It also involves purchasing the correct quantities in a timely order to maintain the proper flow of materials. So why is a supply chain important? Businesses must have a supply chain strategy that corresponds with their business strategy. Depending on how a business decides to compete with the market, their supply chain is what will ultimately support that decision. The supply chain is made up of different processes that work to create a product, these processes lay the groundwork for where a company decides to add value.
The value chain is what gives a business a competitive advantage over others. The more value that is created, the more a customer will want a product, and therefore, the more profit a company will make.
There are many opportunities within the supply chain to add value for the customer. Michael E. Porter , author of Competitive Advantage , identifies different ways in which businesses are able to gain a competitive advantage. The different strategies rely on adding customer value within different steps of the value chain.
He defines the activities of the value chain to include, inbound logistics, operations, outbound logistics, marketing and sales, and service. We already know that inbound logistics and outbound logistics are part of what we defined as the supply chain. Operations are more or less another term for manufacturing as they are all the activities involved in turning raw materials into a product.
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Measure content performance. Develop and improve products. List of Partners vendors. The term value chain refers to the process in which businesses receive raw materials, add value to them through production, manufacturing, and other processes to create a finished product, and then sell the finished product to consumers.
A supply chain represents the steps it takes to get the product or service to the customer, often dealing with OEM and aftermarket parts. While a supply chain involves all parties in fulfilling a customer request and leading to customer satisfaction, a value chain is a set of interrelated activities a company uses to create a competitive advantage.
He used the idea to show how companies add value to their raw materials to produce products that are eventually sold to the public. The concept of the value chain comes from a business management perspective. Value chain managers look for opportunities to add value to the business. They may look for ways to cut back on shortages, prepare product plans, and work with others in the chain to add value to the customer. There are five steps in the value chain process.
They give a company the ability to create value exceeding the cost of providing its goods or services to customers. Maximizing the activities in any one of the five steps allows a company to have a competitive advantage over competitors in its industry.
The five steps or activities are:. In order to help streamline the five primary steps, Porter says the value chain also requires a series of support activities. These include procurement, technology development, human resource management, and infrastructure.
A profitable value chain requires connections between what consumers demand and what a company produces. Simply put, the connection or sequence in the value chain originates from the customer's request, moves through the value chain process, and finally ends at the finished product.
Value chains place a great amount of focus on things such as product testing, innovation, research and development , and marketing. The supply chain comprises the flow of all information, products, materials, and funds between different stages of creating and selling a product to the end user.
The concept of the supply chain comes from an operational management perspective. Every step in the process—including creating a good or service, manufacturing it, transporting it to a place of sale, and selling it—is part of a company's supply chain.
See how global supply chains give procurement the opportunity to take advantage of the strengths and innovation of other countries. Global supply chains are networks that can span across multiple continents and countries for the purpose of sourcing and supplying goods and services.
Supply chains are constantly evolving, technology along with diversification of staff skill set is playing a key part in this development. You can work in various areas of the supply chain, but the main goal when managing a supply chain is adding value.
A demand driven supply chain focuses on the demand from the consumer data and feeds this data through to the supply base so driving greater efficiency. SCND covers all movements and storage of raw materials, work-in-process inventory and finished goods from the point-of-origin to point-of-consumption.
For Individuals What is Procurement? What is a Supply Chain. What is a Supply Chain?
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