Profit from supply chain

United States to primarily Africa. The clothing is sorted into different sets with associated price points in order to appeal to potential global market segments. Notice that even if the final retail price is lower than original product cost, this reverse chain can be profitable, since it only has to cover transportation and margin requirements from supply chain participants. 

Losbichler H, Mahmoodi F, Rothboeck M (2008) Creating greater shareholder value from supply chain initiatives. Supply Chain Forum Int J 9(1) 82-91 Raheman A, Nasr M (2007) Working capital management and profitability case of Pakistani firms. Int Rev Bus Res Pap 3(l) 279-300... 

Table on page 74 from The Customer Profit Centre, Focus, 2 (2) (Hill, G.V. and Harland, D.V. 1983), Institute of Logistics and Distribution Management Table 10.1 from Supply Chains in a Vulnerable, Volatile World, A T. Kearney (2003)... 

Similarly, when tax planning is performed independently from supply chain planning, it may lead to suboptimal strategies with respect to operating cost and profit. 

In market economies, however, companies are confronted with competition when selling to customers and they use the market competition when purchasing from suppliers. On the other hand, market constellations can change, when many customers compete for limited resources or raw materials provided by few large suppliers. In these situations, prices, values as well as ensured profitability within each company are decisive for the sustainable survival of the business. While the supply chain emphasizes the supply aspects including ensured supply and availability (Corsten 2001, p. 94), an essence of Porter s value chain underlining the value focus and the supply chain concept is required as basis for the study. 

However, a focus shift from supply to demand would again not consider the overall profitability of the value chain leaving out supply volumes and values supply specifically in procurement. Concluding, a focus on either demand or supply is not sufficient and both have to be managed in an integrated way together with the resulting values. Therefore, the different... 

Value planning and the integration of company s profit and loss structure with supply chain management is not addressed often artificial penalty costs are applied in models to steer results instead of actual cost parameters from controlling... 

However, although these aspects are discussed as separate topics below, in line with the way scientific studies and regulatory issues are normally defined, most consumers still see them as parts of a holistic picture where the good intentions of the people involved in the food supply chain are the most important assurance for all aspects of food quality. In this context, stringent safety measures and sophisticated process control, which are the cornerstone of food quality assurance schemes in conventional supply chains, maybe seen by consumers at best as self-imposed restrictions that prove the sincerity of these good intentions, and at worst as unfair, unnecessary burdens introduced through lobbying from big profit business to support its suppression of small-scale or local producers. 

There are typically a few major contributors to the cost savings from the business side, such as consolidated purchasing, inventory management, supply chain integration, offshoring etc. Look for those to justify the harmonization decision - the rest is windfall profit . 

In particular, downstream chemical users will benefit from a more efficient and streamlined flow of information among the supply chain, allowing a more discerning choice of materials and enhancing the profit potential of new materials. 

Up to this point, retail supply chains have largely generated greater profit margins through driving out inefficiencies. For example, retailers have pushed the function of maintaining an inventory back onto the vendor or middleman. Vendors, in turn, have required lower prices and faster deliveries from their suppliers. This type of approach has been effective, but for many supply chains there is precious little fat stUl left to cut out of the system. To reach the next level of efficiency, productivity, tmd profitability, a new perspective on what retail competition means wfil have to be adopted. 

Hakansson and Snehota (1995) stress that the structure of activities within and between companies is a critical cornerstone of creating unique and superior supply chain performance. Executives in leading companies believe that competitiveness and profitability can increase if internal key activities and business processes are linked and managed across multiple companies. Thus, successful supply chain management requires a change from managing individual functions to integrating activities into key supply chain business processes (Lambert et al. 1997). 

In many cases a firm may have to exercise some control over other members of the supply chain to ensure product quality and/or post-purchase services. The need for control stems from management s desire to protect the firm s long-term profitability. 

The use of subcontracting, sub-subcontracting and sub-sub-subcontracting (as noted in Chapter 2) creates supply chains along which production pressures flow, and ever increase as another slice of profit it taken from each tender price the lower it goes ... 

How coordinated are the supply chain choices with the company strategy How does this differ from our competitors If our competitors have a coordinated supply chain and we do not, then the relative efficiency of competitors may require coordination of our supply chain. Note that the coordination of all competing supply chains does not guarantee improved profits, but only su ests a competitive necessity. The decision then is whether to continue to eng e as needed or to change market focus. 

Thus the corresponding expected profit for Retailer 1 is 2.178 and the corresponding profit for Retailer 2 is 2.52. These values are obtained by taking the product of the probability and expected profit. Thus, when both retailers offer an advance order discount, they see their expected profits drop from the original values of 2.4 and 2.88 to the new values of 2.178 and 2.52. Thus, competition can improve individual supply chain performance, but when matched by competitors, can create a prisoner s dilemma outcome (bad for all) when both retailers engage in the same action. 

Once the manufacturer and retailer decisions are made, the combined profit across the two firms is termed the supply chain profit. Notice that when the profits of the manufacturer and retailer are added together, the wholesale price level does not affect this total as it is merely a transfer payment from the retailer to the manufacturer. The supply chain as a whole thus attempts to choose a capacity level Kthat will maximize supply chain profit. 

Again the retailer s profit is the sum of the entries in the last column and is equal to 28. Notice that the supply chain profit is lower than the maximum supply chain profit possible of 40.32. Note that for any wholesale price such that c + q < w < r, then Kq > K, if the service levels are greater than 50%. Thus the supply chain profits are not maximized, and the supply chain is termed uncoordinated. Notice that this remains the case even when the wholesale price varies from the current level. In general,... 

Figure 5.2 shows the manufacturer, retailer and supply chain profits for different possible values of the manufacturer capacity. Notice from this picture that it is optimal for the manufacturer to choose a capacity of 17 units because that capacity maximizes the manufacturers profits. Notice, however, that the capacity level does not maximize the supply chain profits. This example illustrates that wholesale price agreements may not be able to coordinate a supply chain. 

It is thus clear that the wholesale price contract caimot always create a coordinated supply chain, that is, that the profits added across individual companies do not attain the supply chain maximum profit because the optimal capacity decision, from a supply chain perspective, is not chosen. The next section describes a coordinating agreement that can generate a coordinated supply chain. 

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