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strengthening your value delivery network

Planning and partnering to build enduring and profitable stakeholder relationships

It is important to understand how your organisation fits into your existing value delivery network and what proportion of the relative value-add is captured by each participant – this information will provide valuable insight into potential integration opportunities.

The majority of business organisations are involved in supply chains that involve the production of goods (from materials sourced through a supplier), the subsequent selling of goods either directly to a consumer or to a marketing distributor who services the consumer market.  Generally, there are numerous competitor supply chains that are working in parallel and competing to attract the same group of potential consumers (figure 4.1, below).

Definition of Value Delivery Network
The network of all direct industry participants involved in the production, marketing, delivery, installation and service of your organisation’s goods into specific demographic and geographic markets.

The process of adding value
Raw material suppliers, processors, manufacturers, wholesalers, distributors and retailers are all actively involved in the process of converting raw-materials into finished goods, and through the process of converting inputs into outputs each participant adds actual or perceived value to each unit of goods sold.

The benefits of integrating and synchronising your value delivery network

  • Extracting a significant commercial benefit from your customers by using competitive advantages that are external to your organisation through partnering with aligned value delivery partners.
  • Increasing the intensity of integration within a value-chain, often leads to the lowering of the unit cost of production through the incremental recovery of overhead costs, often generating free cash flows (FCF’s) available for research (to generate innovation) and technology (to adapt automation) – core sources of competitive advantage.
  • Alliances between value-chain participants often lead to reduced transaction costs, through eliminating intermediary margins and increasing pricing transparency, providing your organisation with powerful leverage in supply negotiations.
  • Provides your organisation with real time information to be able to enhance inventory management and employ JIT-manufacturing practices to better match your production (supply) with demand.

How can Activated Logic help?

As outlined in the Creating value through competitive advantage and Strategic planning in changing times sections and advocated by a number of innovators in the area of Competitive Strategy, organisations are best served by “sticking to their knitting”. That is, the majority of organisations are best served by leveraging their organisational strengths and focusing on developing core competencies to be able to compete more effectively.  Consequently, despite the potential benefits of “owning the value chain” (vertical integration in the supply chain), “many organisations often partner with a network of suppliers and distributors, and increasingly R&D and marketing firms whose collective competitive strengths, provide an integrated and powerful path to market”.

Value Delivery Audit
The relative competitiveness of an organisation is not determined by the quality of products it’s produces, it’s innovativeness - not even it’s pricing, but rather - the effectiveness and responsiveness of the entire value delivery network which the organisation is operating within or integrated with. 

It is important to independently determine which parts of the value chain your organisation operates in, assess how competitive your overall value delivery network is in relation to your major competitors, and explore opportunities to further enhance the value delivery capacity of your organisation. 

Preparing a Strategic Marketing Plan
At the core of every highly effective value delivery network is a brilliantly conceived strategic business and marketing plan. This provides direction for not only the external partners in the network, but also internal organisational departments including; finance, accounting, purchasing, operations, information systems and human resources.

A Strategic Marketing Plan should be developed following a comprehensive value delivery audit, and should determine and make recommendations and recommendations concerning which segments of the value chain your organisation should be participating in.  The plan should be based on segments where your organisation is most competitively positioned and also objectively determine the optimal level of integration necessary to maximise value creation.  The Strategic Marketing Plan is particularly important in aligning your core partners with the objectives and interests of your organisation, and if done well, hopefully being recognised as a “partner of choice”, further increasing leverage in future partnering negotiations.

Partner Relationship Management
The benefits of Customer Relationship Management (CRM) are well established, and rightfully so, as the customer is the ultimate end-user of the organisation’s products & services, and understanding the needs, demands and purchasing habits is obviously very valuable.  However, understanding the end-users aspirations is of limited use unless your organisation can identify and partner with the appropriate organisations which can add-value to your offering and provide an effective network for delivering value.

Activated Logic can assist your organisation build relationships with your partners by devising innovative partnering solutions to optimise the effectiveness of your entire value delivery network.  Solutions range from operational synergies resulting from organisational alignment to co-branding & joint promotional material though to innovative differentiation strategies.

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