How will supply chains be designed in the future? There are new forces at work--new dynamics--but even old forces will influence the structure of supply chains. Charles H. Fine, a professor at MIT Sloan School of Management and author of Clockspeed: Winning Industry Control in the Age of Temporary Advantage, argues that questions of supply chains are actually questions of value chains--the whole dynamic ecosystem of a company's suppliers, customers and stakeholders--along with the ecology of the industry. Fine spoke with MIT Sloan Management Review editor-in-chief Michael S. Hopkins. In your work you usually talk about the "value chain. " What do you mean by that? I distinguish between supply chain and value chain. Supply chain has historically addressed issues of logistics and the flow of materials, flow of information, flow of money. Value chain focuses on who gets the value in the chain, who creates value, who captures value, where is the value created--and how do you think about that in a coherent manner.
Value supply chain magazine
Suppliers have a value chain (upstream value) that create and deliver the purchased inputs. In addition, many products pass through the value chain of channels (channel value) on their way to the buyer. A company's product eventually becomes part of its buyer's value chain. This article will not go into the entire supply chain (from suppliers all the way to the end-consumer), but rather focuses on one organization's value chain. The value chain activities can be divided into two broader types: primary activities and support activities. Primary activities The first are primary activities which include the five main activities. All five activities are directly involved in the production and selling of the actual product. They cover the physical creation of the product, its sales, transfer to the buyer as well as after sale assistance. The five primary activities are inbound logistics, operations, outbound logistics, marketing & sales and service. Even though the importance of each category may vary from industry to industry, all of these activities will be present to some degree in each organization and play at least some role in competitive advantage.
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Procurement Procurement refers to the function of purchasing inputs used in the firm's value chain, not the purchased inputs themselves. Purchased inputs are needed for every value activity, including support activities. Purchased inputs include raw materials, supplies and other consumable items as well as assets such as machinery, laboratory equipment, office equipment and buildings. Procurement is therefore needed to assist multiple value chain activities, not just inbound logistics. Technology Development (R&D) Every value activity embodies technology, be it know how, procedures or technology embodied in process equipment. The array of technology used in most companies is very broad. Technology development activities can be grouped into efforts to improve the product and the process. Examples are telecommunication technology, accounting automation software, product design research and customer servicing procedures. Typically, Research & Development departments can also be classified here.
Source: GHG Protocol (2011) Corporate Value Chain (Scope 3) Accounting and Reporting Standard – Supplement to the GHG Protocol Corporate Accounting and Reporting Standard, World Resources Institute (WRI) and WBCSD, p. 141 (emphasis added) (Accessed 04. 20). Porter's Value Chain – the seminal 'business school definition'
"The idea of the value chain is based on the process view of organisations, the idea of seeing a manufacturing (or service) organisation as a system, made up of subsystems each with inputs, transformation processes and outputs. Inputs, transformation processes, and outputs involve the acquisition and consumption of resources - money, labour, materials, equipment, buildings, land, administration and management. How value chain activities are carried out determines costs and affects profits. Most organisations engage in hundreds, even thousands, of activities in the process of converting inputs to outputs. [According to Porter (1985) these] activities can be classified generally as either primary or support activities that all businesses must undertake in some form. "
Finally, AI combined with IoT provides better agility, visibility, and improved communication with suppliers. 5G Networks — Compared to its forerunners, 5G is a much more advanced technology offering more speed for data processing. Supply chains can become faster and more resilient thanks to 5G. For example, using a 5G network businesses can boost their real-time visibility tools and IoT capabilities, minimizing latency and downtimes. Digital Supply Chain Twin — A digital supply chain twin (DSCT) technology is a computer representation of a real-world SC that gathers data from the entire network in real time, provides advanced analytics, and applies to the physical world across the SC full lifecycle. It is used to boost the SCM performance and is expected to dramatically change the way supply chains are operated today. For instance, a famous tire company Bridgestone is using digital twin technology to enhance its products by adding more safety and reduce disruptions on the road. Therefore, Bridgestone incorporated the real-time tire sensor data simulated with actionable predictions.
