Terry ackerman value chain 101

Value Chain Value Chain Management Forum Management Forum

““Value Chain 101-Value Chain 101-

A Practical Path to Sustainable A Practical Path to Sustainable Profitability”Profitability”

Terry AckermanTerry Ackerman

Value Chains DefinedValue Chains Defined

““Value Chains .... are a network of Value Chains .... are a network of independent businesses, producers, independent businesses, producers, processors, distributors and retailers processors, distributors and retailers who recognize their who recognize their mutual mutual need for one need for one another and who …another and who …

2Value Chain Management Forum –

Value Chain 101

Value Chains DefinedValue Chains Defined

… … work together – strategic objectiveswork together – strategic objectives

… … share information and trust.share information and trust.

… … share risks and benefits.share risks and benefits.

… … invest time, energy and resources.invest time, energy and resources.

… … value add their products or services.value add their products or services.


Value Chain 101

What is Value Add?What is Value Add?

“the worth added to a product during the production or conversion process”


Value Chain 101

Why Do Companies Need Why Do Companies Need Value Chains? Value Chains?

Companies are no longer self–contained.

The ability to innovate and compete is directly linked to that of their partners.


Value Chain 101

How Do Value Chains How Do Value Chains Contribute to Your Companies Contribute to Your Companies

Sustainability?Sustainability?

1.1. ProfitabilityProfitability

2.2. ProductivityProductivity..

3.3. Innovation/DifferentiationInnovation/Differentiation

4.4. Managerial talentManagerial talent..

5.5. AdaptabilityAdaptability

6.6. Risk reductionRisk reduction


Value Chain 101

Supply Chain Supply Chain

““Companies in a supply chain often Companies in a supply chain often

have little or no knowledge or have little or no knowledge or

interest in the remaining interest in the remaining participantsparticipants

in the supply chain. “in the supply chain. “

““The relationship is often based on The relationship is often based on a P.O.”a P.O.”


Value Chain 101

Characteristic Value Chain Supply Chain

Information Sharing Extensive

Limited

Trust Trust - key factor Often non-existent

Cost Control Focus on value formation

Focus on lowest price.

Margin Margin sharing

Not uncommonEach participant is focused solely on capturing as much margin as possible.

New Product Development

Often share the risk. Limited interest.

Market response Respond quickly to

market demand – information sharing.

Focus on purchase order.

Value Chain Management Forum – Value Chain 101

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Value Chain vs Supply ChainValue Chain vs Supply Chain

The Management ChallengeThe Management Challenge

The challenge is changing the The challenge is changing the relationship to collaborative from relationship to collaborative from

adversarial because ….adversarial because ….


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The Management ChallengeThe Management Challenge

... in a value chain, companies are ... in a value chain, companies are collaborating, sharing information and collaborating, sharing information and

engaging in other activities.engaging in other activities.


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Managing –Managing – Value Chain vs Supply Value Chain vs Supply

ChainChainMore time. More time. Collaboration required.Collaboration required.Build the trust. Build the trust. Give up some independence.Give up some independence.Willing to share information.Willing to share information.““Reconfigure” the VC when required.Reconfigure” the VC when required.


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Pork Industry Value Chain Pork Industry Value Chain


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Organic Value ChainOrganic Value Chain


The Value Network The Value Network ` The value chain network extends The value chain network extends

beyond any one individual company.beyond any one individual company.Value Chains of a company’s suppliers Value Chains of a company’s suppliers

(and their suppliers).(and their suppliers).The Company’s Value Chain The Company’s Value Chain Value Chains of the Company’s Channels Value Chains of the Company’s Channels

of distribution- Up streamof distribution- Up streamValue Chains of the Company’s Customers Value Chains of the Company’s Customers

(and the buyers of their products)(and the buyers of their products)


Value Chain 101

Why Do Value Chains Fail?Why Do Value Chains Fail?

Lack of trust.Lack of trust. Chase MoneyChase Money Too ambitious Too ambitious

/complex/complex No ChampionNo Champion Lack of capability & Lack of capability &

resourcesresources Incorrect Partners & Incorrect Partners &

ease of dissolutionease of dissolution

Lack of trust.Lack of trust. Chase MoneyChase Money Too ambitious Too ambitious

/complex/complex No ChampionNo Champion Lack of capability & Lack of capability &

resourcesresources Incorrect Partners & Incorrect Partners &

ease of dissolutionease of dissolution

Limited information Limited information sharing sharing

Unwilling to give up Unwilling to give up independenceindependence

Difficulty in building Difficulty in building consensus on consensus on critical issues.critical issues.

Undefined Undefined responsibility.responsibility.

Limited information Limited information sharing sharing

Unwilling to give up Unwilling to give up independenceindependence

Difficulty in building Difficulty in building consensus on consensus on critical issues.critical issues.

Undefined Undefined responsibility.responsibility.


Value Chain 101

SettingSetting Up A Value Chain Up A Value Chain

Find a Champion. Find a Champion. Find the right partners.Find the right partners.Start Small.Start Small.Be Prepared to “Reconfigure .“ Be Prepared to “Reconfigure .“ Management Commitment Management Commitment You probably are already in a VC.You probably are already in a VC.


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What Are What Are YourYour Company’s Company’s Value Creating Activities? Value Creating Activities? Processing – Outsourcing Processing – Outsourcing Managing Information Flow Managing Information Flow Product Development (Speed to market)Product Development (Speed to market)Purchasing (Raw Materials/Packaging)Purchasing (Raw Materials/Packaging)Marketing (Brand Development)Marketing (Brand Development)Customer Service (On time Delivery)Customer Service (On time Delivery)Information Flow (Internal/External)Information Flow (Internal/External)


Value Chain 101

Finding the PartnersFinding the Partners

Management Commitment.Management Commitment. Value Creation Focus – Not Just Price. Value Creation Focus – Not Just Price. Core Competency – What do they do well.Core Competency – What do they do well.Willingness to invest time and energy and Willingness to invest time and energy and

resources.resources.Can you trust them?Can you trust them?


Value Chain 101

Why Should Your Company Why Should Your Company Develop A Value Chain? Develop A Value Chain?

Sustainable Competitive Advantage. Sustainable Competitive Advantage.

1.1. Reduced Costs.Reduced Costs.

2.2. Increased Profits. Increased Profits.

3.3. Product Differentiation .Product Differentiation .

4.4. Reduced Risk. Reduced Risk.

5.5. Product Innovation.Product Innovation.

6.6. Speed to Market .Speed to Market .


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What’s In It For You?What’s In It For You?

Terry ackerman value chain 101

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