This paper aims to analyze the success business case of a global organization implemented strategic value chain collaboration network which enables them to achieve competitive advantage in the industry.

1. Author: Charlie Chen; Email:charliexwc@gmail.com; Linkedin
URL: http://au.linkedin.com/in/charliesenioritmanagementpro
5/20/2015
STRATEGIC VALUE CHAIN
COLLABORATION IS THE
KEY OF STAYING ON THE
COMPETITIVE EDGE
Global Fast Food Organization Value Chain Initiative
This paper aims to analyze the success business case of a
global organization implemented strategic value chain
collaboration network which enables them to achieve
competitive advantage in the industry.

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INTRODUCTION
The manufacturing and the service industries have evolved from simple
products/services to much more complicated products/services (i.e. from
phone to smart phone, from telephone companies to telecommunication
companies, to name a few). These days, the final products/services usually
are a combination of multiple producers’ raw materials or semifinal products
via the processes within integrated value chain to become a final product and
then eventually land on the customers’ hands.
Driven by globalization many organizations transformed their simple supply
chain management to strategic value chain collaboration management.
This author has been involved in a journey of initiating a strategic value
chain collaboration network within a global fast food organization.
This case study will leverage the author’s business knowledge and critical
thinking skills to identify and analyze the business challenge, the
organization “Networked Economy Business Model” and embrace concepts of
industry performance driver, value drivers, value builders,
strategic/operational cost drivers and enablers.
Strategic Value Chain Collaboration Initiative
Company background
It is the world’s largest fast food restaurant organization. It services more
than 60 million customers every day. The quick-service-restaurant giant has
a sophisticated supply chain which includes soft drink suppliers, agriculture
products and raw meat products producers.
The background of the initiative
In the early 21st century, one country, in the Asia-Pacific region, of this global
fast food organization has launched a marketing campaign promoting a new
food item. To their surprise, it generated a huge demand of this item in their
stores and restaurants. Due to the lack of proportion and participation of
their global raw material supplier chain the company was unable to meet
customer demand. The CEO had to go to national TV to publically apologize
for the shortage of the promoted item. This incident prompted senior
management of this global organization to redefine their value chain and
initiated the program of building a new strategic value chain collaboration
network.

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Integrated Value Chain Network Approach
The organization decided to work with its raw material suppliers and adopt a
vertical integrated value chain networked business model. The new business
model will have the following two characteristics:
1. Seamless integration of all the processes in a highly efficient network
cross the boundaries of different companies
2. Identifying the customer’s demands should be the beginning of the
production lifecycle.
Figure 1: Customer Centric Value Chain Network Design
In order to achieve the ultimate objective, the organization built the world’s
largest networked Point of Sales system which enabled the organization to
collect real time sales data from stores/restaurants for customer demand
analysis. This data will be transmitted to their business partners’ IT system
via extranet (private cloud) and then generated orders. Drink and raw
materials business partners loaded required goods on trucks and dispatched
them from warehouses.
Figure 2: Vertically
Figure 2: Vertically Integrated Global Value Chain Processes
Real time Customer
Demands Analysis
Integrated value chain
network response
coordnation
Value add on finished
product deliver to
customers
Demand
Analysis
Based
onPOS
data
Forecast sales
data
transmitted
to value
Chain
business
partners
Goods
Dispatched
from Value
Chain’s
Warehouse
and loaded on
Truck
Goods are
delivered to
Restaurants
or stores
Customer
Value
Delivery
New
Restaurant
Manu item
design
“Plan to Win” Global Networked
Value Chain Strategy Approach

