What does customer value encompass?

Customer value encompasses the overall benefit that a customer perceives from a product or service in relation to the cost incurred. It is an important concept in supply chain management as it highlights the balance between the effectiveness of a supply chain in delivering products and the costs involved in that process.

The sum of supply chain surplus (the total revenue generated minus the total cost incurred in the supply chain) and supply chain cost collectively reflects this balance. This perspective captures not only the costs associated with producing and delivering goods but also the value created for the customer through the efficiency and effectiveness of the supply chain. High customer value occurs when a company can maximize the surplus while keeping costs manageable, leading to satisfied customers who find value in the total package being offered.

In contrast, focusing solely on the cost of products sold, perceived quality, or return on investment for suppliers would not provide a complete picture of customer value. These factors are important but do not encompass the holistic view that includes both costs and value delivery within the supply chain. Thus, understanding customer value requires a comprehensive approach that integrates both the surplus generated and the costs associated with that surplus.