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Supply Chain and Shareholder Value

Alexandre Oliveira and Anne Gimeno introduce their book, Supply Chain Management Strategy: Using SCM to Create Greater Corporate Efficiency and Profits.
This chapter is from the book

People are the hidden gem in the virtuous cycle. Through people, sophisticated information networks find the adequate architecture required to help companies achieve both their intermediate and ultimate goals.

Only through the adequate engagement of people does an organization trigger the virtuous cycle that creates and sustains a value-added innovative environment. This environment leads the business to its ultimate goal: delivering value to shareholders (see Figure 1.1).

Figure 1.1

Figure 1.1 Virtuous cycle

Knowledge management enables visibility, which becomes tangible by understanding the processes and thus enables efficient decision-making mechanisms. The Supply Network Knowledge Management Maturity Roadmap (SKMap), shown in Figure 1.2, introduces the various levels at which organizations perceive the strategic contribution of supply chain management (SCM).

The goal of the virtuous cycle is to promote within the organization the ability to decide and implement actions that modify the business and add value to it. Therefore, it is expected that what the organization considers valuable is well known even before the decision-making process begins.

Note that the virtuous cycle suggests that innovation is the mechanism to enable value as the ultimate goal to be delivered to shareholders and stakeholders. According to Oxford Dictionaries,1innovation is (1) the action or process of innovation; (2) a new method, idea, product, etc;” whereas innovating is to (1) make changes in something established, especially by introducing new methods, ideas, or products.”

The concept of innovation is strongly associated with performing differently. But many people can do many things differently; that’s easy. The difficulty lies in making the change different and, simultaneously, adding value to the business. What one company considers added value might not hold the same importance for another business (even for a competitor). In addition, because business priorities change over time, the value-added concept is temporal.

Adding value to the business may come from entering a new market, reducing the revenue cycle, reducing accounts payable, increasing profitability, or implementing a physical distribution structure capable of responding to demand volatility. What is value for a particular company at a given time?

So many knowledge areas influence SCM decisions that executives often find themselves confused. So, we developed the Supply Network Alignment Reference Model (the SNAR Model), which provides a structured approach to these knowledge areas, mapping the extended supply network from different perspectives (see Figure 1.3).

Figure 1.3

Figure 1.3 SNAR Model

The SNAR Model provides a flexible approach to several dimensions of supply chain management, especially because of its coding system (see Figure 1.4). This coding system applies to the management of supply chain strategies (as presented in this book), to process mapping techniques, and to the use of performance indicators,2 customer service management,3 and the management of fluid and complex supply networks through knowledge management.4

Figure 1.4

Figure 1.4 SNAR Model: Coding system

Supply Chain and Value

Since 2013 (and as of this writing), the Operations and Supply Chain Academic Group at LinkedIn has debated how best to achieve short-term cost-benefit advantage via supply chain management. This LinkedIn group currently has about 20,000 members, and the debate involved academics and executives from countries such as the United States, Brazil, India, Australia, Finland, New Zealand, Turkey, China, England, and Canada.

The variety of knowledge areas involved in supply management, as mentioned earlier, reflects the potential complexity of coordinating within the supply chain the efforts to deliver differentiated contributions to the business and to fulfill shareholder expectations.

To help you understand these contributions, consider the categorizations shown here under the SNAR Model coding system (see Table 1.1).

Table 1.1 SNAR Model Coding System

Contributions from Supply Chain Management to Gain Short-Term Cost-Benefit Advantage

SNAR Model Coding System


Indirect purchasing (indirect materials, MRO, office, and so on)



Business process outsourcing








Benchmarks financial performance






How your deliveries are matching with the orders








Synchronized planning and scheduling



Risk management




Audit the inventory control process




The team




Simplify/standardize supply chain processes




Study the expenditures




Packaging and recycling of the packaging








Review of service levels








Great performance can come only from a great team




Check the costs




Integrate demand and supply

01.02 (01.02.x)



Work with sales area



Reengineer procurement




Check transportation expenses






Review procurement contracts




Define flow of goods, documents, and flow of payment



Monitor inventory aging



Focus on the major spend areas



01.05 (all 01.05.x)


Eliminate unnecessary non-value-added processes



Talk to the front lines


Figures 1.5 and 1.6 show the knowledge areas cited in this public and spontaneous Operations and Supply Chain Academic Group debate/consultation. Most of the SNAR Model is covered.

Figure 1.5

Figure 1.5 Public consultation: SNAR Model knowledge areas

Figure 1.6

Figure 1.6 Public consultation: Intensity chart

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