Value Chain Management
This is defined as the ‘high level’ structure of the process of receiving raw materials as inputs for the businesses, adding ‘value’ to the raw materials by a variety of procedure before selling it to the consumers (Kotelnikov, 2001). This covers all the steps in the in the operation of the company even from the purchasing of the raw materials from your suppliers’ suppliers to the consumers and later on to the end users.
The main objective of this is to give the end user the maximum value of the product but still minimizing the operational costs. The main players that are considered here in the process are the company itself, the company’s supplier and the company’s supplier’s supplier (WMEP, 2003). It is under in this process that the other “simple” employees will be motivated in such a way that they will no longer be supervised most of the time of the managers of the company.
Waste reduction is also experienced by that company who shifted to value chain management. This helps any company by saving/cutting the costs of operations and thus will have more of the resources in the future, probably, in the expansion of the company or investment on new machineries. The empowerment of the employees and the reduction in the wastes leads to the customers’ greater satisfaction together with the aid of the suppliers’ partnership.
With the suppliers partnership, the quality of the product is improved, flexibility increases, the pace of the production increases and the operations are just in time (Kotelnikov, 2001). It is said that if a company is into supply chain, the said company can switch to value chain by putting into realization the “Lean Manufacturing Principles” for this principle is the one responsible for the empowerment of the employees, cut the wastes and all the other aspects that improves the supply chain into a more “profitable” yet customer oriented company.
Moreover, value chain management is not just giving more attention to the maximization of the “profits” of the company by making your product cheaper relative to the other thus attracting customers, but also not letting value of the product/s of the company to be downgraded. Based from the overall experiences of the companies that shifted to value chain management, they really testified based on the article of WMEP, that they have been experiencing improvement in the field of market share, sales, quality, delivery time, customer service and logistics management.
The increase in the effectiveness and value added on the efficiencies of the employees and on the operation itself makes the companies to experience such impressive growths. In order to fully understand what happens during the value chain management through which most of the firms are getting their competitive advantage over their competitors, the following are the steps in the value chain management.
First one is the “inbound logistics” wherein it involves all the processes in the receiving, warehousing and inventory control of the raw materials. The second step is the “operations” which covers the ‘value-creating’ activities that converts the raw materials into finished products and this is followed by the “outbound logistics” that includes all the activities required in order to ‘deliver’ the finished products to the customers as well as warehousing, order fulfillment and the like.
The fourth step is the “marketing and sales”. This encompasses those activities related to the acquisition of buyers that will purchase the product together with the ‘channel selection’, advertising, pricing and the like. The last step for the value chain is the “service” which includes the areas that sustains the product’s value as well as the customer support, repair services, etc (QuickMBA, 2007).