For manufacturers & retailers. Supply Chain Management is strategic and powers new reality success. Interesting paper from U of Tennessee on SCM Excellence Drives Shareholder Value:
UT White Paper: Supply Chain Excellence Drives
Shareholder Value
While supply
chains are increasingly recognized as vital to corporate finance and risk
mitigation, not all supply chain managers yet understand the need to be total
business leaders and provide growth solutions.
In a new
white paper, “Driving Shareholder Value with your Supply Chain,” the Global
Supply Chain Institute at the University of Tennessee, Knoxville’s Haslam
College of Business emphasizes the financial performance of best-in-class
companies.
The paper provides
strategies for companies to unlock their working capital to drive economic
profit, says lead author J. Paul Dittmann, assistant head of the Department of
Supply Chain Management at Haslam. In doing so, the links between shareholder
value and supply chain excellence are explored through the lens of cost, cash
and growth.
“We
absolutely believe shareholder value is driven by supply chain excellence,”
Dittmann says. “Supply chain plays in all the buckets of economic profit:
revenue, cost, working capital and physical capital. If you believe that drives
stock price, then supply chain clearly is a big factor in determining
shareholder value.”
The white
paper features self-assessment tools for analyzing whether companies are using
their supply chains to drive shareholder value. It also includes best
practices, case studies and the Total Value Optimization (TVO)™ Pyramid from supply
chain consultant Maine Pointe, which sponsored the paper.
“Total Value
Optimization delivers the greatest value to all parties in the end-to-end
supply chain at the lowest cost to business,” says Steve Bowen, CEO of Maine
Pointe. “In the white paper’s case studies, we can see how TVO best practices
are used to find those value drivers, create an action plan to achieve growth
and deliver bottom-line increases in profit and shareholder value.”
Dittmann
says shareholder value is the language of the CEO and the board of directors.
“If you want to be relevant in the overall corporate structure, you need to
speak their language. Your career is tied in a major way to the overall health
of the company.”
Although the
white paper offers a number of definitions for supply chain excellence, Dittmann
emphasizes the concept will vary between companies.
“What is it
for your company, and how can your performance drive shareholder value?” he asks.
“We encourage companies to come up with their own opinion on supply chain
excellence and then think through how it’s going to drive shareholder value and
how to communicate that throughout the company.”
Chad Autry,
head of the Department of Supply Chain Management and FedEx Corporation Endowed
Professor of Supply Chain at Haslam, says this research is a valuable
contribution to the Global Supply Chain Institute’s library of approximately 20
white papers.
“The
implications of supply chain management on shareholder value is an area that
often goes unaddressed,” Autry says. “Best-in-class companies drive down their
working capital using the techniques described in this paper so they don’t
impede free cash flow through their systems and are able to beat analysts’
expectations for economic profit.”
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