Value chain and supply chain are two business management concepts, every entrepreneur looking out to run a successful business should learn about. The knowledge of how they work is needed to build a business’s competitive edge and promote a business product or service efficiency and availability. In this article, you will learn a few truths about the two and the reason they are important to a business.
What is Value Chain?
Value chain refers to all activities required to build a business product or service from scratch to finish. It is concerned with all phases of product creation which usually includes; procurement of inputs needed to manufacture a product, the processing of a product from received inputs, activities needed to get a finished product to a consumer, the strategies taken to get a customer to purchase a product and even, activities to maintain the value of the product in the hands of the customer.
The activities encompassed in the process are vast but it is equipped to establish a stable connection between consumers’ needs and what a company produces to satisfy the needs- this itself is one of the importance of a profitable value chain.
What is Supply Chain?
When you think of the supply chain, the first thing that comes to mind will be how a product is made available to consumers. Well, that is what the supply chain is about.
The supply chain is the system and all resources put in place to move a product or service from the supplier to a customer. It considers the several parties involved in ensuring a consumer’s request for a product is easily fulfilled- this is important in getting consumers satisfaction with a business product or service.
The supply chain also considers when to manufacture a product, and how it is manufactured and further distributed. The supply chain is useful in minimizing consumer costs and increasing profits for a product manufacturer, thus it calls for effective management and maintenance.
What is the difference between a value chain and a supply chain
From the above definitions, you will discover that they are closely linked.
But its primary difference is that value is a strategic management concept whilst supply chain is an operational management concept. Value considers the activity of the supply chain but it focuses on ensuring that value is added along the chain from both the product end, the parties involve to supply the product and also how the product value is maintained in the consumers’ hands to keep satisfaction which includes product disposal and recycling.
The supply chain only considers the movement of a product or service to the customer whereas the value looks beyond the supply chain perspective, a reason that makes the value chain more appealing.
Importance of Value Chain
- The description of all activities required to create a product from raw inputs to a finished product serves as a visual model which further gives insight into how a business can be effectively managed and if needed reduce costs.
- A look at a business value-chain analysis can help a business to distinguish certain practices that differentiate its business operation from its competitors, and if need be proffer better solutions. This helps to build a business competitive advantage and improve operational efficiency.
- A value chain is also useful in developing better and improved supply chains.
The Bottom Line
A supply chain is mostly about the movement of a final product along the supply channel(supplier – end-user), and the inputs made by parties stationed at each phase to ensure the supply chain is successful. The value-chain considers the value created on the supply chain at various points and concentrates more on the value given to the final consumer. They are both business sustainability concepts where the former is more strategic whilst the latter is operational and both need each other to help a business thrive.