Supply Chain Management Strategy: Using SCM to Create Greater Corporate Efficiency and Profits

2. Enabling Business Value

The general model of business value is called the reference scenario. In it, we can see four basic patterns: sales volume, sales revenues, costs, and profitability (margin of contribution). The logical structure is quite simple:

1. Volume sold (products or services)

2. Amount paid by unit (product or service)

3. Revenue = 1 × 2

4. Cost of serving

5. Profitability = 3 – 4

Note that this basic algorithm has a few simplifications (see Figure 2.1). For example, the cost-of-serving line aggregates all costs and expenses without segmentation (including tributes and taxes). Although more sophisticated models could be used, this format is well adapted to the objectives of this book.

Figure 2.1 Business value: Reference scenario ...