Customer value creation

The value created by a company in a supply chain equals the surplus accrued to all individual stakeholders - customers and suppliers - in the company s supply chain. Surplus for each stakeholder is defined as its revenue minus cost. As the revenue of one company in a supply chain can be the cost of another, value creation can be intertwined. Therefore, if value creation were a zero sum game, the stakeholders would operate as adversaries. However, if the total value-pie were to increase, the stakeholders would be mutually supportive. This can happen only if the supplier is interested in increasing customer s value and vice versa. Conversely, to increase the total value, the supply chain would need to increase benefits to customers, lower the costs of its suppliers, use its resources more effectively, and develop relationships with suppliers and customers in innovative ways. 

Consider a computer manufacturer that makes two types of computers. Assume three customers with willingness to pay (WTP) of 1,500, 1,800, and 1,900. As the total demand of these three customers exceeds supply of two computers, the manufacturer will increase price until the customer with the lowest WTP is driven out of the market. At that point the price of the computer will be set to 1,500. At that price point the value created for the remaining two customers will be 300 and 400, respectively. Assuming the manufacturer procures parts from suppliers at 1,050 for each computer, the manufacturer obtains a value of 900 =2 (1,500 — 1,050). Assuming the suppliers cost of producing the parts equals 500, the suppliers value equals 1,100 =2(1,050 — 500). The total value created in the supply chain is 2,700 (= 1,900 + 1,800 — 2 500). Thus, value is created for all three parties 700 for customers, 900 for the manufacturer, and 1,100 for the supphers. Obviously, if the manufacturer could negotiate a lower 

The real world problem is much more complex for several reasons customers purchasing from other competing manufacturers, a large number of customers with uncertain buying habits, raw material price uncertainty, and the uncertain manufacturing lead times. Therefore, the challenge each partner faces is to maximize its share of value, while increasing the total supply chain value. 

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Shapiro, Rangan, Moriarty, and Ross (1987), Rangan, Moriarty, Gordon, and Swartz (1992), and others conceptualize industrial buying behavior segmentation in mature markets as based on price and cost-to-serve. This framework permits the linking of a vendor s customer management effort (value creation) with ability to extract customer value (prices). ... 

It had to transform the conglomerate into a focused portfolio that gave the new company a credible story of value creation for customers, shareholders, employees, and global communities ... 

The type of supplier-customer relationship and the degree of supply chain complexity are likely to determine the opportunities and the recommended strategic approach to value creation. To map the opportunity and the recommended strategic approach to value creation, it is useful to classify segments by the type of sup-... 

Value creation an accurate understanding of how customer value can be created... 

Demand Networks and Use of Downstream Data Joint Value Creation Strategies with Customers... 

Peters, L. (1997). IT enabled marketing A framework for value creation in customer relationships. 

Ensure you provide better value than your competition and communicate your superior value creation to your customers. 

Systems Thinking. We have brought our main strategic projects under the umbrella of four Value Creation programs Profitable Growth, Productivity, Renewable Feedstock, and customer Focus ... 

Integrated load planning and building with warehouse management Consolidate oders by customer, source, traffic lane, carrier, etc. 2-Modularization and x vertical range of value creation o... 

As one of the world s leading specialty chemical companies, Clariant contributes to value creation with innovative and sustainable solutions for customers from many industries. The business units are divided into four Business Areas Care Chemicals, Catalysis Energy, Natural Resources and Plastics Coatings. The product portfolio of Clariant provides competitive and innovative solutions to customers and research and development is focused on addressing the key trends of our time. These include energy efficiency, renewable raw materials, emission-free mobility and conserving finite resources. 

Value creation Product features, new applications Customizing for total solution... 

The fundamental decision problem in all businesses is how value is created, shared and captirred in the complex relationships between customers, competitors, suppliers, and other network actors. The broad concept of value can be regarded as a trade-off between benefits and sacrifices (Parolini 1999), and the value of an offering is formed through a set of relationships with customers and other stakeholders (Ramirez and Wallin 2000). Value in business relationships constitutes the intangible and tangible elements of customer and supplier perceptions of the value of an offer. The risks associated with value creation, on the other hand, pose a threat of value escalation in these relationships. This may be caused by the imwanted transfer of knowledge when engaging in close cooperation with another company. 

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