'Value chain' definitions and characteristics
So what your insurance company has done, is taken the cost, broken it down to an affordable figure, and presented it to you in a convenient manner. That way, you get your much-needed insurance and the insurance company gets its much-needed business, everybody wins. This is the essence of creating a value chain. How much profit a business makes is determined by the quality of the value it creates. The reason every high-end store charges considerably more for their goods and services is because they have created better value for their customers. Either that or they just simply target wealthier clients who can spend more. But with wealth comes higher standards and expectations, which means the store has to be able to provide better and more suited products to satisfy their clients' demands and expectations. Simply put:
The value a business creates and captures
– the cost of creating and capturing that value
= their profit margin
Porter proposed a general-purpose viewpoint of the value chain.
These include warehousing, inventory management, order fulfillment, and shipping. Marketing and Sales: Activities associated with getting a buyer to purchase a product. Service: Activities that maintain and enhance a product's value, such as customer support and warranty service. In order to help streamline the five primary steps, Porter says the value chain also requires a series of support activities. These include procurement, technology development, human resource management, and infrastructure. A profitable value chain requires connections between what consumers demand and what a company produces. Simply put, the connection or sequence in the value chain originates from the customer's request, moves through the value chain process, and finally ends at the finished product. Value chains place a great amount of focus on things such as product testing, innovation, research and development, and marketing. Supply Chain
The supply chain comprises the flow of all information, products, materials, and funds between different stages of creating and selling a product to the end-user.
Supply Chain vs Value Chain
Supply chains and value chains are both networks of companies/processes that come together to deliver a product that is of good quality, at low cost, in a timely manner. Both supply chains and value chains are made up of a well-integrated selection of processes that need to be strategically managed to deliver the highest customer satisfaction. The focus, however, of each is different; the supply chain focuses on the supply of the product from production to delivery, whereas value chain focuses on adjusting business processes to yield the highest value. The following article clearly explains each term and shows how they are similar and different to one another. What is a Supply Chain? A supply chain is like a chain or collection of suppliers, manufacturers, distributors, technology, information systems, transporters, etc. that come together to manufacture and sell products to customers. A supply chain will convert raw materials, natural resources and supplies into a finished product that is finally delivered and sold to the end consumer.
In a supply chain, all that is being done is a conveyance. One product or material is taken from one company or from one end and transported to the other. Of course, there are procedures involved such as proper storage and careful transportation but that is about it. In value chains, as much as there is the transportation and some storage involved, the main purpose of a value chain is to add value to the product so as to make it presentable to the client. This is often achieved via packaging, marketing, and sales. That being said, a supply chain is as important to the business world as a value chain. Without one or the other, we would simply be mired in a logistically impossible nightmare. Supply chains are the one thing that connects the world. A product produced or manufactured on a continent you have only heard of in your Geography lessons is essential for your daily consumption. The reason you always find this product on the shelves at your convenience store is that supply chains never rest.
Value Chain vs. Supply Chain: An Overview
The term value chain refers to the process in which businesses receive raw materials, add value to them through production, manufacturing, and other processes to create a finished product, and then sell the finished product to consumers. A supply chain represents the steps it takes to get the product or service to the customer, often dealing with OEM and aftermarket parts. While a supply chain involves all parties in fulfilling a customer request and leading to customer satisfaction, a value chain is a set of interrelated activities a company uses to create a competitive advantage. Key Takeaways
The value chain is a process in which a company adds value to its raw materials to produce products eventually sold to consumers. The supply chain represents all the steps required to get the product to the customer. The value chain gives companies a competitive advantage in the industry, while the supply chain leads to overall customer satisfaction. Value Chain
The idea of a value chain was pioneered by American academic Michael Porter in his 1985 book "Competitive Advantage: Creating and Sustaining Superior Performance. "