The Investopedia online dictionary defines a value chain as a high-level production model, which was created by Michael Porter. The chain part of the word is meant to imply the stages between the receiving of raw materials, “adding value” to them and finally producing a finished product for sale. The procedures employed within the value chain are supposed to give the organization’s services or goods a competitive edge over those of the competitors ( Ayers, 2001) . A robust value chain management lineup helps a company create high value and a strong competitive advantage in any or all of the value chain's intended steps.
How Value chains work
The purpose of a value chain is to create value for goods that exceed the cost of providing its service or good ( Kuglin & Hood, 2008). The value chain activities vary from organization to organization, but generally, the stages involved in value chain management include inbound logistics, operations, outbound logistics, marketing, and sales and service.
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Inbound logistics pertains all the activities that include; inventory and warehousing, additionally control of raw/input materials. Following inbound logistics is operations, which includes the processing activities that change raw materials into finished products. The third is outbound logistics that refers to all the activities involved in getting the finished product from the processing plant to the customer (Ayers, 2001). Marketing and sales involve the activities geared towards creating and disseminating information regarding a product/services. This has many activities that include; advertising, channel selection, and pricing. Service includes activities that maintain and enhance a product's value, such as customer service.
How do you think value chain management helps companies create and build value?
The above-named activities are essential to building and maintaining an organization’s value chain. Additionally, they build the company’s competitive advantage. Each of the stages in the value chain is meant to add value in some way to the input materials ( Sindi & Roe, 2017 ). The value management team sifts through the stages and evaluates the sub-processes, identifying what can be done to reduce the expenses by the organization whilst increasing the value of the overall product. The increase in value means that customers derive more usefulness from the product, thus the organization gains a consumer base that trusts its value, through the value added generated via its value chain ( Sabri & Shaikh, 2010 ).The fact that the added value is done at mitigated costs is also beneficial to the organization in that they have more finance to expand production lines. An expanded production line means more goods and service produced, without compromising on quality. This ensures the organization gains from economies of scale.
The Online Video
The aspects that caught my eye within the video are how there is extensive computerization, reporting, task division and continuous testing within both the product line of the vehicles and the baseballs. Employees at the different parts of the motor vehicle assembly seem to understand their task and how much time it takes to complete the task. E.g. the person installing the front doors installs the doors, checks of they close correctly and that the gap between the door and the door seam/bracket are within tolerances stipulated. This continuous check for quality overall assures the quality of the final vehicle as each stage ascertains its tolerances are not surpassed. The timeliness of both lines is also noticeable, none of the employees seemed to take longer to complete a task.
References
Ayers, J. B. (Ed.). (2001). Making supply chain management work: Design, implementation, partnerships, technology, and profits . CRC Press.
Kuglin, F., & Hood, R. (2008). Using technology to transform the value chain . CRC Press.
Sabri, E. H., & Shaikh, S. N. (2010). Lean and agile value chain management: a guide to the next level of improvement . J. Ross Publishing.
Sindi, S., & Roe, M. (2017). Strategic Supply Chain Management: The Development of a Diagnostic Model . Springer.
