Supply Chain Management
Introduction
The global nature of business has been changing over the years, and most businesses are in the quest of growth, and the desire to reach new markets. Most business firms focus on production, marketing and finance, with avid attention directed into achieving customer satisfaction through effective and efficient operations of various processes in the business. In light with this, competition is an aspect that seriously affects many businesses, and in order to address this, most firms consider the use of the supply chains, which aid in the efficient distribution of goods at minimized costs but sufficient profits (Prajogo, McDermott and Goh, 2008). Similarly, the preference of customers is also taken into consideration with most producers, thence, establishing the essence of adding value to the services or goods that are provided to customers. The value creation process is highly achieved through the value chain, and proper manipulation of the value chain into productive and profitable chain, always amount to success and the achievement of sustainable competitive advantage (Prajogo, McDermott and Goh, 2008).
Discussion
The conception of the value chain was originally formulated and popularized in 1985 by Michael Porter, in the process of articulating a competitive strategy to obtain quality business performance, through the value chain (Prajogo, McDermott and Goh, 2008). The nature of value has been frequently changing ascribed to the current trends in business, together with the consistent demand of the customer. However, it has never been clear whether the activities carried out in the value chain are all essential, which is analogous, to Prajogo, McDermott and Goh (2008) assertion that the activities performed under the value chain are ill defined and their implementation by a firm maybe or maybe not effective in achieving set goals.
Similarly, the meaning of the term value has been shifting from purely financial and industry based approach to a consumer motivated one (Al-Mudimigh, Zairi and Ahmed, 2004). Also, the generation of value has been efficiently managed through the customer chain, and supply chain, which is a set of integrated, dependent process, in which there is a transformation of the required specifications to finished deliverables (Al-Mudimigh, Zairi and Ahmed, 2004).
Supply Chain
The concept of supply chain has been applied a lot by leading firms in order to maximize their profits, and achieve the best in their business activities. The activities incorporated in the supply chain help, in the diminution of cost and the upgrade of the quality of production and the firms’ performance in general (Prajogo, McDermott and Goh, 2008). The development of efficient supply chain and defining its leading role in a company is particularly significant, and this can be attained through elimination of inefficiencies by improving on the various internal systems (Al-Mudimigh, Zairi and Ahmed, 2004). In relation to this, supply chain management is equally indispensable as it facilitates the realization of benefits of both operational and strategic aspects. Al-Mudimigh, Zairi and Ahmed (2004) still affirm that management of supply chain deals with quality delivery that assures smooth operations, and maximized value customers.
Besides, Al-Mudimigh, Zairi and Ahmed (2004) portray supply chain as a cardinal instrument to the creation of value through its effective management, which can be enhanced through changing from directing of functions to smooth flow or process, and establishment of a substantially responsive management. Conventionally, the knowledge of supply chain provides a complete foundation for the understanding of the value chain, and the restructuring of the supply chain, by focusing on the main activities in the production and distribution process, provides a clear delineation of the value chain and all its attributes (Al-Mudimigh, Zairi and Ahmed, 2004).
Value Chain
Crain and Abraham (2011) define value chain under two categories; internal and external value chain. Under internal value chain, they describe value chain as the value added stages from purchasing materials to dispensing, selling and in the entire after sale services, and this is correspondent to Porter’s view on the concept of the value chain. Under external value chain, the chain is delineated as the value added stages from the raw materials to the finished products, as the product is manufactured and distributed, with each stage plays a crucial role (Crain and Abraham, 2011). Moreover, Crain and Abraham (2011) affirm that internal value chain is the core concept in strategic management and it can yield tremendous basis for an achievement of sustainable competitive advantage, ascribed to its thorough exploration.
Unlike supply chain, value chain tends to concentrate more on the materials offered by participants with the aim to increase the asset value. Also, the value chain focuses on the actions that add value, and they may include; shipping finished products, ordering goods, receiving goods, and receiving revenues (Crain and Abraham, 2011). In tandem to this, the value chain also acts as a tool for a firm or company to know the sources of reducing cost and enhancing the value simultaneously (Crain and Abraham, 2011). In conjunction to this, the enhanced value should be managed carefully, and a firm must know the clear cut distinction between price and worth (Al-Mudimigh, Zairi and Ahmed, 2004). Price is purposefully set to draw in customers, and large amounts of profits, hence assigned to good and services, on the other hand, worth, speculates the buyer’s opinion of the set price, through the association of the purported benefits, and attributes of the products (Al-Mudimigh, Zairi and Ahmed, 2004).
