TRUE VALUE METRICS
TVM for the SUPPLY CHAIN
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PRODUCT flowing through the supply chain
A big part of all the 'value-add' associated with the manufacture of a product occurs in the supply chain. As long as their is 'profit' at each link of the supply chain the product moves. Any link that is not profitable is a weakness that will sooner of later impede the product flow.
The supply chain is also responsible for a large variety of social impacts that are not accounted for in conventional financial accounting and analysis. These are important and must be brought into account.
The supply chain is also responsible for a range of environmental impacts that also are not accounted for in conventional financial accounting and analysis. These are important and must be brought into account.
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NO TRANSPARENCY IN THE SUPPLY CHAIN
For all practical purposes there is little or no transparency in the supply chains for most major product flows.
This is a huge problem and the private sector / corporate business community has little incentive to change this state of affairs.
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SELF REPORTING BY BUSINESS ORGANIZATIONS
Essentially all the information about business operations is available as a result of 'self reporting' by the business entities. The reporting may be 'required' by law or regulation of government, but the reporting is still done using a self reporting process.
In some cases, as for example, the financial reporting of public companies, there is a requirement that there is some form of validation of the reporting by independent third parties. Independent financial audit by professional accounting firms is an example of such validation, a system that has been in place for well over a century.
Various industry groups have been established in order to improve the transparency associated with the supply chain. Mostly these are voluntary with very limited power to effect change unlsess the concerned parties are willing to make change.
Some of these industry groups are simply cover ups for ongoing abuse within the supply chains.
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ACCOUNTABILITY BY SOCIETY FOR SOCIETY
It is widely accepted that a strong free media is a good way to hold pubic figures and policy makers accountable for their behavior. The idea should be expanded and enabled using modern technology to hold the business world and global supply chains accountable for the complete range of behavior, both good and bad, that has impact on society and the environment.
At the present time the speed of modern communications and the short news cycle has diminished rather than enhanced the role of the media in holding important people and entities accountable, but it is entirely possible to have an accountability platorm of some sort that would be able to organize information in ways that would give incentive to good behavior and expose bad behavior in a meaningful way.
TPB Note: In this connection it is interesting to note that some States in the USA have made it illegal to observe the behavior of some segments of the industrial farming industry. These laws are an abomination, and reflect the takeover of some parts of the US legal system by corporate interests.
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PRODUCT AND SUPPLY CHAIN
In the prevalent system of economics and business management, Over time the incentives of the system mean that the system and the products flowing through the system optimize for profit as measured using conventional financial accounting principles. The success of this optimization in pursuit of profit has been amazing and modern international trade is incredible efficient and one of the great economic drivers of the modern age.
TPB note. In the 1960s in my early 20s I created a small company (BITS ... Burgess International Trade Services) to engage in international trade. I had little money and even less practical experience, though I had a considerable amount of academic education. I am reminded of the logistics and administrative nightmare that I was faced with when we purchased some cutlery in Japan for import into Britain. On paper the price we paid was going to be profitable, but the high cost of doing everything we needed to do was many times higher than I could have imagined. Added to this, those established already in the business, were not in any way interested in helping a young and new entrant into the industry. Bottom line, the business struggled and failed. The silfer lining is that I learned something ... indeed I learned a lot.
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Accounting for the PRODUCT through the SUPPLY CHAIN
The TVM approach makes it possible to account for the product as it flows and changes through the supply chain. In the conventional setting for financial accounting, that is the corporate organization, the changes in the balance sheet over time tell a good part of the story of the company. The balance sheet may also be used in respect of a product as it flows through the supply chain. The TVM balance sheet is more than the assets, liabilities and owners' equity expressed in money terms, it is a balance sheet reflecting social and natural values as well, but the bassic concept is exactly the same.
Essentially the TVM method makes it possible to have an easily understand accounting during the whole of the life cycle of the product.
Experience shows that the flow through the supply chain stops when any part of the supply chain is economically unviable ... that is unprofitable. When there is accounting also for social and environmental impacts, it is likely that the flow will stop because of issues in these areas as well.
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TVM FOR THE SUPPLY CHAIN
How the TVA data architecture adds IMPACT of the performance analysis in the SUPLY CHAIN
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GO TOP
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IMPORTANCE OF THE SUPPLY CHAIN
A customer facing company is only a small part of what it takes to bring a product to market. Usually, the supply chain for all the components and materials is a much bigger part of the the activities that go into delivering the product to the customer. The customer facing company and brand is a bit like the iceburg in nature ... most of it is out of sight.
The management of supply chains has become very sophisticated, and supply chains have become complex with every element that goes into the final assembly of a product having its own discreet supply chain.
… The MONEY dimension of the supply chain has become a routine, and everything is optimized to deliver a maximum of money profit for the corporate participants in the supply chain.
Meanwhile, the IMPACT of the supply chain on SOCIETY (PEOPLE) and ENVIRONMENT (PLANET) is more or less completely ignored
This has to change.
TVM is an approach to accountancy that enables impact of the supply chain on society (social capital) and the environment (natural capital) to be accounted for and reported in a simple yet meaningful way.
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