Supply Chain and Value Chain Management basic principles.pptx

1. Supply Chain and Value Chain
Management basic principles

2. Strategic Decisions
Profit Margin
• Value Created and Captured – Cost of Creating that Value = Margin
Competitive strategy, CS
• Understanding how your company creates value, and looking for ways to add
more value – critical to develop CS
Value chain
• A set of activities that an organization carries out to create value for its
customers.

3. Value Chain
Presented by Michael Porter in his book Competitive Advantage: Creating and Sustaining Superior Performance

4. Primary Activities
• Inbound logistics –Processes related to receiving, storing, and distributing
inputs internally. Your supplier relationships are a key factor in creating value
here.
• Operations –Transformation activities that change inputs into outputs that are
sold to customers. Here, operational systems create value.
• Outbound logistics –Deliver your product or service to your customer. E.g.
collection, storage, and distribution systems
• Marketing and sales –Processes used to persuade clients to purchase from you
instead of your competitors. The benefits you offer, and how well you
communicate them, are sources of value here.
• Service –Activities related to maintaining the value of your product or service
to your customers, once it's been purchased.

5. Support Activities
• Procurement (purchasing) – To get the resources it needs to operate. Such
as finding vendors and negotiating best prices.
• Human resource management – How company recruits, hires, trains,
motivates, rewards, and retains its workers.
• Technological development – Related to managing and processing
information, and protecting a company's knowledge base. Maintaining technical
excellence are sources of value creation.
• Infrastructure – Company's support systems, and the functions that allow it to
maintain daily operations. For instance- Accounting, legal, administrative, and
general management

6. Using Porter's Value Chain
Step 1 – Identify sub-activities for each primary activity
Step 2 – Identify sub-activities for each support activity.
Step 3 – Identify links between different activities
Step 4 – Look for opportunities to increase value

7. Using Porter's Value Chain
Step 1 – Identify sub-activities for each primary activity
• Direct activities create value by themselves. For a retailer’s marketing and sales
activity - making calls to clients, advertising, selling online, organizing events
• Indirect activities allow direct activities to run smoothly. For a retailer’s sales and
marketing activity - include managing the sales force software and keeping
customer records.
Step 2 – Identify sub-activities for each support activity.
Step 3 – Identify links between different activities
Step 4 – Look for opportunities to increase value

8. Supply Chain
• Characterized by
• short product life cycles
• unpredictable customer demands
• tremendous product variety
• labor-intensive production
• long supply processes
• Complex decision making
Flow of A Fashion Supply Chain

9. Following are phases/steps in supply chain. Length of each cycle varies with company
• Product
• Planning (Based on Trend forecast, SMs feedback)
• Design (Design Team)
• Product Development (Ready product to be mass produced)
• Wholesale Selling
• Production – Time taken depends on the factory
• Delivery – Time taken depends on the country and mode of transport
Standard Turnaround time- 3 months

10. Retail Price
Rs.10,000
Making cost
Rs.1,500
Warehousing
Rs.500
Marketing
Rs.3,000
Packaging
Rs.500
Shipping
Rs.500
Taxes
Rs.1000
Liquidation
Cost
Rs.3,000
Sample Cost structure

11. Fast Fashion Vs. Slow Fashion
• Not to be redesigned every year
• Wardrobe staple
• Every customer needs it
• Trendy
• Follow taste of customer
• Customer may get over it soon
Basis for Sourcing decisions

13. Case study
- Zara