Explain what is meant by the term “value” in a supply chain Answer

Value Chain

Explain what is meant by the term “value” in a supply chain. How can it be best measured in a supply chain? How does increasing value in a supply chain help align supply chain operations to the business mission?  Respond to at least two of your fellow classmates’ postings.

Explain what is meant by the term “value” in a supply chain.

Value can be added, or viewed in many different forms.  Probably the most well-known is shareholder’s value.  Shareholders value is created anytime, by any legal method,   which adds to the overall financial wellbeing of the company.  Value for the stockholder is created when their return on investment (ROI) in your company is greater than it would be in a comparable risk investment.

How can it be best measured in a supply chain?

In managerial finance there are many ways to measure value but, the best way is to use ratio analysis combined with other data.  You can make a ratio out of any two or more numbers by dividing them in some form into each other.   In managerial finance there are many standard ratios that are used to analyze value of a company, or investments, for example: net present value (NPV), Return on Assets (ROA), Return on Investments (ROI) and many others.  “Return on investment is an important measure that is widely used to assess shareholders value” (Harrison & Van Hoek, 2012, p. 75).  ROI is profit * 100/capital employed or a different formula that is the outcome of profitability and asset utilization is:   ROI = 100 * profit/sales * sales/ capital employed.

ROI can also be used as a great tool to show “The Boss” that an individual project or improvement is cost effective and profitable. Another way of stating ROI is: the ratio derived from   the sum of the improvement benefits divided by the sum of the costs of the improvement. A 40-to-l ratio, for example, means $40 of benefits was derived from every $1 of cost.  ROI   can help justify the cost of quality improvement projects, determine the value of continuing a project already under way and determine the overall organizational effectiveness of an implemented quality initiative.

How does increasing value in a supply chain help align supply chain operations to the business mission?

Managing supply-chain operations is critical to any company’s ability to compete effectively. The supply chain has traditionally been managed as a series of, compartmentalized business functions. It was driven by manufacturers who managed and controlled the pace at which products were developed, manufactured and distributed.  However, customers have   forced increasing demands on manufacturers for options/styles/features, quick order fulfillment, and fast delivery.  With the long-time competitive differentiator of manufacturing quality   starting to be non-differentiated across the board, meeting these customer demands has emerged as the next critical opportunity for competitive advantage by efficient supply chain management.  Maintaining competitive advantage likewise forces constant redirection and enhancement of product features, quality, cost, options and services.  “Supply-chain   effectiveness has therefore joined product quality and time-to-market as a key competitive differentiator. Success for many companies now depends on their ability to balance a stream   of product and process changes with meeting customer demands for delivery and flexibility. Optimally managing supply-chain operations has therefore become critical to companies’ ability to compete effectively in the global marketplace” (Gordon, 1997, para. 1).  In today’s world you cannot compete effectively without a well-developed supply chain.  Emphasizing the importance of supply chain operations will develop value by eliminating non-value added steps.  To develop an efficient supply chain that adds value to the company and shareholders as well as meeting the needs of today’s customers and supply chain partners all sections of the supply chain must share common goals, and concentrate on the end


Gordon, S. (1997). Supply-chain Operations. Logistics Information Management, 10(2). Retrieved from http://search.proquest.com.proxy-library.ashford.edu/docview/220041033?accountid=32521

Harrison, A., & Van Hoek, R. (2012). Logistics Management & Strategy (4 ed.).  London, England: Prentice Hall Financial Times.

Mission of customer satisfaction .