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Part - VI

Product quality must also be measured throughout the process in terms of numerical values such as 6 sigma, and PPM. Quality must also be converted to Rupees in terms of cost of quality or the price of non-conformance for the same reasons we measure time and inventories. When everyone understands the amount of cash tied up in lead time and resulting inventories and inappropriate quality, it is easier to attack those issues with a single focus. With the measures in place and the investments visible to all, one can now tackle the real problems of titles, areas of responsibility, turf issues, and raw politics. The internal structure with its supporting policies, procedures, and history is what dictates much of today’s business results.

It may be more realistic to divide the Supply Chain in half: Supplier Chain Management and Customer Chain Management with both reporting to the same authority.

The Objectives of a Supply Chain

The objective of every supply chain is to maximize the overall value generated. The value a supply chain generates is the difference between what the final product is worth to the customer and the effort the supply chain expends in filling the customer’s request. For most commercial supply chains, value will be strongly correlated with the supply chain profitability, the difference between the revenue generated from the customer and the overall cost across the supply chain. Supply chain profitability is the total profit to be shared across all supply chain stages.

Competitive and Supply Chain Strategies

A company’s competitive strategy defines the set of customer needs that it seeks to satisfy through its products and services. A firm’s competitive strategy will be defined based on customers’ priorities. Competitive strategy targets one or more customer segments and aims to provide products and services that will satisfy customers’ needs.

The value chain for any organization begins with new product development, which creates specifications for the product. Marketing and sales generates demand by publicizing the customer priorities that the product and services will satisfy. Marketing also brings customer input back to new product development. Using new product specifications, operations transforms inputs to outputs to create the product. Service responds to customer requests during or after the sale. These are core functions that must be performed for successful sales. Finance, information technology and human resources support and facilitate the functioning of the supply chain.

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* Contributed by -
Amit Mishra,
PGP 19188,
Indian Institute Of Management, Lucknow.