Profitability, link with customer

Virtually all published chain-link or cascading models linking vendor resource inputs with customer-level profits share roots in Heskett, et al. s (1994) Service-Profit Chain (SPC). Examples include its derivatives (e.g. Kamakura, Mittal, de Rose, Mazzon, 2002 Love-man, 1998 Soteriou Zenios, 1999), the return-on-quality (ROQ) framework (Rust, Zahorik, Keiningham, 1995), and the general satisfaction-profit chain (Anderson Mittal, 2000). Further, with one exception (Bowman Narayandas, 2004), all are developed in a consumer setting. 

Example 2 - Resource inputs and customer profitability. Firms invest resources in a customer relationship with the objective of earning a return on that investment. Consistent with this goal, Shapiro, Rangan, Moriarty, and Ross (1987) develop the price versus cost-to-serve (which includes pre-sale, order-related, distribution, and postsale service costs) framework, which links vendor investments to the returns from each customer relationship. This relationship, however, is not a simple one efforts to find a strong correlation between vendor investments in a relationship (as measured by cost-to-serve) and returns (i.e. price paid by the customer) typically fail. Shapiro, Rangan, Moriarty, and Ross (1987) interpret this as evidence that high income does not necessarily mean high cost-to-serve. And nor does low income necessarily mean low cost-to-serve. 

The focus of a company is to be competitive in the marketplace and thus be profitable. A competitive supply chain has to provide customers with the expected or superior performance. But what does it mean to be competitive The competitiveness of a supply chain refers to two aspects of the supply chain (1) the link between a supply chain s choice of its competitive metric and the corresponding choice of its architecture and (2) the impact of competitors on a supply chain s performance. While successful firms in every industry often have unique capabilities, an important question for every firm is to adjust its supply chain architecture to remain competitive in the presence of a changing environment. 

The NP-GP model (with weights from AHP) selects supplier K3, plants Ml and M2, distribution center Nl, and transportation link Ul. Direct shipment from plant to customers is not allowed. Finished products are distributed to customers via DC Nl. For this network design, the unfulfilled demand and delivery time to customers are achieved. However, profit, the facility disruption risk, and the transportation disruption risk goals are not achieved, differing by 2.36%, 30.35%, and 27.4% from the target values, respectively. 

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