A supply chain is designed to acquire resources in order to create a product or offer a service.
A value chain, on the other hand, is designed to add value along the various steps of the supply chain, and its ultimate goal is to gain a competitive advantage over a competitor.
Together, these two chains combine to offer customers a quality product or service at a reasonable price.
What is a value chain?
The term “value chain” means the array of activities that contribute value at every step in planning, production, and delivering a product or service to the customer. Companies will often use a value chain analysis to examine the activities within and around the company relating to its capacity to supply value for money, goods, and services.
Analyzing a value chain is comprised to two primary steps: identifying an activity related to production and analyzing that activity as it relates to a company’s strength.
A value chain’s “primary activities” include receiving materials, manufacturing goods, distribution, marketing and services that increase an end product’s value. A value chain also includes “support activities” that relate to primary activities, such as procurement and technology development.
The difference between a supply chain and a value chain
Supply chains originated from operational management, while value chains came from business management.
Other primary differences are the terminal points. A supply chain starts with a request for a product or raw material, and ends with a finished product in a customer’s hands. A value chain starts with a customer asking for a product and ends with the delivery of said product.
Finally, a supply chain is built to give something to a customer. A value chain is not.
What does a value chain analysis do?
A value chain analysis can identify short- and medium-term opportunities in the value chain, constraining factors, better strategies, partnership possibilities and corporate social responsibility opportunities.
Companies do not need to address every single constraining factor identified by a value chain analysis. Instead, a business should focus on constraint fixes that offer the most benefit, or those that can be addressed the most quickly.
What it means to the customer
Supply chain companies can get caught up in looking at the process from production to the customer. With the help of a value chain analysis, a business can look at it what it does in the eyes of the consumer.
This type of introspection enables a company to reduce costs for the consumer. It can also enhance a buyer’s own activities and products, allowing these companies further down the supply chain to increase prices or sell more goods.
At ZDA, we understand that both supply chains and value chains require skilled personnel. Contact ZDA today to work with a leading supply chain recruiter to find the top talent ready to help your company provide great value to its customers.