…Creating sustainable Business value through optimized value chain process.
In today’s ever-evolving world, debating whether to incorporate sustainability into your business strategy is no longer an option. Considering a values-driven approach when developing business strategies can be vital to long-term success of any business. Sustainable performance of an organization speaks to the ability of meeting the needs and expectations of customers and other stakeholders on long-term, balanced by an effective management of the organization’s staff, application of appropriate innovation tools and orientation.
This requires rethinking supply chains from the bottom up to align with the targets set by the organization to build a robust system around their products; strengthening product and service delivery ecosystems across the entire value chain.
Thus, while consumers increasingly demand engagement with businesses based on values rather than value, the physical and material risk of climate change is fast becoming a reality for organizations as well. To meet these new demands and mitigate supply chain disruptions, organizations need to optimize their value chains to be more efficient and environmentally conscious.
To gain this new perspective, innovation teams must first understand the core principles of generating new value within the product lifecycle. With renewed ambitions set out to achieve sustainable outcomes and ultimately net positivity, it is imperative that businesses change their mindsets from profit making imperative to embrace value creation instead.
That, organizations should continually look for ways to remain competitive and increase their value creation through the optimization of their value chain processes, whether by improving operational efficiency or removing costs. Value chain optimization helps redefine a company’s processes, improve collaboration, reduce value leaks and increase innovation to ultimately make better and more robust decisions across operation’s lifecycle.
To emphasis on sustainable value creation is to reconsider building successful strategies to maintain profitability, growth, employee retention and the integration of robust culture for sustainability.
Understanding Sustainable Business Performance.
Performance is a reflection of commercial effectiveness. Commercial effectiveness is the ability of an organization, a department or an individual to achieve its or their objectives and expected results. The notion of commercial effectiveness covers issues of costs, deadlines, quality and profitability. This, sometimes is measured using qualitative and or quantitative KPIs (key performance indicators) measures.
Meanwhile, business performance, which is tied to commercial effectiveness is determined by the ability of an organization to implement optimal organization performance with the aim of offering a product or service that meets the expectations of consumers and customers.
The business performance of a company is based on multiple criteria such as management style, customer relationship management, the quality of the service provided and the effectiveness of incentive compensation schemes and employee motivation.
By deeply understanding the effectiveness of current governance structures and strategies, organizations can start internal and external dialogues to elevate the strategic climate debate and drive holistic decision-making that includes careful consideration of the links between business strategy and impact within the systems of change.
To avoid reactive solutions that may undermine the business case for sustainable practices, it is critical to understand where the organization is, assess existing capabilities and the impact of current initiatives within the greater system to establish a strategic direction.
In short, sustainability in business speaks to the effect companies have on the environment or society. A sustainable business strategy must aim to positively impact environmental, social and governance areas of its ecosytem thereby helping address some of the world’s most pressing problems.
Understanding the Business Value Chain
The term value chain process brings to mind the understanding of creating a product or service. It includes the procurement of raw materials, production, manufacturing and other procedures to develop and sell a finished product to the consumer.
A value chain represents a series of consecutive steps that go into the creation of a finished product from its initial design to its arrival at a customer’s door. The chain identifies each step in the process at which value is added, including the sourcing, manufacturing and marketing stages of its production. Effective value chain management ensures the transformation of a product or service from idea to reality. The Value chains in concept helps increase a business’s efficiency so the business can deliver the most value for the least possible cost. The end goal of a value chain is to create a competitive advantage for a company by increasing productivity while keeping costs reasonable.
However, because of ever-increasing competition for unbeatable prices, exceptional products, and customer loyalty, companies must continually examine the value they create in order to retain their competitive advantage. A value chain can help a company to discern areas of its business that are inefficient, then implement strategies that will optimize its procedures for maximum efficiency and profitability.
In addition to ensuring that production mechanics are seamless and efficient, it’s critical that businesses keep customers feeling confident and secure enough to remain loyal. The overarching goal of a value chain is to deliver the most value for the least cost in order to create a competitive advantage.
Value creation through Sustainable principles
Some of the global issues that sustainable business strategies help to address include: change, Income inequality, depletion of natural resources, Human rights issues, Fair working conditions, Pollution, Racial injustice and inequality. Meanwhile, applying sustainable performance principles, lead to the harmonization of environmental and financial objectives in the delivery of core business activities to maximize value. In addition to driving social and environmental change, sustainability initiatives can contribute to an organization’s overall success.
Sustainability principles rightly implemented, infuse into the organization gives it purpose to attract and motivate, skilled workforce that eventually drives financial success. By this, if an organization commits to sustainable products and practices, it could gain market share by converting sustainability-minded customers and increasing sales.
Optimizing the Value Chain for Value performance.
How can value chain optimization increase the performance of businesses? Using supply chain management tools, one can efficiently generate schedules for business’s upcoming projects and plans. Value chain optimization generates a tremendous opportunity to overcome past deficiencies highlighting critical operations and supply chain decision-making tools.
To talk about optimizing the value chain is to reconsider a series of support activities required to streamline these value chain steps. These steps run through technology, procurement, development, human resource management and infrastructure to ensure the desired performance. That mentioned, to react faster than the rapidly changing market for instance calls for organizations to remain innovative and use modern technologies for sustainable performance. Here, organizations must be driven towards:
Agility: A digital twin of the value chain provides real-time operational insight, allowing the organization to stay competitive in volatile markets.
Sustainability: Achieving sustainability goals by gaining insight into all its value chain processes and ensure optimum performance.
Innovative technology: Using innovative technologies to speed up computations and simplify deployment.
Value chain optimization increases production performance and provides insights to improve understanding deviations between operations and planning. Technological development software to give a break from the traditional time-consuming means of data collection. From initial planning to scheduling and inventory, optimization will help promote greater visibility across the entire value chain.
Value chain optimization helps organizations build model scenarios to track performance and systems. Value chain optimization can consider resource-to-market strategies that take the entire system into account. That means from raw materials to market, these strategies take all elements and put them into context to improve inventory and quality.
The need for value chain analysis and Management
The practice for value chain management has gained prominence over the past couple of decades. As business in general has gone increasingly global, the resulting competition has caused many companies to focus on their core competencies and outsource other business activities.
The core-competency strategy designed to help streamline operations and make business operations less cumbersome but profitable by moving less-efficient and non-core competency tasks and operations outside the enterprise ultimately has led to the purpose of value chain analysis to ensure increase efficiency, delivering the most possible value to consumers at the lowest possible cost. Achieving this optimal value chain results in a significant competitive advantage.
A value chain analysis therefore, can offer important benefits. However, when emphasizing the process details in a value chain, it’s important to still give proper attention to an organization’s broader strategy. The value chain framework ought to help organizations understand better and evaluate sources of positive and negative cost efficiency, support decisions for various business activities, diagnose points of ineffectiveness for corrective action, understanding linkages and dependencies between different activities and areas in the business, optimizing activities to maximize output and minimizing organizational expenses and potentially creating a cost advantage over competitors.
More importantly, proper value chain management is considered key to optimizing business operations and maximizing profit and value. Usually, companies that optimize value for themselves ensure, their vendors and their end customers are effectively managed to continue the flow of production and sales from inbound logistics to operations, outbound logistics, marketing, and sales and service processes.
Ultimately, the result of a comprehensive and robust value chain management program enhances revenues and better profit margins, contributing to greater overall organizational value creation and success.
Frank is the CEO and Strategic Partner of AQUABEV Investment and Discovery Consulting Group. And an Executive Director and the Lead Coach in Leadership Development and best Business Management practices for Discovery Leadership Masterclass
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