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Networked Value Chain Business Model Analysis
The “Plan to Win” global network value chain strategy is a master piece of
many companies in a virtually integrated value chain network can work
together to achieve the ultimate goal of providing customer value add-on
products and services.
Applying the knowledge learnt from UTS EMBA Strategic Value Chain
Management, I am able to identify the value proposition of this new business
model from industry performance drivers, value drivers, value builders,
strategic cost drivers and complimentors/enablers perspectives.
Figure 3: Strategic Networked Value Chain Relationship
Industry Performance Drivers:
Through leveraging ubiquitous connectivity (knowledge sharing and IT
system integration within the private cloud), this strategic approach has
dramatically improved the effeteness and efficiency of the overall operations
processes and enhanced relationships within the value chain. The real time
sales data, raw material consumption data and customer demand feedback
data (flow between partners’ IT system and organization’s sophisticated
enterprise resource management system (ERP/EDI)) provides accurate
customer demand requirement information for the entire networked value
chain. Critical information enabled this virtual organization to quickly
respond to customer demand and dramatically reduce waste in its final goods

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production process. This integrated value chain strategic approach also
created an eco-efficiency product distribution solution for the vertical
integrated value chain network. After successfully implementing this
strategic approach, we saw many tangible improvements in:
Relationship Management and Process Management
Positive supplier chain relationship; seamless and highly reliable order
processing; reduced waste in distribution network which significantly
lowered the cost of total production. Managers (stores/restaurants) much
happier due to less stress from oversupply or under supply of raw materials;
High labor productivity. The integrated information management system
improved truck drivers’ productivity as well as trucks’ productivity which
ultimately reduced the waste of petrol and reduced the carbon footprints of
the production process. The networked value chain has the capability of
quickly responding to market/customer demand.
Value Drivers
“A Business is a value delivery System” (Lanning, et al. 1988). The fast food
giant traditionally use package/combo meal (combined with drink, various
food together or drink, various food and well-designed toy) with discounted
price as value deal for customers. However these days, customers do not just
want cheaper food. “Natural Marketing Institute (NMI) found that 17% of US
consumers are passionate about eating healthier foods and are willing to pay
more for it”(Cardello, 2013). The fast food industry can no longer afford to
fight a price war as a way to grow their sales. They must find innovative
ways to grow their revenue. This fast food giant was looking for new value
drivers. Research data showed that a third of US consumers want healthier
food.
Figure 4: Developing Value Proposition of Health Meals
•Value
Drivers
•Solutions
customer
Identification
• Cost
• Advantage
Value
Proposition
• Vaslue
distribution
• Time 2
Market
Capacity
Analysis
Process
and monitor
outcomes
Implementation

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The fast food restaurant giant decided to add low-calorie foods (i.e. salad, low-
calorie bread, water, etc.) to its menu. This approach appeared to be a huge
success in terms of meeting customer demands as well as improving revenue.
Figure 5: Value Drivers of New Healthy Meal Items on the Menu
One of the key requirements, of these new menu items, was raw materials
and ingredients had to be served absolutely fresh and they have to be
serviced Just in Time (JIT). This would be impossible if the organization was
using its old supply chain management methodology and old labor intensive
manual operation system. With the new integrated value chain network
system, the fast food restaurant giant had the ability to supply customer with
high quality (freshness) and a high level of customer satisfaction food items
with a low cost of production.
Value Builders
Value Builders are the “long-term capabilities characteristics and positional
characteristics” of a business. The global organization has its famous value
builder system and has its tradition to improve the system from time to time.
The following are tangible and intangible assets the organization has:
Performance
Management
Time
Management
Cost
Management
Healthy Meal
Fresh
ingridians
Local
producers
Compativite
Prices
Value
Drivers
Value proposition

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Figure 6: Value Builder Scenarios Analysis
Tangible Assets
 The country head office provides extensive store location research and
analysis to ensure it will attract enough customers;
 It has one of the best lean store operating systems which meticulously
documents all store processes and provides extensive online/offline store
crew and manager training during the lifecycle of their employment.
 It has a great variety of foods in its restaurant/store menu and has the
ability to launch new item to attract new and existing customers to visit
restaurants and stores.
 It is the first organization in the fast food industry to provide free Wi-Fi
service to its customers globally and at the same time to leverage the
technology introducing Wireless hand-held order taking system in the
stores and restaurants to reduce customer waiting times during peak
hours.
 It is the leader in its industry of implementing integrated value chain
networked product distribution process with sophisticated EDI which
leverages Internet/Intranet, private cloud technology and dramatically
improve effectiveness and efficiency of its production workflow.
 It has state of the art R&D facilities to research and develop products (i.e.
“made for you”) and processes (i.e. smart kitchen, remote order, etc.) for
“Stores of the Future”.

