Value-Based Management: The Guiding Principle for SCM

Abstract

VBM is playing an increasingly significant role in shaping corporate strategies. Since the key mission of SCM is to develop and deploy effective solutions to enable the deployment and execution of corporate strategies, SCM should also adopt a VBM perspective. VBM-based SCM has therefore two intertwined dimensions, as depicted in Figure 2.1. On the one hand, VBM should enable value creation through product and/or process innovation, both of which should drive a customer’s WTP. While product innovation may enable the deployment of niche strategies, process innovation may lead to cost leadership. In both cases, however, innovation plays a key role in differentiating a firm from its competitors or in avoiding the commoditization of its products and services.