Value grid

Last updated

The value grid model was proposed by Pil and Holweg as a means to show that the way firms compete has shifted away from the linear value chain way management theory has traditionally thought about value chain management.

The advantages of a value-grid framework, as opposed to value chains, is in allowing companies' managers to strategize and coordinate operations. Common non-linear value chain strategies include influencing demand, modifying information access, exploring multitier penetration, managing risk, seizing value, integrating value, creating new value propositions, exploiting value chains across tiers, pursuing pinch-point mapping, and defining demand enablers.

Literature

Pil, F.K. and Holweg, M. (2006) "Evolving from value chain to value grid." MIT Sloan Management Review, 47(4): 72-80

See also

Related Research Articles

Supply chain management Management flow of goods and services

In commerce, supply chain management (SCM), the management of the flow of goods and services, money and information between businesses and locations, and includes the movement and storage of raw materials, of work-in-process inventory, and of finished goods as well as end to end order fulfillment from point of origin to point of consumption. Interconnected, interrelated or interlinked networks, channels and node businesses combine in the provision of products and services required by end customers in a supply chain.

Supply chain System for moving a product or service from where it is produced to where it is consumed

In commerce, a supply chain is a system of organizations, people, activities, information, and resources involved in supplying a product or service to a consumer. Supply chain activities involve the transformation of natural resources, raw materials, and components into a finished product that is delivered to the end customer. In sophisticated supply chain systems, used products may re-enter the supply chain at any point where residual value is recyclable. Supply chains link value chains.

Lean manufacturing, or lean production, is a production method derived from Toyota's 1930 operating model "The Toyota Way". The term "Lean" was coined in 1988 by John Krafcik, and defined in 1996 by James Womack and Daniel Jones to consist of five key principles: 'Precisely specify value by specific product, identify the value stream for each product, make value flow without interruptions, let customer pull value from the producer, and pursue perfection.'

A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product for the market. The concept comes through business management and was first described by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance.

The idea of the value chain is based on the process view of organizations, the idea of seeing a manufacturing organization as a system, made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources – money, labour, materials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits.

The beer distribution game is an educational game that is used to experience typical coordination problems of a supply chain process. It reflects a role-play simulation where several participants play with each other. The game represents a supply chain with a non-coordinated process where problems arise due to lack of information sharing. This game outlines the importance of information sharing, supply chain management and collaboration throughout a supply chain process. Due to lack of information, suppliers, manufacturers, sales people and customers often have an incomplete understanding of what the real demand of an order is. The most interesting part of the game is that each group has no control over another part of the supply chain. Therefore, each group has only significant control over their own part of the supply chain. Each group can highly influence the entire supply chain by ordering too much or too little which can lead to a bullwhip effect. Therefore, the order taking of a group also highly depends on decisions of the other groups.

Demand response Techniques used to prevent power networks from being overwhelmed

Demand response is a change in the power consumption of an electric utility customer to better match the demand for power with the supply. Until recently electric energy could not be easily stored, so utilities have traditionally matched demand and supply by throttling the production rate of their power plants, taking generating units on or off line, or importing power from other utilities. There are limits to what can be achieved on the supply side, because some generating units can take a long time to come up to full power, some units may be very expensive to operate, and demand can at times be greater than the capacity of all the available power plants put together. Demand response seeks to adjust the demand for power instead of adjusting the supply.

The demand chain is that part of the value chain which drives demand.

Bullwhip effect Economic phenomenon in which small shifts in consumer demand cause disproportionately large reactions in the supply chain

The bullwhip effect is a distribution channel phenomenon in which demand forecasts yield supply chain inefficiencies. It refers to increasing swings in inventory in response to shifts in consumer demand as one moves further up the supply chain. The concept first appeared in Jay Forrester's Industrial Dynamics (1961) and thus it is also known as the Forrester effect. It has been described as “the observed propensity for material orders to be more variable than demand signals and for this variability to increase the further upstream a company is in a supply chain”.

Demand-chain management

Demand-chain management (DCM) is the management of relationships between suppliers and customers to deliver the best value to the customer at the least cost to the demand chain as a whole. Demand-chain management is similar to supply-chain management but with special regard to the customers.

In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time. The relationship between price and quantity demanded is also called the demand curve. Demand for a specific item is a function of an item's perceived necessity, price, perceived quality, convenience, available alternatives, purchasers' disposable income and tastes, and many other factors.

Dynamic Demand is the name of a semi-passive technology to support demand response by adjusting the load demand on an electrical power grid. The concept is that by monitoring the frequency of the power grid, as well as their own controls, intermittent domestic and industrial loads switch themselves on/off at optimal moments to balance the overall grid load with generation, reducing critical power mismatches. As this switching would only advance or delay the appliance operating cycle by a few seconds, it would be unnoticeable to the end user. This is the foundation of dynamic demand control. In the United States, in 1982, a (now-lapsed) patent for this idea was issued to power systems engineer Fred Schweppe. Other patents have been issued based on this idea.

In integrated circuits, electrical power is distributed to the components of the chip over a network of conductors on the chip. Power network design includes the analysis and design of such networks. As in all engineering, this involves tradeoffs - the network must have adequate performance, be sufficiently reliable, but should not use more resources than required.

Build to order

Build to Order is a production approach where products are not built until a confirmed order for products is received. Thus, the end consumer determines the time and number of produced products. The ordered product is customized, meeting the design requirements of an individual, organization or business. Such production orders can be generated manually, or through inventory/production management programs. BTO is the oldest style of order fulfillment and is the most appropriate approach used for highly customized or low volume products. Industries with expensive inventory use this production approach. Moreover, "Made to order" products are common in the food service industry, such as at restaurants.

Order fulfillment

Order fulfillment is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer. Sometimes order fulfillment is used to describe the more narrow act of distribution or the logistics function, however, in the broader sense it refers to the way firms respond to customer orders.

Smart grid

A smart grid is an electrical grid which includes a variety of operation and energy measures including:

In computer science, the Bx tree is basically a query that is used to update efficient B+ tree-based index structures for moving objects.

Lean services is the application of lean manufacturing production methods in the service industry. Lean services have among others been applied to US health care providers and the UK HMRC.

The Program on Vehicle and Mobility Innovation (PVMI) is the oldest and largest international research consortium aimed at analyzing the global automotive industry.

Retail leakage occurs when local people spend a larger amount of money on goods than local businesses report in sales, usually due to people traveling to a neighboring town to buy goods. Retail sales leakage occurs when there is unsatisfied demand within the trading area and that the locality should provide extra stores spaces for such type of businesses. After all, retail leakage does not necessarily translate into opportunity. For instance, there could be a tough competition in a nearby locality that leads the market for same type of product. Many small - to medium-sized communities experience leakage of retail expenditures as local citizens drive to neighboring towns to shop at national retail chains or eat at national restaurant chains. Attracting such national retail chain stores and restaurants to a community can prevent this type of expenditure leakage and create local jobs.

Evolution of Management Systems

'A management system is the framework of processes and procedures used to ensure that an organization can fulfill all tasks required to achieve its objectives.