Value Chain Mapping

TermiKnowledge - Supply Chain, Procurement and Inventory Terminologies
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In the early stages of any business it is easy to get wrapped up in just keeping things moving along, on-track with production and fulfillment, and simply to take advantage of the current value chain setup. However, once a company has built up a substantial inventory, moved into a new location, or is experiencing a peak period with orders, then it's time to pay attention to the whole production/provisional process and how it impacts the bottom line. There are many ways to measure business value and all of them have their place, from absolute inventory and order flow to the overall sales mix, return on investment, and more. But perhaps the most important measure of all in terms of the whole production process is the one that no one really thinks about: the value chain matrix.

When people think of the value chain mapping, they typically think of a complex system filled with numbers and statistics, with distributors and manufacturers divided into groups according to how they each interact with the rest of the system. While this is true, without the supporting details it becomes easier to make sweeping generalizations and fail to look closely at the individual relationships that underlie those statistics. For example, while it might be true that all distributors are strictly segregated by type, there are often other relationships within each group that are not so easy to spot on a basic inventory management level. This means that even if one distributor performs poorly, another may do as well or even better. The only way to really understand inventory flows is to look at the complete supply chains at all points in the supply chains and analyze all of the variables that affect them.

Often this requires the help of third-party vendors such as pallet vendors, manufacturers, and distributors. By putting all of these pieces of the puzzle together and interpreting the data, it becomes easier to see which activities are adding value and which are costing businesses money. Once companies have the data in front of them, they can easily improve their inventory planning and execution processes, removing what is hurting the bottom line and focusing on the areas that are creating flow. However, even with the assistance of these tools it is still possible to create faulty plans, create unworkable processes, or manage an overabundance of activity. Because of this, it is still important for businesses to keep up on the latest trends in the market, reading magazines and business publications, keeping tabs on company news, watching for any important announcements regarding changes to the business landscape, and reading up on industry news and information.

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