Lecture Four: Outline

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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

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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.

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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

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The Demand Chain (contd)

• 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.

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The Demand Chain (contd)

• Other problems that are caused by demand
  uncertainty include inventory obsolescence and
  holding costs.

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The Demand Chain (contd)

• The increasing frequency of new product
  introductions also contributes to demand
  uncertainty.

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The Demand Chain (contd)

• 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
  companys production-planning processes

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The Demand Chain (contd)

• Outcomes of this methodology include accurate
  response and quick response

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A Value-Based Demand Chain
Source Walters (2002)
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Value Benefits and Costs (upstream and downstream)
Source Walters (2002)
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Demand and Supply Chain Processes The Value Chain
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Demand and Supply Chain Processes The Value
Chain (contd)

• 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.

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Demand and Supply Chain Processes The Value
Chain (contd)

• 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.

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Demand and Supply Chain Processes The Value
Chain (contd)

• Secondly they must recognise the distinct supply
  and demand processes that must be integrated in
  order to gain the greatest value.

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Demand and Supply Chain Processes The Value
Chain (contd)

• He suggests three key elements

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Demand and Supply Chain Processes The Value
Chain (contd)

• The core processes of the supply and demand
  chains, viewed from a broad cross-enterprise
  vantage point rather as discrete functions

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Demand and Supply Chain Processes The Value
Chain (contd)

• The integrating processes that create the links
  between the supply and demand chains and,

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Demand and Supply Chain Processes The Value
Chain (contd)

• The supporting infrastructure that makes such
  integration possible

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The Value Chain
Source Walters (2002)
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The Value Chain (contd)

• Gardiner (2000) identify value congruence as
  essential to operating a successful value chain.

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The Value Chain (contd)

• Pohlman and Gardner (2000) describe eight value
  drivers, based on the assertion that what people
  value drives their actions.

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The Value Chain (contd)

• External cultural values

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The Value Chain (contd)

• Organisational cultural values

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The Value Chain (contd)

• Individual employee values

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The Value Chain (contd)

• Customer values

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The Value Chain (contd)

• Supplier values

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The Value Chain (contd)

• Third-party values

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The Value Chain (contd)

• Owner values

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The Value Chain (contd)

• Competitor values

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The Value Chain (contd)

• Kotler (2002) colloquially refers to this process
  as

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The Value Chain (contd)

• Identify the value

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The Value Chain (contd)

• Deliver the value

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The Value Chain (contd)

• Communicate the value

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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?