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Value Chain Planning and Supply Chain Planning

Posted by: Ashish Agnihotri On September 23, 2011 12:00 AM

It would be interesting to know that SCM (Supply Chain Management) and Value Chain Planning (VCP) concepts has originated only few years apart. Keith Oliver coined the term ‘supply chain management” in 1982 while value chain concept was developed and popularized by Michael Porter in 1985.

By 90’s however SCM had gained huge popularity with advent of initiatives like Rapid Response and Just in Time in textile and retail industries. Primary aim of SCM is cost reduction and efficiency of supply and flow of materials from various sources to their final destination.
However there is lack of awareness as far as the difference between supply and value chains is concerned. While Supply chain is more tangible, value chain is context based. I came across a nice analogy .Consider a man walking in desert or a man who is dying of thirst. For that person the only thing running on his mind is water. There is little consideration for the form of water, container of water or who is providing him with it. Water has a unique value for that man .On same lines consider a waiter in a hotel who cleans tables and has 4 glasses of water – for that waiter it is more of burden to clean the table leave alone think about water.

What is point of this example?

Value is a subjective experience and is completely dependent on the context.  Value is an experience that occurs when need is met through the provision of goods and services.
Primary difference between SCM & VCP is the fundamental shift in approach. While SCM relies on optimizing processes for a supplier to producer, improving efficiency and reducing costs where as value chain focuses on creating significance in the eyes of customer. A third generation of supply chain , as it is called, SCM3.0, focuses on customer intimacy - this is a huge paradigm shift in the way the traditional SCM was viewed where customer was not the focus.
How Oracle relates to above?

Oracle has APCC (Advanced Planning Command Center), SNO (Strategic Network Optimization, Inventory Optimization (IO), and Demantra S&OP (S&OP). There are distribution and supply planning products like ASCP, ORP (rapid planning), forecast demand products like Demantra Demand management and promotion management Products like Demantra’ Predictive Trade Planning which elevates Oracle to an advantageous position
There are some key points to be noted while implementing advanced modules like source integration – for example, although Demantra is tightly integrated to Mfg, OM, Planning modules it is important to ensure all data feeders are normalized. It is also a good practice to have a separate box for Demantra for performance reasons as when the plan is run it consumes a lot of resources and can impact 24x7 or mission critical applications performance. Also it is important for every customer to know what exactly works best for them – for example customers on R11.5.10 & ASCP on R11.5.10.2 should ideally upgrade ASCP (if not EBS) to R12 to take advantage of new features of R12 which are marked improvement over R11i. Similarly upgrade can be shortened a great deal by simple techniques like DROP all plans , DROP all plan partitions – which reduces the size of data and saves time , once the upgrade is done , the next step involves re-creating all plans and run. ​

Tags: Industry Trends
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