1. Understanding value….. ….The Magic Pallet
ValueMathics
Understanding value…..
….The Magic Pallet

2. Every time a shipment sails to its final destination, seller and buyer have done business because the transaction represents a value for each of them.

3. The same applies whenever a service is delivered to the buyer

4. Then again, for seller and buyer alike, there is a difference between both “values”
“The Magic Pallet” visualizes that difference -”value add”- in global value chains
VALUE ADDED
VALUE
VALUE ADDED
COST OF OWNERSHIP
VALUE
COST OF OWNERSHIP
SELLER
BUYER
CONSUMER

5. Let us look at an example of value creation throughout a typical value chain of tomatoes:
On their way from “farm to fork”, the value of these tomatoes increases because each player in the supply chain adds value.
What value do they add ?
SELLER
BUYER
CONSUMER

6. 1. Research, seed breeding
SELLER
BUYER
CONSUMER

7. 1. Research, seed breeding 2. Sales, distribution of seeds
SELLER
BUYER
CONSUMER

8. 1. Research, seed breeding 2. Sales, distribution of seeds
3. Planting, growing, harvest
SELLER
BUYER
CONSUMER

9. 1. Research, seed breeding 2. Sales, distribution of seeds
3. Planting, growing, harvest
4. Post-harvest activities
SELLER
BUYER
CONSUMER

10. 1. Research, seed breeding 2. Sales, distribution of seeds
3. Planting, growing, harvest
4. Post-harvest activities
5. Export/import/distribution
SELLER
BUYER
CONSUMER

11. 1. Research, seed breeding 2. Sales, distribution of seeds
3. Planting, growing, harvest
4. Post-harvest activities
5. Export/import/distribution
6. Retail marketing, branding
SELLER
BUYER
CONSUMER

12. From crude oil to garbage bag
Another example of value creation, but now in an industrial sector
1. Crude oil exploration
RUSSIA
SELLER
BUYER
END USER

13. 2. Refining into solvents
1. Crude oil exploration
2. Refining into solvents
FINLAND
RUSSIA
SELLER
BUYER
END USER

14. 2. Refining into solvents 3. Sourcing, trading
1. Crude oil exploration
2. Refining into solvents
3. Sourcing, trading
FINLAND
RUSSIA
HOLLAND
SELLER
BUYER
END USER

15. 2. Refining into solvents 3. Sourcing, trading 4. Storage, transport
1. Crude oil exploration
2. Refining into solvents
3. Sourcing, trading
4. Storage, transport
FINLAND
RUSSIA
HOLLAND
SELLER
BUYER
END USER

16. 2. Refining into solvents 3. Sourcing, trading 4. Storage, transport
1. Crude oil exploration
2. Refining into solvents
3. Sourcing, trading
4. Storage, transport
5. Toll conversion
FINLAND
RUSSIA
HOLLAND
VENEZUELA
SELLER
BUYER
END USER

17. 2. Refining into solvents 3. Sourcing, trading 4. Storage, transport
1. Crude oil exploration
2. Refining into solvents
3. Sourcing, trading
4. Storage, transport
5. Toll conversion
6. Shipping, processing
FINLAND
RUSSIA
HOLLAND
SOUTH KOREA
VENEZUELA
SELLER
BUYER
END USER

18. 2. Refining into solvents 3. Sourcing, trading 4. Storage, transport
1. Crude oil exploration
2. Refining into solvents
3. Sourcing, trading
4. Storage, transport
5. Toll conversion
6. Shipping, processing
7. Sales and distribution
FINLAND
RUSSIA
HOLLAND
SOUTH KOREA
VENEZUELA
SINGAPORE
SELLER
BUYER
END USER

19. 2. Refining into solvents 3. Sourcing, trading 4. Storage, transport
1. Crude oil exploration
2. Refining into solvents
3. Sourcing, trading
4. Storage, transport
5. Toll conversion
6. Shipping, processing
7. Sales and distribution
8. Blow molding
FINLAND
RUSSIA
HOLLAND
SOUTH KOREA
BANGLADESH
VENEZUELA
SINGAPORE
SELLER
BUYER
END USER

20. 2. Refining into solvents 3. Sourcing, trading 4. Storage, transport
1. Crude oil exploration
2. Refining into solvents
3. Sourcing, trading
4. Storage, transport
5. Toll conversion
6. Processing
7. Sales and distribution
8. Blow molding
9. Export
FINLAND
RUSSIA
HOLLAND
SOUTH KOREA
BANGLADESH
VENEZUELA
SINGAPORE
SELLER
BUYER
END USER

21. “Around the world in 80 days”
1. Crude oil exploration
2. Refining into solvents
3. Sourcing, trading
4. Storage, transport
5. Toll conversion
6. Processing
7. Sales and distribution
8. Blow molding
9. Export
10. Retail marketing
FINLAND
RUSSIA
HOLLAND
SOUTH KOREA
GERMANY
BANGLADESH
VENEZUELA
SINGAPORE
SELLER
BUYER
END USER

22. Distribution of value addition
Design studio (Italy) 0,03 %
Fabrics, treads, etc. (Korea) 2,95 %
Shipping (Korea) 0,05 %
CMTP1 (Bangladesh) 2,62 %
Shipping, storage (USA) 0,08 %
Brand marketing (USA) 74,13 %
Retail marketing (USA) 20,14 %
Retail price ,00 %
An example of value creation in the global supply chain of a men’s shirt
1 Cut, make, trim, packing
ValueMagics, a new road from cost to value, 2013 Sharma V. And H. Verhulst, McGraw Hill, New Delhi

23. Value add; costs and profits
An example of value creation and the distrubution of profits in the global supply chain of Apple’s iPhone
Capturing Value in Global Networks: Apple’s iPad and iPhone, Distribution of profits iPhone 2010, Kenneth L. Kraemer, Greg Linden, and Jason Dedrick, University of California, Irvine, University of California, Berkeley and Syracuse University

24. 100 Customer values: what makes us pay 100 ? DESIGN QUALITY SPEED
IMAGE
SERVICE
100
COST
CONSUMER

25. 100 How can seller and buyer fullfil these values ? SUPPORT MARKETING
QUALITY
DESIGN
SPEED
IMAGE
SERVICE
LOGISTICS
LOGISTICS
COST
COST
PRODUCTION
TECHNOLOGY
SELLER
BUYER
CONSUMER

26. Value creation- historical perspective

27. How to upgrade from production ?
PATENT
BRAND
TECHNOLOGY
MARKETING
VALUE
PRODUCTION