Understanding Your Value Chain Network
In the business world, the term value chain is used to describe the different processes and activities that go into creating a product or service. A value chain network, then, describes the system or network by which a value chain operates. This network may comprise several elements, including procurement and logistics, but its overall purpose is to provide the processes and supplies required to bring a product to market. The importance of value chain operations is that they allow businesses to create the most valuable, cost-efficient products possible. Ultimately, the end goal of a value chain is to create the highest value at the lowest cost.
There are two main types of value chain operations, as outlined by business strategist Michael Porter: primary and support activities. According to Porter, value chains consist of five primary activities (marketing and sales, service, operations, inbound logistics, and outbound logistics), and four support activities (tech development, firm infrastructure, human resource management, and procurement).
Together, these activities work in concert to provide the best pathway to creating a product and delivering it to customers in a cost-efficient way. Businesses must consider each aspect of the value chain to determine the most appropriate course of action for the procurement of materials, the creation of the product itself, and the way in which it’s sold.
Understanding the concept of the value chain in strategic management can help you produce better products at lower costs. This results in a win-win situation for both your business and customers, as both are reaping the benefits of the value chain.
Your business saves money by enacting cost-efficient measures, and customers receive a better product that was created with value top of mind. Value chain operations can help ensure that quality is delivered all around and help businesses develop even better products in the future.
The Difference Between a Value Chain and Supply Chain
You may hear the terms value chain and supply chain used interchangeably, but there is a difference between the two—namely that the supply chain is responsible for dealing with suppliers and logistics, while the value chain is concerned with maximizing a business’s competitive advantage by ensuring the creation and delivery of value. A supply chain value chain diagram can further illustrate the difference between these two processes, and you may even view a value chain and supply chain example to get a better idea of how these concepts work in practice.
Of course, value chain and supply chain similarities do exist. Both processes follow an outlined set of steps and procedures to achieve an end result. In the case of the value chain, primary and support activities are carried out; in supply chains, steps like supply planning and order fulfillment are performed. While they are both involved with the creation and delivery of products, supply chains help procure materials and get products sent out to customers, while value chains follow a series of operations to provide cost-efficient solutions for those products.
It can be easy to get these two concepts mixed up, but understanding the value chain and supply chain difference can better equip you to perform each task to the best of your abilities. This helps you avoid missing any steps and making sure that your product goes through each stage of each process for the best results.
Performing Value Chain Analysis
The importance of value chain analysis cannot be overstated. If you research value chain analysis Wikipedia, you’ll find that the value chain analysis refers to the process by which companies evaluate the overall performance of their value chain operations. Organizations then take these insights and work to make meaningful changes to improve the process the next time around.
There are different types of value chain analysis, but the main thing that businesses are trying to uncover with analysis is where in the value chain they are failing to meet certain expectations. A value chain analysis example or value chain analysis example PDF can detail some of the steps that may be taken when performing analysis and help you get a better understanding of what factors should be considered.
For instance, a value chain analysis in strategic management might look at ways in which businesses can strategize to get the most out of value chain activities. A value chain analysis template or value chain analysis PDF can help guide you as you perform your analysis, pointing out specific areas of focus and helping you determine what’s most important to the overall process.
The value chain analysis Porter concept was developed by Michael Porter and is useful in understanding connections between processes and systems and how they work together to impact value, whether for better or for worse. This analysis framework has proven useful for businesses as they seek to implement better value strategies and conduct better chain analyses.
MetaCX is a solution that helps users uncover what links in the value chain are not delivering on expected value. By joining businesses with suppliers, MetaCX makes it possible for companies to uncover what’s working well in their value chain and what could be improved. MetaCX’s Business Value Network aligns all stakeholders on common objectives and helps ensure that results are delivered in a meaningful and effective way. It’s important to optimize your value chain analysis process to reveal the most pertinent areas for growth, and MetaCX can help businesses identify these weak spots and work to close the gap separating them from success.
Operationalizing Value Chain Management
Value chain management is the process by which value chain activities are organized and monitored and a plan is developed to get the most out of the value chain. There are several aspects to value chain management, all of which involve quality control and distribution. In most management processes, for instance, businesses check to ensure the quality of supplies and determine whether or not they’re a good investment. If it turns out that certain items or materials could be produced at the same value at a lower cost through a different vendor, value chain managers may choose to switch suppliers and get the ball rolling with the supply chain on procuring those materials.
Value chain management and supply chain management are essential components of the overall value and supply chain process. It’s in the best interest of companies to see to it that they’re getting the most bang for their buck, and by implementing proper management techniques, they can catch problems as they arise, and even before they become a problem. There are multiple value chain management examples, but one of the most important elements of the process is inbound operations, where managers oversee the materials and resources coming in from the supply chain. The inbound operations process often involves sorting and filtering as businesses examine the materials at their disposal to decide what’s going to be of use to them and what might need to be discarded.
A value chain management PPT or value chain PDF can be useful in educating teams on the importance of good management. Likewise, a value chain management PDF file may be sent out to quickly convey information regarding the value chain and inform new team members on best practices. The MetaCX solution can help companies operationalize and scale value chain management, customizing the process to suit their unique business needs.
Improving Value Chain Activities
Value chain activities encompass everything from marketing to logistics. Each activity plays a separate role in helping to develop the broader value chain strategy. There are many types of value chain activities, including sourcing the right materials from the supply chain and determining item prices. Value chain primary activities are those activities that are designed to drive profit by creating value that exceeds the costs related to the development and delivery of the product.
One great example of how value chain activities help generate greater value is the value chain for service industry personnel. Those working in this industry deliver services rather than tangible products, and so while the value chain works a bit differently in this area, it is still useful for understanding the various activities that can impact the value and quality of the end result. For instance, while the service industry performs the standard primary activities, its support activities focus more on human resources than physical goods.
The Best Value Chain Example
Value chain examples can take a number of forms. For instance, a firm infrastructure value chain example might involve strategic management, planning, and finance. A value chain example manufacturing company can shed light on how the value chain process works in the manufacturing space. Starbucks is a great value chain example—more specifically, it’s a good example of how a value chain can operate successfully to boost value and profit.
In this value chain example, Starbucks selects high-quality coffee beans as part of its inbound logistics process and sends them out to distribution centers in special packaging that maintains the bean quality. These steps and more ensure that customers receive quality products and that Starbucks itself is able to secure quality items at the most reasonable prices, given what they expect to make off of those products down the line. This demonstrates the potential impact of the value chain and how it can lead to better results across the board.
Another value chain example, Amazon, demonstrates how important an effective value chain is. Much like Starbucks, Amazon constantly analyzes and improved its value chain. This is why they have become a household name for a wide array of products and services.
Whatever your industry, value chain examples can be useful for seeing how value chains actually work in practice. They can help businesses understand the necessary steps to creating a successful chain and how doing so can pay off in the long term. You may even choose to distribute a value chain example PDF form to help educate your teams on the importance of establishing a solid value chain and how it can promote the overall growth of the business.