Value Chain & Value Delivery System for SCM

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Value Chain and Value Delivery System for Supply Chain Management


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Value Chain & Value Delivery System for SCM:

Value Chain & Value Delivery System for SCM Dr. G C Mohanta, BE( Mech ), MSc( Engg ), MBA, PhD(Mgt) Professor Al-Qurmoshi Institute of Business Management, Hyderabad – 500005

Value :

Value Value is the total amount ( i.e. total revenue) that buyers are willing to pay for a firm’s products. The difference between the total value (or revenue) and the total cost of performing all of the firm’s activities provides the margin. Value may also be defined as quality, exclusivity, convenience, service response or the cost to the customer. The value chain is a tool developed by Dr. Michael Porter.

Value Chain:

Value Chain As per P orter, the Value Chain includes all activities to design, produce, market, deliver, and support the product/service . The value chain is concentrating on the activities starting with raw materials till the conversion into final goods or services. There are two categories of activities: Primary Activities (operations, distribution, sales) Support Activities (R&D, Human Resources) The term value chain means that at each stage of the order-to-delivery system, value is added to the product or service.

Primary Activities:

Primary Activities 1. Inbound logistics - Concerned with receiving, storing, distributing inputs (e.g. handling of raw materials, warehousing, inventory control) 2. Operations - Comprise the transformation of the inputs into the final product form (e.g. production, assembly, and packaging) 3. Outbound logistics - Involve the collecting, storing, and distributing the product to the buyers (e.g. processing of orders, warehousing of finished goods, and delivery)

Primary Activities:

Primary Activities 4. Marketing and Sales -Identification of customer needs and generation of sales (e.g. advertising, promotion, distribution) 5. Service -Involves how to maintain the value of the product after it is purchased (e.g . installation, repair, maintenance, and training

Support Activities :

Support Activities 1.Firm Infrastructure The activities, such as, Organization structure, control system, company culture are categorized under firm infrastructure. 2.Human Resource Management Involved in recruiting, hiring, training, development and compensation. 3.Technology Development These activities are intended to improve the product and the process, can occur in many parts of the firm. 4.Procurement Concerned with the tasks of purchasing inputs, such as, raw materials, equipment, and even labour.

Value Delivery System:

Value Delivery System A value delivery system includes the value chains of a firm's supplier and their suppliers, the firm itself, the firm’s distribution channels, and the firm's buyers and the buyers of their products.

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