Value Chain vs. Supply Chain: What's the Difference?

Share Us

3391
Value Chain vs. Supply Chain: What's the Difference?
04 Feb 2022
7 min read
TWN In-Focus

Post Highlight

A company's value chain is the process through which it adds value to its raw materials to manufacture products that are finally sold to consumers. The supply chain encompasses all of the procedures involved in getting a product to a customer. #TWN

Podcast

Continue Reading..

The term "value chain" refers to the process by which firms take raw materials, add value to them through production, manufacturing, and other processes to create a finished product, and then sell that product to consumers. The stages involved in getting a product or service to a consumer are called a supply chain, and they frequently involve OEM and aftermarket parts. A value chain is a collection of interconnected activities that a company uses to gain a competitive advantage. While a supply chain involves all parties in fulfilling a customer request and leading to customer satisfaction, a supply chain is a collection of interconnected activities that a company uses to gain a competitive advantage.

Value Chain

In his 1985 book Competitive Advantage: Creating and Sustaining Superior Performance, American academic Michael Porter popularized the concept of a value chain. He utilized the concept to demonstrate how businesses add value to their basic resources to create products that are then sold to the general population. The value chain is a concept that comes from the world of business management. Value chain managers seek ways to improve the company's bottom line. They might seek ways to reduce shortages, make product strategies, and collaborate with others in the supply chain to provide more value to the client. The value chain is made up of five steps. They enable a company to create value that is greater than the cost of providing goods or services to customers. A corporation can get a competitive edge over competitors in its industry by maximizing the activity in any of the five steps. The following are the five steps or activities:

Inbound Logistics

Receiving, warehousing, and inventory control are all aspects of inbound logistics.

Operations

Operations like assembly and manufacturing create value by transforming inputs into products.

Outbound logistics

It refers to the activities involved in delivering a finished product to a client. Warehousing, inventory management, order fulfillment, and shipping are among them.

Marketing and Sales

The activities involved in persuading a customer to buy a product.

Service

Customer support and warranty service are examples of service activities that sustain and enhance the value of a product. Porter claims that the value chain requires a range of support operations to assist streamline the five core processes. Procurement, technological development, human resource management, and infrastructure are just a few examples.

Supply Chain

The supply chain refers to the flow of all data, products, materials, and cash between the many stages of developing and selling a product to the ultimate user. From the standpoint of operational management, the supply chain is a notion. A company's supply chain encompasses every step of the process, including designing a product or service, manufacturing it, transporting it to a point of sale, and selling it. All functions involved in receiving and fulfilling a client's request are included in the supply chain. These are some of the functions:

  • Product development
  • Marketing
  • Operations
  • Distribution
  • Finance
  • Customer service.

At large corporations, supply chain management is a critical operation that involves many interconnections. As a result, supply chain management necessitates a high level of expertise and talent to sustain.

Conclusion

While many people associate logistics—or the transportation of goods—with the supply chain, it is simply one aspect of the process. The supply chain is responsible for coordinating how and when things are created, as well as how they are delivered. The cost of materials and effective product delivery are the two main objectives of supply chain management. Proper supply chain management can lower consumer costs while increasing company profitability.

If you liked reading this article, we have two more for you. Click on the link below to explore!

michael-porters-value-chain

What are the Primary Activities of Michael Porter's Value Chain?

effects-of-backward-integration

What Are the Effects of Backward Integration?