The Integration of Supply, Demand and Value: A Coherent Theory of the Supply Chain

This paper presents a refined means of conceptualizing the combination of sets of integrated business processes and activities that since the late 1980s has come to be known as the “supply chain.” It identifies specific sets of processes and activities, “channels,” by the primary economic value that each contributes to products and services as they move from the sourcing of raw materials to final delivery. The paper further drills down to the way in which value is developed, aggregated, and completed through the interaction of functional areas, “subchannels,” at different, discrete locations throughout the supply chain. Value is not complete in a product or service until final delivery, and if, at final delivery value is less than full, then it is the result of supply chain inefficiencies. The concept of economic value as something contributed by supply chain processes is not new, and has its origins long before “supply chain” was coined (circa 1988) in traditional discussions of time and place value associated with transportation and logistics, form associated with manufacturing processes, and possession associated with marketing processes. This paper develops coherence in supply chain theory by further adapting some of the discussion of the values associated with traditional processes to an integrated concept of supply, demand, and value, and concludes that the fundamental manner in which a modern supply chain should be conceived and managed must be in the knowledge and spirit of that integration; an unbalanced emphasis on any one of the three elements of supply, demand, or value without regard to their systemic relationship is neither optimal theory or practice.