Value Chain Management in Online Reverse Auction: Towards Strategic and Operational Excellence

By Leong, Leslie | Academy of Information and Management Sciences Journal, January 2008 | Go to article overview

Value Chain Management in Online Reverse Auction: Towards Strategic and Operational Excellence


Leong, Leslie, Academy of Information and Management Sciences Journal


INTRODUCTION

The concepts of Supply Chain Management have been around for quite a while and have already shown their possible positive impact on the performance of a company. In recent years the stakes of this game have changed. It is no longer considered being a field of innovative competitive advantage over the competition, but a necessity to stay profitable and competitive. Most companies have realized that only close collaboration with all involved partners can produce the kind of speed and reaction time to customer demands that are needed in today's business world.

Another shift in the focus took place in the past; the first steps in Supply Chain Management were mainly concerned about the integration of suppliers to ease the operations for their own company. Some companies even only focused on new strategies for procurement to squeeze the profits from their suppliers. But the slow move to put the customer in the center of all operations brought many firms to the point where they realized that only cooperation could deliver the desired results. Supply Chain Management changed to Demand Chain Management by examining the downstream components of the whole chain; the part directed towards the customer, but this focus is too narrow, so the Value Chain Management finally evolved. Value Chains are concerned about the whole chain, from the raw material supplier to the end customer, and set the value or the satisfaction perceived by the end customer in the center of attention.

The relationship with e-business can be a very close one; both concepts can greatly gain from the application of the other concept. Only a working value chain management can offer a company the benefits from e-business, especially in e-commerce, to their fullest extend and e-business can boost the cooperation in the value chain to improve the performance of the whole chain.

SUPPLY AND VALUE CHAIN MANAGEMENT

The modification of the supply chain management concept is to expand the focus and include more partners, especially in downstream direction that further increased the benefits and importance of supply chain management. This was another step towards managing the whole chain from the raw material produced by the supplier to the end customer and building a network or chain of partners working jointly together to achieve better customer satisfaction. Demand chain management brought some new concepts and ideas into consideration that partly replaced the concepts of supply chain management in a narrow sense. If one takes this narrow definition of the supply chain that is concerned about the smooth operations with partners mainly upstream in the chain, the system can be defined as a push-system while demand chain management is a pull-system. (Vakharia, 2002)

This paper will not distinguish between demand and supply chain management and see them as different forms of the same idea. Every company should always consider the whole value chain from the beginning to the end and the demand chain for one company is the supply chain for a company's further downstream. Therefore the whole chain has to decide whether to use a 'push-systems', based on demand forecast and assumed consumption, or a 'pull-systems', based on the real consumption and demand of the end customer instead of forecast. The value chain also pushes the scope further by not only focusing on the smooth flow of goods and information and the small cooperation with the direct neighbors in the chain. It should also look at the operation of the whole chain and assessing the performance based on the ultimate measurement, customer satisfaction, and changing and improving the overall way of performing the related tasks. The, probably, easiest distinction between a supply chain and a value chain is the focus. Rash (2001) stated that supply chain management is mainly concerned about the manufacturing part of operations and thereby the flow of goods and information needed to process the goods, while value chain management also includes the general flow of information. …

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Value Chain Management in Online Reverse Auction: Towards Strategic and Operational Excellence
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