Transcript Value Chain management

ValueMathics
THE MAGIC PALLET
Every time a shipment sails to its final
destination, seller and buyer have done
business because the transaction
©2004of
TGVC
represents a value for each
them.
The same applies whenever a
service is delivered to the buyer
Then again, seller and buyer have
different perceptions of “value”.
“The Magic Pallet” explains the
different elements of those
perceptions.
Value
COST OF
MEANS
SELLER
COST OF
OWNERSHIP
VALUE
ADDED
BUYER
PERCEIVED
BENEFITS
SELLER
For the seller, value is the sales price
of his goods minus the cost of means
(fixed and variable costs);
the net profit on
the transaction
Seller’s sales/buyer’s purchase price
Value
COST OF
MEANS
SELLER
COST OF
OWNERSHIP
VALUE
ADDED
BUYER
PERCEIVED
BENEFITS
SELLER
For the seller, value is the sales price
of his goods minus the cost of means
(fixed and variable costs);
the net profit on
the transaction
BUYER
For the buyer,
value is the worth
in monetary terms
of the perceived benefits
in return for the price he pays
plus the additional costs incurred,
called “total cost of ownership”.
This is the “value proposition” of the seller.
D
EE
SP
Q
UA
L
IT
Y
ValueMagics uses
concise concepts
with precise
descriptions to
identify the elements
that constitute the
value proposition
of a firm
CUST
OMER
VALU
ES
CHANGE
CHANCE
COST
OF
OWN
ERSH
IP
UE
L
VA ED
D
AD
E
IMAG
DESIGN
Let us first agree on some definitions….
CUSTOMER VALUE
VALUE CHAIN
The chain of
activities performed
by a single firm,
which add value
for its customer
The sum of perceived
benefits – in monetary
terms- in turn for the total
cost of ownership
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
TECHNOLOGY
SUPPORT
PRODUCTION
LOGISTICS
MARKETING
TECHNOLOGY
SUPPORT
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
VALUE
COST OF
OWNERSHIP
The set of value chains
that come together
including suppliers,
manufacturers
processors,
distributors,
traders, etc.
PERCEIVED
BENEFITS
VALUE SET
We now can start loading the pallet……
The costs of means are
the comparative
resources of a firm or
sector.
MATERIALS
MACHINES
MAN POWER
MONEY
MINDS
For most, these costs
are a given
- hard to improve upon
BUYER
SELLER
MINDS
MONEY
MAN POWER
MACHINES
MATERIALS
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Cost people with a higher education and/or creativity.
Cost of own financial resources or financing
Cost of skilled, proficient or experienced workers
Cost of machines, infrastructure and other means.
Landed cost of raw materials, seeds, ingredients a/o
The second crate…….
……..…..contains the value added;
the value chain of a firm or sector,
which is the source of competitive
advantages.
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
Not the comparative
“What do you have?”,
but
MATERIALS
MACHINES
MAN POWER
MONEY
MINDS
“What do you do with it?”
BUYER
SELLER
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
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Creating new, developing or adapting existing products
Transformation of inputs into a final product
All in-bound, in-house, out-bound movement of goods
Attracting new and retaining existing customers
All pre/after sales support, personalization of processes
This is the value proposition of ……
COST
For the buyer, that value
proposition has two
sides: his total cost of
ownership……..
MATERIALS
CHANCE
CHRONO
CONFLICT
BUYER
SELLER
COST
CHRONO
CHANGE
CHANCE
CONFLICT
….the seller to the buyer.
CHANGE
MACHINES
MAN POWER
MONEY
MINDS
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
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=
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Purchasing price on a DDP basis
Time involved in purchasing, control and corrective actions
Change and adaptation to new products, processes or suppliers
Number of potential suppliers, reliability, barriers, distances
Disputes on incompetence, unresponsiveness, non-transparancy
MATERIALS
CHANCE
CHRONO
……………..perceived
benefits from the
purchase.
These benefits can be of
technical, social,
economic or any other
nature and are related to
the product and processes
CONFLICT
BUYER
SELLER
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
COST
CHANGE
MACHINES
MAN POWER
MONEY
MINDS
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
The last crate contains the……….
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Design, shape, color, taste, feel, texture, packing
Compliance with product and process standards and norms
Availability and/or delivery time, convenience of purchasing
Contribution to profit by reputation supplier/country or brand
Level of pre- and after sales service, customization of processes
COST OF
MEANS
COST OF
MEANS
SELLER
COST OF
OWNERSHIP
VALUE
ADDED
BUYER
BUYER
PERCEIVED
BENEFITS
SELLER
PERCEIVED
BENEFITS
Higher cost of means –
MMMMM- will cause higher
cost of ownership –CCCCCwithout necessary
increasing benefits -PASIS
COST OF
OWNERSHIP
Competitiveness….
Higher value added –TPLMS- will
lead to higher benefits –PASIS.
Therefore, higher MMMMM need to
be compensated by higher TPLMS.
Business or no business ……
COST OF
MEANS
SELLER
COST OF
OWNERSHIP
VALUE
ADDED
BUYER
PERCEIVED
BENEFITS
If total cost of ownership –CCCCCis higher than the benefits –PASIS-,
the buyer will not buy, postpone
the purchase or look for
other suppliers.
The business equation
VALUE
ADDED
Comparative
advantages
COST OF
MEANS
SELLER
BUYER
PERCEIVED
BENEFITS
Competitive
advantages
COST OF
OWNERSHIP
The value proposition of a seller is composed by his
cost of means –comparative advantagesplus value added –competitive advantages
That value proposition should contain
more perceived benefits than the
total cost of ownership
for the buyer
Value addition and profits
Though not
designed to
be a
mathematical
model, The
Magic Pallet
serves to give
indications of
value to
players in
global
supply chains
Capturing Value in Global Networks: Apple’s iPad and iPhone, Distribution of profits iPhone 2010, Kenneth L. Kraemer, Greg
Linden, and Jason Dedrick, University of California, Irvine, University of California, Berkeley and Syracuse University
From B2B to B2C
Behind the buyer are the end users or consumers.
They also have a perception of value.
But –other than the buyer- the end user’s perception of
benefits and sacrifices is not strictly monetary. Less tangible
issues play an –often dominant- role in the purchasing
decision. Like environmental and or social considerations.
And –last but not least- psychological motives to buy or not
to buy. These customer values complete The Magic Pallet
PERIL
PEOPLE
PLANET
PROFIT
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
CHRONO
CHANGE
CHANCE
CONFLICT
COST
PRODUCT
ACCESS
BUSINESS
MATERIALS
MACHINES
MAN POWER
MONEY
MINDS
SPEED
PRICE
QUALITY
SUPPORT
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
PRODUCT
SPEED
IMAGE
IMAGE
SERVICE
BUSINESS
SERVICE
CONSUMER
Though not designed to be
a mathematical model, The
Magic Pallet serves to give
indications of value to
players in global
supply chains
See www.valuemagics.com
SELLER
COST
MATERIALS
CHANGE
MACHINES
MONEY
MINDS
In the SWAT analysis, we
show how to use The Magic
Pallet to find the most
successful road to global
markets.
MAN POWER
TECHNOLOGY
PRODUCTION
LOGISTICS
MARKETING
SUPPORT
PRODUCT
ACCESS
SPEED
IMAGE
SERVICE
ValueMagics applied….
CHANCE
CHRONO
CONFLICT
BUYER