Supply chain profitability

Use multiple metrics to evaluate global supply chain networks. Because one metric can give only part of the picture, it is beneficial to examine network design decisions using multiple metrics such as firm profits, supply chain profits, customer service levels, aud response times. Good decisions perform well along most relevant metrics. 

Supply-Chain Management Increases Profitability of the Chemical Industry Through Computer Tools... 

The Supply Chain Operations Reference-model [12] has been developed and endorsed by the Supply-Chain Council (SCC), an independent non-profit-making corporation, as the cross-industry standard for supply-chain management. 

Chopra and Meindl support the aspect of many-to-many relations and a supply chain network. Additionally, they add the aspect of direct relations between partners in the supply chain across several supply chain steps. The primary purpose of the supply chain is to satisfy customer needs, in the process generating profit for itself (Chopra/Meindl 2004, p. 5). 

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. 

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... 

The value objective function is oriented at the company s profit and loss definitions. Guiding principle is to only use value parameters that can be found in the cost controlling of the company signed by controlling. Penalty costs and without currency and weighting factors being applied to steer optimization results but having no actual financial impact - as it can be often found in supply chain optimization models - do not meet this requirement. 

Global profit optimization consistent with profit and loss statements demonstrates how to integrate the value and volume views in controlling, sales marketing, supply chain management, production and procurement. 

Maloni M, Benton WC (1999) Power influences in the supply chain. The Ohio State University, Fisher College of Business Mandal P, Gunasekaran A (2002) Application of SAP R/3 in on-line inventory control. International Journal of Production Economics 75 47-55 Mam MV, Rosiello RL (1992) Managing Price, Gaining Profit. Harvard Business Review 70 (5) 84-94... 

Pyke DF, Johnson ME (2005) Real-Time Profit Optimization Coordinating Demand and Supply Chain. URL http //www2.cio.com/higher/report3489.html, Date 31.03.2005... 

Niraj, R., Gupta, M., Narasimhan, C. 2001. Customer profitability in a supply chain. Journal of Marketing, 65(3) 1-16. 

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. 

Directly or indirectly, it can influence as much as approximately 20 percent of total costs1 , and a 20 to 30 percent reduction of total supply chain costs can be tremendous for companies that, in some cases, are operating on profit margins of around five percent. 

It is crucial to know the requirements and service breakpoints of each customer segment (Fig. 22.3) and the related economic opportunities. Most successful players go as far as designing and tailoring differentiated supply chains and service level offers (Fig. 22.4), and tracking service levels and profitability to address service issues and extra costs. 

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. 

For all these reasons, ready-made ingredients are a profitable choice for small and medium-sized companies with only limited resources in the areas of logistics, product development or procurement. Ready-made flavour systems are an important part of the supply chain and can contribute to a reduction in processing costs. This is a benefit that broad-based multinational corporations can also appreciate. 

Our results also capture the notion of double marginalization of the vertical supply chain where two independent firms, upstream and downstream, may end up with lower profits in the decentralized setting. The decentralized model also considers price ambiguity since the price information is not revealed between... 

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