Question

Describe the three types of value (supply) chain frameworks and state which one you like the best. Why? What does leadership look like in the supply chain and how does it impact operations management? Provide an example.

Answer 1

The captive Value chain is the best of the value chain framework. The three popular value chain frameworks include

Modular value chain – This is a market-like chain network with the suppliers making products to satisfy customer specifications. Suppliers are completely accountable for process technology in a modular value chain spreading investments across a wide customer segment. The key benefits of modular value chain include low switching costs, establishing substantial relationships, limits specific investments, high information flow between the firms and maintaining simple interaction among the value chain partners making management effective with minimum complications and difficulties

Relational value chain – This is a network-style chain model based on mutual reliance between the buyer and the seller involving interactions and information exchange. This type of value chain is popular among family businesses and it takes a lot of time to adopt relational linkages among normal business partners involving higher switching costs, difficulties and high switching to new partners

Captive Value chain – In this value chain model, the buyers possess more buying power with the suppliers dependent on the dominant buyers. Switching costs are high with a high degree of control and monitoring by the lead buyer firm. In this model, ethical leadership is highly essential to ensure that suppliers are treated fairly and the lead buyers help the suppliers to upgrade their capacities thereby increasing the supply chain efficiencies. The ethical leadership impacts the operations considerably building core competency for the small suppliers and obtaining an equitable market price share. The example of Captive Value chain model exists in the thick linkage established between dairy farmers (suppliers) and dairy cooperative society (lead buyer) making this value chain model highly efficient mutually benefiting the supplier, buyer and the end-user. Hence for the above said reasons impacting operations and the influence of ethical leadership on this value chain model, Captive Value chain model is the best of the three value chain models