Book Review: Building Effective Value Chains

A value chain is the overall set of internal and external resources – human, physical, financial and informational – that require to be marshalled and managed in order to achieve the objectives of any organization. (p. 2)

Building Effective Value Chains: Value and Its Management by Tom McGuffog provides an almost completely unexpected perspective on the meaning of value and value chains as well as how they should be nurtured in a variety of contexts. I chose the word ‘nurtured’ deliberately; McGuffog makes the point that this book is for “students” in a wide range of disciplines extending far beyond a corporate setting. The attention he pays to humanity and the “value of human life” in his discussions of value and values is so compassionate that I found myself wondering if McGuffog had switched places with Gyöngyi Kovács, Karen Spens, and Ira Haavisto who edited Supply Chain Management for Humanitarians how the two books might have turned out differently.

But I digress…

McGuffog is the first author whose work I have reviewed to share his ancestry dating back to the 17th Century in the About the Author section. The inclusion of this information is quickly shown to align with the author’s reading and study of a number of diverse and often historic books. Whether it is my own combined background in Humanities and business or just the author’s writing style, there is no denying that the tone and pace of this book are a pleasure for readers.

From a procurement perspective, any discussion of value is immediately on point. For years we have struggled to measure and create value without ever being able to pinpoint what it is. What McGuffog does is to make the case that what we need it is not a precise definition but rather relative positioning on different scales that allow us to get our arms around the term. While we often focus on value, we nearly almost neglect the importance of overarching values – as these are what create alignment, unity, and shared purpose in an organization. Another key tie in to procurement objectives is the need for all value to be created at the lowest total cost.

More traditionally speaking, value can be captured as either utility or stored value, both of which are subject to supply and demand, shaped by opportunities and constraints, and lead us to optimize by factoring in timing and risk/uncertainty. In the broad, almost raw, description of value as a function of supply and demand, Adam Smith (Wealth of Nations) seems like a familiar old friend, included perfectly and not seeming the slightest bit out of date.

The final point I will offer up in support of my assertion about the unexpected nature of this book is McGuffog’s emphasis that we need to care for our value chain partners. Care in this context has two dimensions: 1. something of a ‘duty of care’ responsibility for ensuring well being, and 2. An actual ability to care (emotionally) about our customers, suppliers, logistics partners, etc. Anyone who has attempted to implement a relational or collaborative supply program without this ability to care can testify to its importance.

I highly recommend Table 2.1 on Value Analysis (page 11) for a framework that makes it possible to deconstruct and better understand value in each situation. My only disappointment with the book was that the website listed for additional information and case studies (WebsiteofValue.com) does not (yet?) seem to exist.