SUPPLY CHAINS TO ADMIRE // 2022
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What Drives Value?
When I wrote the book Bricks Matter, one of the reviewers asked, " How do you define value? " I struggled to answer the question. The Supply Chains to Admire methodology is designed to help business leaders understand value. The focus of the traditional supply chain organization is cost management. Saving money does not drive value. Improving cost also does not necessarily improve margin. So, as a part of this analysis, our goal was to answer the questions, " What drives value? " and " What steps should companies take to improve Price to Book Value? " The definition is: Price to Book Value = Market Share Price / Book Value/Share Outstanding
Figure 4. Driving Market Value
Our research finds that companies with a Supply Chain Center of Excellence, an effective S&OP process, and operational supplier development programs to drive supplier reliability are more likely to improve value. These processes become even more critical to managing the supply chain through the pandemic.
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