An Overview of Value Chain Management
The value chain refers to the cluster of activities that adds value to designing, producing, and delivering a quality product to the customer. Value chain analysis is used to evaluate the activities within the organization related to the value for money, goods, and services.
In 1985 Michael Porter was first to invent the concept of the value chain in his renowned book ‘competitive advantage.’
The value chain consists of two main categories that are:
- Identification of individual activities.
- Analyzing the value-added in each activity.
Other activities that are performed by a value chain are as follows:
- Inbound logistics deals with receiving and storing inputs.
- Manufacturing operations include the conversion of inputs into finished products.
- Outbound logistics are concerned with the collection and distribution of products or services to clients.
- Marketing and sales involve activities that create visibility among the public regarding the product or service.
- These activities increase the value of products or services.
- Support activities assist the primary activities related to procurement, technology development, and infrastructure.
Supply Chain a Decision Maker
Supply chain management is the group of activities that control and execute the flow of products by acquiring the raw material and production through distribution to the customer.
Supply chain management encompasses the integrated planning and execution which is required to optimize the flow of material. It further includes demand planning source production and storage for the defective products.
Supply chain management includes a complex undertaking from the suppliers and manufacturers. It also manages the collaboration and risk management to create alignment and harmony between all the entities.
Other activities that are performed by a supply chain are as follows:
- Supply chain management improves customer service. It secures customer satisfaction by ensuring the availability of the product to the customer at the correct location.
- It also facilitates companies to decrease their overall operating costs. It also reduces the purchasing cost and regulates the operating cost which enhances the financial position of the company.
- This intelligent system helps in the survival of humans by improving healthcare, protecting humans from harsh climatic conditions. During the time of distress of natural calamity, humans rely upon the supply chain for the delivery of food, water, and medicine.
- The supply chain is also responsible for the delivery of electricity, water, and gas to homes and businesses meeting the need for light, heat, air conditioning, refrigeration, and entertainment.
- Supply chain management can improve the overall economy of the nation by generating employment. It strengthens society through the development of railroad networks, highways, and airports.
- It also looks after inventory management in logistics by distributing and taking care of the capital invested in inventory and logistics.
Measurable Differences Between Value Chain and Supply Chain Management
- A supply chain is the process of collection of all the activities, persons, and businesses that further transfers the product from one place to another. A value chain is the cycle of activities that processes to add value to the product in each step until it reaches the customer.
- The supply chain has got its origin from operational management, whereas the value chain got its existence from business management.
- Under the supply chain, the transfer of material takes place and the value chain is concerned with providing a value of price for products and services.
- The supply chain starts with the request of the product and ends by reaching the customer. Whereas, the value chain begins with the request of the customer and ends with the product.
- The main objective of the supply chain is to achieve complete customer satisfaction, whereas this scenario is not available in the value chain.
The supply chain and value chain are the two faces of a coin. They are complementary to each other and support jointly for the chain management and operations. Axolon ERP provides the ideal solution for the ERP inventory management system with proficiency.