What are benefits of value chain management?

by Sree Rama Rao on September 22, 2010

Organizational culture and attitudes

The last requirement for value chain management is having a supportive organizational culture and attitudes. Those cultural attitudes include sharing collaborating openness, flexibility mutual respect and trust. And these attitudes encompass not only the internal partners in the value chain but external partners as well. For instance at hero Cycles , CEO has been able to achieve extremely low inventory levels through its family type culture which encompass its 4,000 employees, 225 vendors (90 per cent of whom are within a 10 kilometer radius from the manufacturing facility) and 3,000 dealers. The core value in the company is that no action should be taken that would hurt a part of the extended Hero family. This sense of belonging to a close knit community allows hero cycle partners to work closely together to create value for the customer. Dell has taken a completely different approach as it works with its value chain partners almost exclusively through cyberspace. Both approaches however, reflect each company’s commitment to developing long lasting mutually beneficial and trusting relationships that best meet customers’ needs.

Collaborating with external and internal partners takes significant investments in time, energy, other resources and a serious commitment by all chain partners. Yet, organizations receive several significant benefits from value chain management. An exhibit highlights the results of a survey of manufacturers that had embarked ob value chain management initiatives and the benefits they perceived. Let’s take a look at what this exhibit is taking us.

Collaborating with external and internal partners takes significant investments in time, energy and other resources and a serious commitment by all chain partners. Yet, organizations receive several significant benefits from value chain management. Exhibit highlights the results of a survey of manufacturers that had embarked on value chain management initiatives and the benefits they perceived. Let take a look at what the exhibit is telling us.

Improved customer service was the major benefits those companies (44%) Managing from a value chain perspective gives organization’s a better handle on customer needs at all points the chain. As value chain partners collaborate and optimize their processes to better meet customers’ needs customer service should improve.

The next two most cited benefits form value management reported by companies were cost savings and accelerated delivery times (40%) as inefficiencies and non value added activities are dozen out of the value chain companies will achieve cost savings in different work activities and areas. In addition as value partners collaborate by savings in different work activities and areas. In addition as values chain partners collaborate by sharing information and linking important activities delivery times can be accelerated.

The next important benefit cited by survey respondents as improved quality (39%). As work processes are evaluated for value added potential quality should be one of the measures used.

Inventory reduction were the next most important benefit identified by survey respondents (35%) Inventory storage – both raw materials and finished products – can represent a significant cost for organizations. Through close and careful collaboration among value chain partners, the flow of materials and information through the chain can be improved, leading to inventory reductions. For example,
Maruti Udyog has recently introduced e-nagara a virtual on line system of delivery for its vendors, which allows it to have only four hour stocks for most inventory items. The daily requirement schedule is posted on the intranet, which has a live interface with its vendor. This alignment of supply and productions schedules has resulted in the sales and production becoming more streamlined at the vendor’s end, allowing them to minimize their own inventory carrying costs.

As exhibit shows, additional benefits of value chain management include improved logistics management, increased sales and increased market share.





  • data entry india

    Great post! thanks for sharing it.

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