After the globalization and the integration of all markets, there is a growing awareness in the organizations relating to the strategic significance of incorporation between suppliers, manufactures and customers so that they can build a competitive position in the industry (Yang, 2009). This will be a profitable situation for all the businesses, which help them to develop and grow at a faster pace. The integration of various digital technologies into the supply chain and logistics of the organisation is important for the sustainability. For example, many organizations in the US use CISCO networking technology for the connection between the various users inside and outside the organization as its algorithms are based on the attributes of reliability, security and accessibility.

Using the Three Lenses to Create Value in the Supply Chain

Supply chain alliance can benefit the business in the increased level of global competition, and help the organization by provide greater strategic information and knowledge about the various complex activities and process. This also challenge many companies to fill strategic gaps, entering new markets and raise their technological capabilities.

Conclusions 

Few organization classifications address the market as a parameter to classify, in the way of customer’s perspective and this study is also done at the customer endpoint of the supply chain. The six value proposition relating to the value matrix provides flexibility and openness for evaluating the value proposition for the traditional and new businesses. The value proposition is a better comprehension of conventional and new business (including e-business and services) as it is made off by accepting the different types of businesses, external situation and so recommends dissimilar types of values to different types of markets.

The value proposition to the customers is given to the customer and this comes from the value matrix, which can be termed as a management tool helps in making suitable business strategy and to choose the customer in a selected market. In addition, it also suggested some incongruences and therefore suggests general alternatives.

In this case, the strategic key members are those who hold the core competencies of the supply chain. It is necessary to align the value proposition of strategic members of the supply chain to that to raise the value proposition at the customer endpoint as the value proposition of the strategic member of the supply chain state the overall value proposition of the supply chain. Considering the overall supply chain, the value proposition is same as that of the company facing the end customers. In addition, the linkage of individual value proposition with the overall supply chain confirms the integration of strategic capabilities and therefore, the associations with the strategic members of the supply chain are based on the enhancement of the competencies in the supply chain.

This research starts with the finding of value proposition at the customer end in the supply chain by studying various factors. It provides several insights into the alignment and integration of strategic competencies and individual values. This research can also help various academics and researchers to understand that how value chain is link to the value proposition in the supply chain.

In addition, this research intends a value chain toolkit and a framework of value proposition through the value matrix. It is also necessary to find out the best suitable method t evaluate and determine the value.

Collaborating for a Better Supply Chain

Various parameters are also suggested including benefit and cost function, which help the business firms in sharing costs and benefits in an appropriate manner.

Therefore, it can be said that there is no right or wrong use of the unit of analysis. This all depends on the nature of the business and its organisation.

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