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Op-Ed: Here’s How We Should Re-Think the Value Chain

There’s no shortage of processes, dynamics, problems and opportunities associated with supply chains, but what we lack is a more progressive, contemporary and pragmatic way of conceptualizing it all and the basic terminology we use.

Supply chains and value chains are dead. That’s right…dead.

Think about it. When we use the word “chain” it both explicitly and implicitly generates a host of images, perceptions and most importantly, behaviors.

By definition a chain is a series of things connected or following in succession, i.e. a “chain of events.”

A chain is linear by definition. We conceptualize and use terminology associated with the value creation process as though it were a sequential, linear, silo-to-silo passing of a product or pieces of a product from one value adding supplier to the next. In today’s reality, that’s the furthest from the truth and becoming even less so every day for numerous reasons.

In reality, value creation has become a collaborative “network” of activities among organizations. Think of it as dynamic ecosystem of services, information, materials, knowledge, and innovation. It’s time to move beyond the linear conceptualization, language and behaviors generated by referring to value creation as supply and value chains and begin calling them for what they are: supply and value networks. Collaborative networks utilizing lateral thinking, state of the art technology and processes with omni directional flows of data, information, innovation and materials. And it’s not like it isn’t already happening—it’s here, so it’s time to fully embrace it.

By definition, a network is a system of interrelated buildings, offices, stations and processes, among other things, especially over a large area or throughout a country, territory or region, i.e. a “network of supply depots.”

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So why is this important?

For one, conceptual models and language are important. We all know this. If you conceive of something as linear and call it that, you will generate like behavior. It’s how we work. So let’s change the concept, let’s change the language, let’s change the behavior and the outcomes.

Supply Network Diagram

But why do we need to make the change? Here are some reasons.

Efficiency – In today’s world, value creation is happening at warp speed, but linearity doesn’t work at warp speed. Communication, collaboration, cooperation and technology do. Designing, sourcing, producing and distributing product is only speeding up and a network approach is the only way to stand a chance.

Transparency – When you sit at the end of a linear chain, it’s easy to be distanced—conceptually, geographically and in most every way conceivable. When you sit at the front of that chain, it’s easy to be removed and feel that distance in a different way. Network conceptualization removes distance and creates connectivity and system thinking, by definition.
Environmental/Social – Related to transparency, it’s easy to distance yourself from practices “way up the supply chain.” When you’re close to each other in a network, it significantly increases the ability to know what’s going on in the network. No more head in the sand, “I had no idea this was happening” excuses are acceptable today. Consumers are increasingly embedding themselves in the network. In fact, they are at the center of it, no longer distant, passive recipients of product at the end of a long value chain.

Technology – We all know this too, from smart phones to sophisticated software systems to advanced collaboration platforms, there’s so much advancing technology connecting brands to suppliers and vice versa, enabling communications, collaboration, speed to market and yes, transparency. Not to mention the risk factor from technology that can come from anyone recording practices and activities that link consumer to supplier, supplier to supplier, supplier to brand, and so on. No one can afford to claim they didn’t know anymore.

Innovation – Innovation and its successful commercialization is no longer about one innovator pushing a solution up or down a supply chain. It’s about collaborating and figuring out how in the value creation process innovation X can be adopted by various stakeholders who will need to execute collectively to be successful.

We see it time and again, brands working with technology innovators, helping to fund and support R&D, while those innovators collaborate with other stakeholders in the network to execute. One simple example: Nike collaborating with DyeCoo in developing and bringing to market compressed CO2 dyeing technology. And DyeCoo working with Huntsman Textile Effects to develop the dyestuffs and chemistry needed to accomplish the waterless dyeing process. For anybody that’s ever played the Nike SIX game, you know this, and it’s not about simulation. It’s real. It’s how its working and it will only grow.

There are other reasons to advocate for conceiving the model this way, such as the creation of better and longer standing partnerships among brands and suppliers, improvement in quality of product, faster and better problem solving, improved enabling of materials circularity among all stakeholders, and probably most important, greater credibility and trust with consumers. It doesn’t take much imagination to see the logic and the benefits.

So why are we waiting? Because we’ve always called them supply chains and value chains? We can do better than that. The future is here. Let’s get started, let’s make the transformation to supply and value networks.

By Jeff Wilson

Jeff is the director of business value strategy and development for Textile Exchange, responsible for ensuring meaningful business value is delivered to membership and their respective industry sectors. His role includes strategy development and implementation, membership value development and delivery, industry collaboration, and operations.