The Value Chain in the Supply Chain

Business Advisors

By Richard McKenna

We hear about the value chain all the time. Company executives talk about maximizing the value chain and effectively managing the supply chain. However, when you look at your organization, do you see a clear difference between the value chain and the supply chain? You should.

The value chain is part of your supply chain. The challenge lies in identifying which portions of the supply chain add value and which portions do not. When looking at the supply chain it is also important to realize that not all departments in your organization are in the supply chain. Some departments support the supply chain and are not technically part of the chain.

Beginning with the customer, value can come in a variety of forms. In many cases, price is not the sole factor in determining value. Other considerations such as reliability, flexibility, rapid delivery, variety and accessibility can be just as important as price. Your challenge is to define what the customer deems to be “valuable,” and focus your supply chain on providing value.

When you examine your supply chain, you can identify the various elements that contribute to value factors such as reliability, variety, and all of the other considerations. Logistics can provide value when materials or products are shipped efficiently and in a timely manner. Your design department, working with suppliers, can design flexibility and adaptability into the products to add value. Manufacturing and engineering can collaborate to build in reliability and safety.

The value your supply chain delivers begins with what the customer deems to be “value.”

So, when you examine your supply chain, pay close attention to the processes and activities that add the most value to your customers. Apply basic supply chain fundamentals by focusing on the efficient delivery of the resources required in every step of the chain and provide value at every opportunity.

If you would like additional information about supply chain management strategies, please feel free to contact Rich McKenna at 412-697-5205 or email him at rmckenna@schneiderdowns.com.

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