CHAPTER 2

Building Value Networks

You cannot save your way to value.

—Lora Cecere

While building the end-to-end value chain was their stated goal for the supply chain pioneers, it has not been their destination. Supply chain leaders have talked about building the end-to-end supply chain from the customers' customer to the suppliers' supplier for the last 30 years, but it is an unrealized aspiration. As we enter the fourth decade, the extended supply chain is an uncharted frontier. Conquering it will be a slow journey.

Let's start the discussion with definitions. When the supply chain is extended to a network of trading partners, it is termed a supply network. When the emphasis of this extended supply chain shifts from cost to value, it is called a value chain. When it becomes more strategic to the company, focused outside-in to drive value-based outcomes, it is termed a value network.

Here we discuss the journey from extended supply chains to value networks. We start with the discussion of how to move from a cost to value and then share insights on how to use this focus to build the right relationships. We then share lessons from the pioneers.

THE JOURNEY FROM COST TO VALUE

So, what is value? It can take many forms. Value happens when the supply chain is used to drive competitive advantage. The supply chain drives maximum value when it is aligned to the business strategy.

The best supply chains have a well-defined strategy to deliver the business goals to maximize value. They are ...

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