Value chain and supply chain are both important ideas for business. But they have different roles. In this blog post, you can understand value chain vs supply chain, their definition, using value chain tenets in the supply chain and how to improve the value of your supply chain.
Value Chain Vs Supply Chain: An Overview
Value chain and supply chain are related, but there are a few differences when we consider business and production processes.
- A value chain refers to a series of activities that a company performs to create products or deliver a service.
- A supply chain involves activities and resources needed to produce and deliver products or services to end customers.
So, the value chain primarily focuses on adding value to the product at each stage of its creation. But , the supply chain involves all the networks needed to get the product or service to the customer.
Define Value Chain
To have a proper understanding of business value chain vs supply chain, let us first understand the value chain in detail. Value chain definition refers to the series of processes through which a business adds value to a good. These processes can start from getting raw materials to designing, marketing, different manufacturing processes and distributing. Let’s understand the value chain with a simple example:
- A wire manufacturer buys copper plates at a rate of ₹100 rupees per plate as raw material and then processes it to make wire.
- After the wire is produced, the manufacturer sells it at ₹200 per bundle.
Hence, the manufacturers added value to the copper plates by making wire from it. So, the whole manufacturing and production process involved can be called a value chain.
Define Supply Chain
Now let's understand what a supply chain is. The supply chain in the manufacturing industry involves the process through which a product reaches the customer. It can include the flow of information, products, funds at different stages, and selling the product to the end customer. In the supply chain, all the activities that are needed to deliver the product to the end customer are interconnected. Moreover, good supply chain management aims to lower manufacturing lead time, decrease inventory, and increase customer satisfaction. There are various models for supply chains, such as the agile model, continuous flow model, and fast chain model. Businesses can identify the benefits of each and choose the best that suits them.
Using Value Chain Tenets In The Supply Chain
You can analyze the value chain vs supply chain PPT and use the principles of the value chain in supply. It can improve efficiency, reduce costs, and provide good value to customers. The value chain framework can be applied to various elements of the supply chain that can help to fulfil the following goals.
1 Inbound Logistics
The principles of the value chain make sure that inbound logistics are well-checked. This confirms that raw materials and other items are acquired efficiently at the right cost. By improving the material acquirement process, businesses can reduce costs and improve the quality of inputs.
2 Outbound Logistics
When we talk about value chain vs supply chain management, both have their own process. But, when it comes to outbound logistics, businesses can improve and make it effective by applying principles of the value chain. This can minimize transportation costs and improve delivery costs and customer service.
3 Operations
Value chain vs supply chain both of them have different roles. But, applying the value chain principle in the supply chain can make operations efficient. It can reduce waste and improve the manufacturing process along with the product. Further, it can decrease lead time and automate tasks, finally adding value to the customer.
4 Service
There is a difference between supply chain and value chain. The value chain focuses on after-sales, which can be very helpful in the supply chain. It can improve by providing timely customer support, maintenance, and warranties. The goal is to improve the overall customer experience.
5 Marketing And Sales
In the value chain, marketing and sales are focused on creating demand for the product. In the supply chain, this can be done through effective communication. This can help meet customer needs and expectations, leading to their satisfaction.
Enhance Value At All Stages of Your Supply Chain
Improving the supply chain at all stages, from production planning to returns, is important. This helps achieve operational excellence and deliver customer satisfaction. Here is how you can improve value at all stages of the supply chain in your business.
1 Planning
You can use data and analysis to correctly identify future demands. This will allow you to improve your inventory levels, reduce stockouts, and minimize deadstocks. Moreover, planning helps you improve your relationship with the supplier to share information and plan production efficiently.
2 Sourcing
Having a good relationship with suppliers can improve quality, lower lead times, and give you better terms and pricing. Besides, create multiple supplier sources to reduce the supply chain risk and to have a stable supply of materials.
3 Production
Use lean manufacturing to reduce waste, and lead time and control manufacturing quality. Also, automate the process with the use of technology to boost efficiency, reduce labour costs, and improve production.
4 Distribution
Always analyze your distribution network to reduce transportation costs, reduce delivery times, and enhance customer service. Also, use logistic technology such as real-time tracking digital route map software. This will improve visibility and your distribution operations.
5 Returns
Develop an efficient way to handle returns, refurbish, recycle, and reduce waste. This will help you dispose of the product efficiently and recover value. Further, use customer feedback and return data to find areas for improvement in product quality and service.
Value Chain and Supply Chain with TranZact
Value chain vs supply chain both have different tasks. The value chain focuses on creating customer value. But, the supply chain focuses on manufacturing efficiency. However, when combined together, both of them can increase a business’s profits. The supply chain can also be improved with supplier relationship management software. TranZact is one of the top providers of SRM solutions. You can reach us to get the right solutions for your business. From good supply management to delivering better service to customers, we are here to assist you throughout the manufacturing process.
Value Chain and Supply Chain FAQs
Q1. What is the difference in value chain vs supply chain?
A value chain refers to a series of activities that a company performs to create products or deliver a service. But, a supply chain involves activities and resources needed to produce and deliver products or services to end customers.
Q2. What is the similarity in the value chain vs supply chain?
Value chains and supply chains differ from each other. However, both method focuses on improving the efficiency of the business.
Q3. Is the supply chain more inclusive than the value chain?
Yes, because the supply chain gives priority to the physical movement of goods and materials.
Q4. Is the supply chain a part of the value chain?
The supply chain is always a part of the value chain because adding value depends on the basic supply chain activities. These can be raw materials, manufacturing, distribution, and selling.
Q5. Is the value chain and supply chain the same?
The main difference in value chain vs supply chain is the supply chain deals with creating a product and delivering it to the customer. Whereas value chains identify ways in which value is added to the product.
Q6. Who brought the concept of the value chain?
The concept of the value chain was introduced by an American academic, Michale Potter. In 1985, he wrote a book, “Competitive Advantage: Creating and Sustaining Superior Advantage”. In this book, he explained how businesses can add value to the raw materials.
