Value-Based Management: The Guiding Principle for SCM

Enver Yücesan
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Enver Yücesan: INSEAD

Chapter 3 in Competitive Supply Chains, 2023, pp 25-40 from Springer

Abstract: Abstract To provide operational guidance, the concept of “value” must be defined in a concise fashion. This chapter adopts a financial perspective in defining value using the construct of free cash flow, which provides a single scoreboard for the entire organization. This construct is then cascaded through the organization in a consistent fashion by identifying the key drivers of value that are within the responsibilities (hence, accountability) of the different entities within the organization. With a common language, decision-makers in different parts of the organization can see the impact of their local decisions on the global mission of the organization, namely value creation. As a result of this broader perspective, decision-makers can assess trade-offs and ensure that all parts of the organization are “rowing in the same direction.”

Keywords: Free cash flow; Economic profit; Capital investment; Operating cycle (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1007/978-3-031-19975-2_3

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