The Curious Case Of Value Chain

Michael Porter first introduced the concept of value chain in his book “Competitive Advantage” . Most organizations have numerous activities along the supply chain into the process of converting raw materials to products or services .

These can be classified either as primary or support activities that all business must undertake. The idea of the value chain is that how activities are organized and carried out determines a firm’s cost and thus its margin. each link of the chain must communicate to other department clearly and promptly. For example marketing and sales must communicate accurate sales forecasts and pass them on the enough time for procurement to buy the correct type and quantity of raw materials who in turn must coordinate with inbound logistics so they can organize receipt of goods.

Pizza Hut greatest asset is breaking down complex pizza-making into simple steps unskilled chefs can do.

• Inbound Logistics : Vast global purchase orders for ingredients
• Operations : Target countries with a liking of Italian food , on a franchise model with local staff.
• Outbound logistics : inhouse meals and home delivery services.
• Marketing : Differentiate from other pizza firms.
• Service : Delicious, convenient, value for money pizza .

Next time you think Supply Chain , Think Value chain as well. looking at the value chain map above, the Margin “In Green” would increase or decrease depending how you handle the value chain components like your logistics and procurement . designing a Value Chain always pays back as a major contributor to your business and supply chain strategy .