The objective of supply chain management is to maximize the overall value generated. A supply chain surplus is found here. Usually, a Supply chain generates is the differences between the value of a final product to customers and the cost associated with the supply chain. Besides, the entire supply chain works to fulfilling the customer’s request.
- Supply chain surplus= Customer value – Supply chain cost
- Value= Benefit/Cost
- Efficiency= Output/Input
The value of final products may vary for different customers. Sometimes it is related to the maximum amount of customer is willing to pay for it. The consumer surplus is the difference between the value of the product and its price remaining with the customer. However, supply chain surplus is the difference between the value of a final product to customers and the cost associated with the supply chain.
For example, the customer goes to a computer shop to buy a pen drive. The customer pays $40 for it. This payment is represented revenue of the supply chain received. Thus, some part of the supply chain surplus is reduced by the consumer surplus. The computer shop’s suppliers provide products, information, and other components, store them, transport them, transfer funds, and so on.
The difference between the payment and cost of supply chain incur to fulfill consumer requests is the supply chain profitability. The total profit is shared by all supply chain stages and intermediaries. The higher the supply chain profits the higher the success of the supply chain. Because the supply chain surplus is highly correlated with the profits.
At present, we are facing a strategic change in traditional retailers. That is the traditional retailers are going to e-tailers. However, e-tailers mean electronic retailers. That means traditional retailers are going online to operate their businesses. In these businesses, they are able to directly interact with the customers. Customer also chooses whatever they like and order online. Moreover, the customer also gets free home delivery from retailers.
Another objective of the supply chain is to find out the focal firm or nodal firm. The focal or nodal firm provides identity to the products in terms of brand. So, it is important to find out the focal or nodal firm. Because they are creating a brand they are working for a particular brand.
The supply chain development depends on the identification of a focal or nodal firm. Because it is the strategic center of supply chain development.