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 It has a nutrition scientist team to research and improve quality of its
food items.
 It provides standardized high quality kitchen equipment, furniture and
ICT systems as well as ICT services for each store/restaurant globally
Intangible Assets
 It developed superior knowledge of its food items on its restaurant/store
menu.
 It has unique integrated and highly coordinated product processes (from
raw materials to ready to serve meals) which add value to its final product
via value contribution of each micro process.
 It has one of the best procurement systems which not only ensures the
quality and quantity of the goods they get but also ensures the wellbeing
and sustainability of their suppliers. (The organization has its tradition of
creating and maintaining Win-Win solution for its business partners and
itself.)
 It has superior product development and marketing resources which
enable the organization to maintain its market landing position in its
industry.
 It offers uncapped opportunities of career development nationally and
globally for crew members and store managers via its extensive internal
training and education program.
 It holds several patents of its innovated Foods
 It has one of the largest loyalty customer groups (ages from young and
old) in the world.
On top of existing tangible/intangible assets, the networked value chain
collaboration business model enables the organization to respond to new
business opportunities that may arise in the near future.

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Cost Drivers
Cost Drivers can come from (strategic and operational) two dimensions.
Creating value will inevitably incur costs. The organization needs to balance
the cost with the value it created. There are extra costs to this global fast food
organization as well as its business partners in the beginning of the
implementation of the highly integrated value chain processes. The senior
management of the organization understands such once off costs will soon be
offset by cost saving of higher utilization of distributors’ assets (i.e. trucks,
warehouse spaces, truck drivers, etc.) in the long run. It also dramatically
increases the mass product customization capability of the organization and
significantly reduces its new product time to market. From an operational
perspective, it reduces the head count of procurement division worldwide and
improves the productivity and workflows of raw materials from upstream to
downstream as well as cash flow of all parties. There is a wide range of
information flow between the fast food giant and its partners within the
value chain which includes planning, forecasting, procuring, manufacturing,
warehousing, distribution and store sales data.
Complementors and Enablers
A Complementor is the organization’s ability to provide service parallel with
its core activities. In order to respond to customer demands in some of the
countries during world cup period, the fast food organization partnered with
local home delivery services to provide fast food online order and home
delivery services in those countries. By the same token the fast food store had
implemented secured cashless transition technology which will handle more
and more sales via online e-commerce platforms as well as a card reader
attached with the Point of Sales devices. The new store network system, e-
commerce platform and new generation Point of Sales (POS) devices are the
enablers from system and hardware perspective.
Conclusion
Value Chain network is an integrated system that consists of a series of
activities and involves multiple organizations to constantly add value to the
raw materials and unfinished product and then transfer it to a final
consumable product. The key element of a successful organization is their
capability to develop a unique value proposition of their product and service
that meets customer/market demand and at same time is able to demonstrate
competitive advantages within the context of industry performance drivers,
value drivers, value builders, cost drivers, enablers and complementors.

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REFERENCES
Walters, D, & Rainbird, M. 2012, Managing in the Value Chain Network,
Prestige Books, Australia, New Delhi, India.
Logistics And Supply Chain Management At Mcdonalds Management Essay,
UKEssay.com, viewed 19 May, 2015,
http://www.ukessays.com/essays/management/logistics-and-supply-chain-
management-at-mcdonalds-management-essay.php
Viasek, K., ‘Trust and Collaboration: McDonald’s Supply Chain Strategy’,
Global Sourcing Council, viewed 20 May, 2015, < http://gscouncil.org/trust-
and-collaboration-mcdonalds-supply-chain-strategy/>