Why the Value Chain is now less of a chain and more of a network

Value Chain Is Now Less of a Chain and More of a Network

Dec. 17, 2015
Increasingly, the Value Chain will organize itself as networks around consumers, offering a multiplicity of channels and interfaces across all value-add processes and business entities.

Traditional value chains are no longer sufficient to keep pace in the consumer products and retail sectors. In order to secure long-term growth, a new report from Capgemini and the Consumer Goods Forum, recommends the adoption of a “value network” approach to doing business.

The industry should no longer think of the value chain as a linear journey, whereby products and information flow linearly and sequentially from supplier to manufacturer to retailer to consumer. Instead, it will increasingly organize itself as networks around consumers, offering a multiplicity of channels and interfaces across all value-add processes and business entities. Ultimately, the consumer is increasingly in charge, making decisions that have direct impact across the value network, with the industry responding to that – rather than the other way around. 

“Today’s consumer is empowered like never before,” said Muhtar Kent,  CEO of The Coca-Cola Co. at the meeting of the Consumer Good Forum where the report was unveiled. “Consumers now have the power and the means to share their opinions and concerns with a larger audience than ever, through a growing array of social and digital channels. In this era of rising consumer expectations and a rapidly changing business environment, there is one crucial question we need to ask ourselves: How do we strengthen our industry and benefit consumers through the unprecedented challenges that lie ahead? This report, initiated by The Consumer Goods Forum, considers some of the essential ways of anticipating and addressing such profound shifts.”

The report highlights three overarching priorities on which the industry could collaborate and which should deliver a positive return on investment: 

  • Consumer engagement. Taking part in a true dialogue with consumers, justifying their trust in our industry. The industry needs to be consistently responsible with consumers’ data so it can add value in serving them and engaging with them. This will require companies to adopt common and clear principles for consumer engagement. 
  • Transparency. Keeping consumers informed about the nature and traceability of products’ ingredients, nutrients and provenance – to inform consumers of the contents, safety, environmental and societal impact of products, while improving efficiency within the industry. This will require a step-change in collaboration on product global data definitions, data quality and data sharing, going beyond simple track-and-trace and audits. 
  • The last mile of distribution. Reconsidering the assumption that distribution to stores and consumers is an area where companies operate independently of each other, and exploring opportunities to collaborate, under certain circumstances, to improve speed, efficiency and consumer satisfaction while minimizing environmental impact. The new model would involve a new form of ‘network’ partnerships. To fully grasp these opportunities the industry will need to invest in flexible technologies, interoperability of new processes and more open corporate cultures.

“We can achieve these goals by collaborating much more effectively than in the past, " said  Motoya Okada,Group CEO of AEON Co., Ltd. "The world is changing profoundly and so must we."

MH&L is an IndustryWeek companion site within Penton's Manufacturing & Supply Chain Group.

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