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Value Creation: Assessing the Cost Service Trade-off

In: Competitive Supply Chains

Author

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  • Enver Yücesan

    (INSEAD)

Abstract

To ensure value creation, we must assess whether investing in a product, process, or supply chain redesign initiative is a value-creating or value-destroying proposition. For instance, if the additional cash flow generated by an increase in the customer’s willingness to pay (WTP) due to a new product design does not lead to a positive net present value to justify the investment of additional R&D resources, this is a value-destroying proposal. To assess these trade-offs in an objective fashion, supply chain professionals need a simple, but flexible, modeling framework. This chapter quantifies the cost-service trade-off through a materials management model. Such a model will also allow us to identify (and cost out) principal levers one can deploy for mitigating such a trade-off.

Suggested Citation

  • Enver Yücesan, 2023. "Value Creation: Assessing the Cost Service Trade-off," Springer Books, in: Competitive Supply Chains, edition 3, chapter 5, pages 87-115, Springer.
    • Handle: RePEc:spr:sprchp:978-3-031-19975-2_5
    DOI: 10.1007/978-3-031-19975-2_5
    as

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