Implementing VFS: A Beginner’s Guide, Part VI

In our last post we highlighted more of the key issues associated with the seven-step process for Value Focussed Supply as identified in CAPS’ recent report on Linking Supply to Competitive Business Strategies, and the issues associated with the middle steps in particular. In this post, we will tackle the rest of the issues that need to be addressed if an organization is going to answer the questions necessary to formulate a good VFS strategy as part of a Next Generation Sourcing effort.

  1. Evaluate and Select Strategic Supply Options
    • Which suppliers have excess capacity, modern equipment, or innovation capabilities that the organization can take advantage of?
    • Will products be built to order, built JIT, or built in bulk and stored at key distribution points? Or will hybrid methodologies be used, where subassemblies are built in economic order quantities, and then assembled and delivered JIT? Will inventory be handled in house, by a 3rd party, or by a partnership?
    • Can the organization change the way the supply market operates or alter consumer market dynamics by way of one or more available supply options?
  2. Identify and Implement Levers
    • Which of the following can change the market dynamics?
      • alternate sources of supply
      • non-traditional markets
      • market / organizational restructuring
      • change of ownership, location, or M&A
      • change in supply base, distribution structure
      • introduction of new competitive tension into the consumer or supply markets
      • a new, segmented, supply chain
    • Which of the following can change what is bought?
      • product simplification or standardization
      • design changes
      • disruptive technologies
      • customer aligned customization
      • demand reduction / elimination
      • innovation on demand
    • Which of the following can change supplier interaction?
      • volume levels
      • investment
      • supplier development program(s)
      • (joint) process integration
      • performance-based rewards
      • target costs / pricing
      • intellectual property management
      • (more) relationship management

Once all of these issues have been addressed, the organization will be in a good position to answer all of the questions required by each step of the VFS process designed to enable an organization to select the right strategies that will create true, long-term, value in the supply chain.

In a future series, we will address how the process can be integrated into a larger Supply Management framework.