Question

Chapter 8 explains the importance of the value chain in managing products and services. Taking your understanding of the value chain, describe some of the business entities, processes, and/or activities involved in your organization's value chain.  While we talk more about value chain in the context of manufacturing organizations, it applies to service and merchandising organizations too.  Remember the goal of every organization is to maximize the value and minimize the cost of the final product or service to the customer.

Answer 1

A Value Chain is a set of activities which a business entity performs to a valuable product or service to its customers. A company's value chain is a system of interdependent activities that are linked to each other. For example, good quality raw material will reduce after sale support. In time completion of production process will help in on time delivery.

A company's value activities fall into two activities:

1. Primary activites - Primary activities are those which are related to procuring raw material, production, on time delivery, its marketing and after sale services.

a. In bound logistics: arranging the inbound movement of raw material, finished inventories to manufacturing department, warehouses.

b. Operations: converting raw material into finished product

c. Outbound logistics: Storage of the final product.

d. Marketing and sales: selling a product or service to its customer or client.

e. Service: it include after sale services to keep the product working for the buyer after it is sold.

Support activities: Support activities provide infrastructure and information that allow primary activities to take place.

a. Infrastructure: Activities such as accounts, legal, finance, general mangement, customer relationship, quality assurance.

b. Technological development: pertains to equipment, hardware, software and technical knowledge required to convert input raw material into final product.

c. Human Resource management: Activities such as recruiting, hiring, training, compensating and dismissal of personnel.

d. Procurement: the acquisition of goods, services and work from outside external source.