The ability to keep pricing competitive and grow volumes while protecting margins remains a challenging balancing act. The ability to pass input cost increases to the consumer is severely limited in the current hyperinflationary environment.
The key is to unlock the hidden collaboration potential across the extended value chain between partners as opposed to within the boundaries of a single organisation.
The supply chain is typically focused on the set of activities that deliver the product to the customer – from raw materials, through processing to the shelf. The value chain, on the other hand, comprises all business activities that increase the value of a product or service in the eyes of the customer.
Revenue and cost of sales, as the underlying drivers, require increased visibility as well as a balanced focus. Next, to leverage cost of sales opportunities one needs (a) insight into cost drivers – from source to final product and (b) true, data-driven collaboration with partners – across the value chain. Fortunately, this goal is not as elusive as many may think.
Fact: There are already opportunities in your and your trading partners’ wider value chain. You can improve your capability of leveraging these opportunities by referencing our Value Chain Maturity Model and assessing the current status of the organisation and its strategic trading partners. Value potential and the required organisational change are directly correlated with data-driven insights and technology supports the effort to progress along the maturity curve.
The Value Chain Maturity Model
Stage 1: Reactive
– Decentralised Approach, Typically Pockets of Fragmented Nonintegrated Data Across Operating Units
– No Formal Value Capturing and Tracking Process in Place
– Sourcing and Value Chain Optimisation is Largely Focused on Managing Cost Increases
Stage 2: Functional Focus
– More Centralised Approach, Relying on Historical Transactional or Financial Data
– Fragmented Value Capturing Process, Tools Typically Used within Functional Silos
– Trading Partners Focused on Maximising Their Own Margins in Isolation of Each Other
Stage 3: Cross-functional Focus
– Supply Chain Focus Across an Organisation, Focusing on Order Fulfillment of Specific Products
– Coordinated Value Capturing Process, Tools, Working with Fragmented Data from Different Departments
– Focused on Opportunities in Specific Supply Chains
Stage 4: Value Chain Focus
– Value Chain Focus Across an Organisation, Focusing on Scaling Opportunities Across Product Categories and the Extended Value Chain
– Process to Extract Value within a Single Organisation is Supported by Structured Data and Insights
– Focused on Wider Value Chain Understanding and Reengineering
Stage 5: Connected Value Chain
During this stage, value extraction efforts are multiplied when partners across the value chain continuously see the same version of the truth and continually collaborate on opportunities. A collaborative approach enabled by digital transformation is required as well as the incentive to share data more openly between partners within the value chain.
Learn more about the Value Chain Maturity Model here.
The Power of Collaboration
Once you are part of a truly connected value chain, built on trust, everything changes.
As illustrated in the diagram below, value chain partners should be focused on golden data threads which can expose win-win and hidden insights and opportunities. The collaboration process should be ongoing and based on facts and data, rather than the result of one-off projects or initiatives. It is built on trust and embedded in the culture of partner organisations and value chain partners share specific data and incentives to collaborate.
With golden data threads at your fingertips you can take action.
- Waste hotspots can be identified and the causes can be addressed
- Overexposure to certain sourcing areas can be reduced
- Customer issues can be investigated and solved
- Supply chain bottlenecks can be overcome
- Ineffective elements can be reconfigured
- Product designs can be simplified
- Hidden insights can be exposed
- Win-win opportunities can be exposed
The collaboration process should be ongoing, always driven by data and facts. It is also naturally incentivised by shared successes. This process should become embedded in the culture of partner organisations and value chain partners.
The Opportunity
Hidden potential for growth and efficiency between your organisation and your partners in the extended value chain are waiting to be uncovered. Sharing agreed value chain data between partners and augmenting that with external reference data sets will drive the required insights and ultimately the consumer will benefit from it. Plus, a data- and insights-driven value chain can also improve resilience plans via a wider perspective on risk management.
How Can Value Chain Solutions Help?
Value Chain Solutions is a fully-integrated consumer goods value chain advisory and solutions business, operating across multiple entities and geographies.
We understand and demystify complex value chain dynamics from shelf to source and we partner with our clients to integrate fragmented data and drive various insights from it to facilitate stepwise improvement in value chain maturity, along with ongoing optimisation and collaboration.
Our approach is focused on enabling the Virtuous Cycle within our clients’ value chains to facilitate sustainable value extraction. It forms the foundation of empowering our clients to develop their ability to use data-driven insights to unlock value, in a sustainable manner.
Step 1: DIAGNOSTICS & VALUE CHAIN VISUALISATION
Step 2: COST OF SALES FOCUS
Step 3: EXPAND BUSINESS IMPACT TO TOP LINE
Step 4: SCALE SOLUTION
Step 5: INVEST BACK INTO VALUE CHAIN
Discover more about each step here and let’s have a value conversation!
ABOUT US
Value Chain Solutions is a fully-integrated consumer goods value chain advisory and solutions business, operating across multiple entities and geographies.
Our unique and specialised talent mix, extensive experience, toolsets and partner network in value chain optimisation, from consumer interests to agriculture economics, instil confidence in the agile delivery of exceptional results.
WE TURN SUPPLY CHAINS INTO VALUE CHAINS WITH OUR ADVANCED ALGORITHMS, EXTRAPOLATION, INNOVATION AND REINVESTMENT FORMULA AND APPROACH.