padma value chain of business

8/13/2019 PADMA Value Chain of Business

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Value Chain of Business


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Value Chain of BusinessValue Chain

The value chain is a

concept from business

management that was firstdescribed and popularized

by Michael Porter in his

1985 best-seller.

Competitive Advantage: Creating and

Sustaining Superior

Performance.

http://en.wikipedia.org/wiki/Michael_Porterhttp://en.wikipedia.org/wiki/File:Porter_Value_Chain.pnghttp://en.wikipedia.org/wiki/Michael_Porter


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Value Chain of Business


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Value Chain of Business Firm LevelA value chain is a chain of activities for a firm

operating in a specific industry. The business unit

is the appropriate level for construction of a value

chain, not the divisional level or corporate level.

Products pass through all activities of the

chain in order, and at each activity the product

gains some value. The chain of activities gives the products more added value than the sum of the

independent activities' values


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Value Chain of Business Firm Level ont… Example:

A diamond cutter , as a profession, can be usedto illustrate the difference of cost and the valuechain. The cutting activity may have a low cost, but the activity adds much of the value to the end product, since a rough diamond is significantlyless valuable than a cut diamond. Typically, thedescribed value chain and the documentation of

processes, assessment and auditing of adherenceto the process routines are at the core of thequality certification of the business, e.g. ISO 9001


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Activities The value chain categorizes the generic

value-adding activities of an organization. The"primary activities" include: inbound logistics,

operations (production), outbound logistics,

marketing & sales, service.


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Industry Level An industry value chain is a physical representation of

the various processes that are involved in producing goods(and services), starting with raw materials and ending withthe delivered product (also known as the supply chain).

It is based on the notion of value-added at the link(read: stage of production) level. The sum total of link-levelvalue-added yields total value.

The French Physiocrat's Tableau économique is one ofthe earliest examples of a value chain.

Wasilly Leontief's Input-Output tables, published in the1950s, provide estimates of the relative importance of eachindividual link in industry-level value-chains for the U.S.economy.


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Significance The value chain framework quickly made its way

to the forefront of management thought as a powerfulanalysis tool for strategic planning. The simplerconcept of value streams, a cross-functional process

which was developed over the next decade, had somesuccess in the early 1990s.

The value-chain concept has been extended beyondindividual firms. It can apply to whole supply chains and distribution networks. The delivery of a mix of

products and services to the end customer will mobilizedifferent economic factors, each managing its ownvalue chain.


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Significance ont… Value chain analysis has also been successfully used in large Petrochemical PlantMaintenance Organizations to show how Work Selection, Work Planning, WorkScheduling and finally Work Execution can (when considered as elements ofchains) help drive Lean approaches to Maintenance. The Maintenance Value Chainapproach is particularly successful when used as a tool for helping ChangeManagement as it is seen as more user friendly than other business process tools.

Value chain approach could also offer a meaningful alternative to evaluate privateor public companies when there is a lack of publically known data from directcompetition, where the subject company is compared with, For example, a knowndownstream industry to have a good feel of its value by building useful correlationswith its downstream companies.

Value chain analysis has also been employed in the development sector as a meansof identifying poverty reduction strategies by upgrading along the value chain.[5] Although commonly associated with export-oriented trade, development practitioners have begun to highlight the importance of developing national andintra-regional chains in addition to international ones

http://en.wikipedia.org/wiki/Value_chainhttp://en.wikipedia.org/wiki/Value_chain


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SCORThe Supply-Chain Council, a global trade consortium in operation with over

700 member companies, governmental, academic, and consulting groups participating in the last 10 years, manages the Supply-Chain Operations Reference (SCOR), the de facto universal reference model for Supply Chain includingPlanning, Procurement, Manufacturing, Order Management, Logistics, Returns, andRetail; Product and Service Design including Design Planning, Research,Prototyping, Integration, Launch and Revision, and Sales including CRM, ServiceSupport, Sales, and Contract Management which are congruent to the Porterframework.

The SCOR framework has been adopted by hundreds of companies as well asnational entities as a standard for business excellence, and the US DOD has adoptedthe newly-launched Design-Chain Operations Reference (DCOR) framework for product design as a standard to use for managing their development processes. Inaddition to process elements, these reference frameworks also maintain a vast

database of standard process metrics aligned to the Porter model, as well as a largeand constantly researched database of prescriptive universal best practices for process execution.


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Six business functions of the Value Chain

Research and Development

Design of Products, Services, or ProcessesProduction

Marketing & Sales

DistributionCustomer Service


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The Importance of Value Chain Analysis The importance of value chain analysis is that it can help you

assess costs in your chain that might be reduced or impacted by a change inone of the chain's processes. By comparing your value chain to yourcompetitors, you can often find the areas or links of the chain where theymight be more efficient than you; that points the direction for you toimprove.

However, you need to understand that the value chain will beinfluenced by the type of small business strategy you and your competitorsfollow: if you are the high value, high quality market leader, your chainwill be quite different than the low cost, high volume competitor.Understand how those differences influence your analysis and make surethat your business strategy is in-tune with your market and with your

strategic objectives.Expect your competitors to have a value chain quite different thanyours; because their business grew from a different set of circumstancesand a different set of operating parameters than your business.


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How to do a Value Chain Analysis Include all the primary or direct activities, such as

Purchases of supplies, materials, incoming shipping

Manufacturing and operations (or if a consumer based business - inventory control andoperations)

Outgoing shipping and logistics

Customer service - includes estimating, coordinating, scheduling

Marketing

Sales

Then include all the support or indirect activities, such as Accounting and finance

Systems support

Legal

Environmental

Safety

Human resources (hiring, firing, training, and more)

New product or service research and development

The last element of your value chain needs to include the profit margin your business (or the product you are analyzing) earns.

Each value chain analysis will be specific to the business and the industry it is in.


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Use of Value Chain Analysis The reason to do this in-depth type of

analysis is to provide you with enough

information to be able to see how cost

competitive you are and where your cost

weaknesses are: this chain analysis leads to a

detailed strategic cost analysis.


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padma value chain of business

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