Value-Chain Management

Computerworld - Value-chain management is the Holy Grail for many of today's most progressive and innovative companies.

It moves businesses away from discrete streams of data about the product being made to one unified pool of information - one that even extends outside the company to suppliers and customers.

The goal: Full and seamless interaction among all members of the chain, resulting in lower inventories, higher customer satisfaction and shorter time to market.

But the obstacles are significant. For starters, many find that the software available is either fragmented, tackling only small portions of the entire value chain, or only recently released and relatively untested. And companies often face institutional barriers to communication between far-flung and operationally disparate divisions.

"Very, very few customers are even close to implementing (ideal value chains)," says Joshua Greenbaum, principal partner at Enterprise Applications Consulting in Berkeley, Calif. "In an ideal world, you would do value-chain management by starting fresh, building an organization from the ground up. And that's the dream of a lot of dot-coms."

But the reality, he says, is that value-chain management has to coexist with legacy management practices.

"You need to break down a lot of the traditional corporate barriers in a company that generally treat these different areas as separate entities that don't necessarily communicate with each other," he says. "Sales and marketing rarely talk to each other; neither ever talks to logistics or finance. Most companies don't have the business culture that understands an integrated view."

But even when starting from scratch, it can take a great deal of work to develop a value-chain management system.

An Expensive Undertaking

Venture capitalist Edward Greissle, managing partner of 1stVenture.com in New York, looks for such a system when evaluating a business plan - and checks to make sure start-ups follow through.

One recent example is ShipaToy.com, which sells gift baskets of toys.

"To be honest, value-chain management was not one of the things they thought about," Greissle says. "But once we went through a testing period, we had to restrategize. This was a difficult phase in the project."

According to Greissle, ShipaToy.com deals with products from more than 30 distributors, in what he called an "outsourcing nightmare."

Getting the right product tailored to the customer and delivered on time requires deep coordination among all stages of the production process, he says.

"Without value-chain management," Greissle says, "this business could not exist."

In fact, the issue is critical to a wide range of businesses in the new economy, he says.

"If a company does not have the ability to manage its data, its future is in question," Greissle says. "Only companies that are utilizing the new information age to its fullest will make it. They're the only ones streamlined enough to succeed."