Prajogo, McDermott and Goh (2008) as well give four crucial elements of the value chain; marketing, research and development, procurement, and operations. Marketing as an element plays a tremendously vital role in the value chain, as it defines the relationship between customers and firm at all level or stages (pre-development and post delivery) (Prajogo, McDermott and Goh, 2008). At pre-development stage, customers’ preference is the key facet put in place before development and designing of the products, and in post-delivery stage, the services offered to the customer, as well the customers’ satisfaction is addressed (Prajogo, McDermott and Goh, 2008). Operation, on the other hand, is a process that deals with the production of high quality products, based on preventive mechanism and standardized procedures (Prajogo, McDermott and Goh, 2008). Research and development mainly deals with the steps involved in product innovation to meet the customers’ specification, while procurement emphasizes on both product quality and innovation (Prajogo, McDermott and Goh, 2008).
Value chain management
Value chain management is majorly concerned with the management of structured information about the flow of products from the producers to consumers (Al-Mudimigh, Zairi and Ahmed, 2004). In light with this, there is a plethora of benefits that can be noticed on the application of the value chain management. The application of the value chain management always assists firms in the identification of the strength and competitive abilities, through the development of their value position (Al-Mudimigh, Zairi and Ahmed, 2004). Also, through the value chain management, a firm is capable of establishing and creating chains, which exhibit impeccable value and reliable cost that amounts to the satisfaction of the customers’ wants and needs (Al-Mudimigh, Zairi and Ahmed, 2004). Further, a firm is also in a position of building dependable relations with the customer through the value chain management. This can be accomplished through shifting all the focus towards the customer, and enhancing an uninterrupted stream of information from the manufacturer or supplier to the consumer and vice versa, in relation to the modern business environment (Al-Mudimigh, Zairi and Ahmed, 2004). Development of partnership with the stake holders and suppliers, is also a benefit that is accrued on the application of the value chain management, and with the incorporation of the current technology, a wider business network can be experienced, thence, an outstanding performance by a firm (Al-Mudimigh, Zairi and Ahmed, 2004).
Value Chain Analysis
In an operational sense, value chain analysis, can be considered as a subset of the value chain management, and understanding of the context for value chain analysis helps widely in the application of the value chain and improving the performance of a firm (Crain and Abraham, 2011). Similarly, the analysis of the value chain is vastly significant in three primary ways; product development, cost analysis and reduction, and differentiation (Al-Mudimigh, Zairi and Ahmed, 2004). Documentation of activities that involve operations, inbound and outbound logistics, accounting, sales and marketing, is also equally momentous function in value chain analysis (Crain and Abraham, 2011). Furthermore, value chain analysis involves a series of processes; activity analysis that identifies the activities, which should be undertaken to deliver a product or service, value analysis, which entails the business activity that can be done so as to add the greatest value to the customer. Evaluation and planning, and it entail weighing the necessities of making changes and the possible action (Crain and Abraham, 2011).
Difference between Value Chain and Supply Chain
Prajogo, McDermott and Goh (2008) depict value chain as a chain that contains relevant attributes, which when fully and correctly implemented, can amount to production of quality goods and unique invention. Similarly, Crain and Abraham (2011) also depict value chain as a fully engrossed in the identification and management of the sources of value for the perfection of a competitive landscape and advantage of a company, and, on the contrary, Al-Mudimigh, Zairi and Ahmed (2004) indicate that supply chain deals with facets such as efficiency, effectiveness and sustainability of the firm. In alignment to this, value chain centers on the sources of value included in the chain, and how they are co-ordinated in a coherent manner whereas supply chain focuses on issues of logistics, material flows, information and funds (Crain and Abraham, 2011).
Conclusion
Concisely, understanding the position of value in the supply and customer chains, both in the mechanism and processes particulars, clearly gives the general perception of what value chain is and its significance in business. The aspects of both value chain management and analysis are discussed, as they place strong vehemence on the necessity for construction of a firm relationship between the network chains, so as to deliver the sought after value to the consumer. Conventionally, the activities involved in the value chain helps in creating customer value, however, the value is assessed by customers and their willingness to pay in the measure of the value offered. Furthermore, for the attainment of sensation value chain, a successful relationship between suppliers, consumers, and producers should be ascertained through change of behavior and culture. This will propel an exemplary flow of communication, and facilitate a rational decision making, hence demonstrating the aspect of values.
Reference List
Al-Mudimigh, S. A., Zairi, M. and Ahmed, M. M. A., 2004. Extending the Concept of Supply Chain: The effective Management of Value Chains. International Journal of Production Economics, 87(3), pp 309-320.
Crain, W. D. and Abraham, S., 2008. Using value-chain analysis to discover customers' strategic needs. Strategy & Leadership, 36(4), pp.29 – 39.
Prajogo, I. D., McDermott, P. and Goh, M., 2008. Impact of value chain activities on quality and innovation. International Journal of Operations and Production Management, 28(7), pp.615 – 635.
