A product goes through many processes before reaching the final consumer. It is not just a matter of transforming the raw material into something else, but of knowing how to add value in each of the stages of this process. This is what we call the value chain.
In this article, we will better address the subject and talk about its importance for the market, its business and its consumers.
What does value chain mean?
Michael Eugene Porter, a Harvard professor, was the creator of this concept, which can be presented in a flowchart of the essential steps for adding value to a company’s final product. The way the chain is organized can affect the company’s costs and profits.
The Porter’s value chain, as it is also known, is a model of structuring the activities developed by the companies. This model aims to achieve maximum quality of service or product, until reaching the final consumer.
Why implement this concept?
With the proper mapping of the value chain, it is possible to acquire competitive advantage. And the appropriate organization of certain elements, can provide more quality to the final consumer at a lower cost.
By viewing each relevant step in the workflow and evaluating how it adds value to the consumer, you can analyze the value network as a whole. Thus, it is possible to have a clearer vision of where changes need to be made to improve the process.
Value chain elements
To better illustrate how the value chain model works, we can analyze the elements that comprise it. Michael Porter defined a chain of activities that are common in companies. With that, it made a division between primary activities and support activities. Understand www.valuenetworksandcollaboration.com/evergreen-wealth-formula-review/ in this case.
Inbound logistics is among the primary activities and is related to processes such as receipt, inventory control and transportation scheduling. Here, what generates the most value is the relationship with suppliers.
Packaging machinery, assembly, machine maintenance, testing and other processes are part of the operations. The creation of value is in the transformation of raw material into the final product and in industrial automation.
Activities such as product delivery, collection, storage, distribution, etc. are classified as outbound logistics. They are also included in primary activities.
It is through sales marketing that end consumers are attracted to buy products. Therefore, this step is extremely important for a company’s value chain.
In service, we are talking about all the support during and after the purchase. In addition, of course, the installation, repairs and all other activities done that complement this stage.
Activities such as general, administrative, legal, financial, accounting management, among others, are part of the infrastructure. These are important systems that help the company maintain its daily operations.