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Everything has been unveiled about Value added supply chain definition

Value and Supply chains go hand-in-hand. It is a circle where material gains value through process and becomes ready for supply. This is a process where a lot of factors are taken into consideration. Both internal and external facets apply in value added supply chain definition. While the bottom line lies in customer satisfaction, it is vital to know the management of costs in between.

An overview of value added supply chain definition

If we talk about Value Chain and Supply Chain as separate entities, it connects when the value is added to the final product. The most practical definition of value chain is when enterprises receive raw materials from vendors and add value. How can they add value to raw materials?

It is a process that takes the raw materials through production and other manufacturing processes. Then the final product goes into the consumer market as a value-added product to raw materials. The Supply Chain comes into play after the Value Chain ends. When the manufacturers release the final product, Supply Chain is when a business takes steps to get the finished products or services to the customer. They generally follow the Original Equipment Manufacturer process for the aftermarket parts.

Value added supply chain definition includes a series of interrelated activities that lead to customer satisfaction. Companies use it for competitive advantage to make the best final product of the same kind in the market.

What is a Value Chain?

The American academic Michael Porter introduced the term Competitive Advantage in his book in 1985. The book contains how to create and sustain superior performance, thus gaining a competitive advantage. Michael Porter introduced Value Chain by showing how industries add value to raw materials. The process of adding value through manufacturing and selling it to the public is what we call Value Chain today.

From the standpoint of business management criteria, Value Chain comes from managers. Business Managers looking for an arena to add value to their materials to expand their business is their perspective of Value Chain. As a business manager, one may investigate ways of automating the process of adding value. There are many other facets like cutting off on shortages, auto-piloting the manufacturing process, and incorporating cost-effective chains are some.

The basic steps to take in Value Chain

Ideally speaking, there are five basic strides in the process of Value Chain. Value Chain paves the way for the company to add value to the final product or service that surpasses the original cost. Business managers always investigate maximizing the efficiency and performance of the below five strides. Consequently, they obtain a competitive advantage over the same products in the market. Hence, entrepreneurs toggle between these five facets to increase efficiency in each one of them to maximize the result with a lower investment.

  • Inbound logistics – This is the first link of the Value Chain. This is where the company receives the raw materials. That is why it is called ‘inbound.’ This step includes receiving raw materials, storing them (this includes warehouse costs), and controlling the movement of the stock (inventory control).
  • Operations – This is where the next loop or link of the chain starts. This is where the company adds value to the raw material. This includes a series of processes. From changing the raw material to making it a finished product, there are many interrelated activities.
  • Outbound logistics – This is the opposite of inbound logistics. This is where the company sends out the finished products from the previous stride. This step includes inventory management, fulfillment of orders, shipping costs, etc.
  • Sales and Marketing – Once the product reaches the market, there is the next link of the Value Chain, which is Sales and Marketing. This step includes all promotional activities, marketing strategies, and campaigns necessary to get the right buy for the product.
  • After-sale service – This is the final and the most important part of the Value Chain. This includes maintaining customer service, warranty services, and enhancing the product features. This is the most vital part of the Value Chain because this step determines whether the Value Chain continues or not.

More about the Value Chain…

Michael Porter said in his book that in order to facilitate the five strides or steps mentioned above, there are many supporting activities that come into play. Most of the commonly used support activities are technological support, infrastructure, human resources, financial aid, etc.

The connecting point between what the customer wants and what the company produces is the profit margin. A profitable Value Chain needs to obtain a higher demand in order to remain profitable. From the request that comes from the customer’s end, the Value Chain puts excellent focus on testing the raw material, maximizing its efficiency, and innovating it to a new product. A lot of research, development, and marketing goes into making the Value Chain a profitable one.

What is Supply Chain?

Supply Chain is the next phase of what we concluded above. The flow of data, products, raw materials, and even the finances that companies require fall into the Supply Chain. It creates different stages in between to sell the product to the end-customer. Unlike Value Chain, Supply Chain does not come from the Business Management standpoint. It comes more from the perspective of operations management. Every step in the process where raw materials become a product or service is also a part of Supply Chain.

Supply Chain also includes manufacturing, transportation, selling, and after-sales. In other words, this is value added supply chain definition. There are main functions that comprise Supply Chain and they are: Product Development, Marketing, Operations, Distribution, Finance/ Funding, and Customer Care Service.

Apart from the main functions that we have mentioned above, larger companies have further divided links in Supply Chain. Supply Chain requires a lot of skill, training, maintenance, and expertise. A lot of people think logistics is a supply chain. But it is not the fact. It is part of the equation; however, Supply Chain includes additional coordination of how companies manufacture products. It also includes transportation, which includes logistics. A profitable Supply Chain determines its efficiency by the cost of the raw materials and the product delivery. The proportion between the two aspects determines whether or not a Supply Chain is profitable.

How can you include value added supply chain definition in your business?

There are many ways to optimize customer satisfaction.

How is customer satisfaction helping in the value added supply chain?

Customer satisfaction is where you determine whether you will have a value added supply chain or not. In order to escalate this, companies seek to improvise their ways to increase customer satisfaction. A lot of companies believe that adding value added supply chain definition as part of their process gives them the way for competitive advantage. Here are some of the ways your business can benefit by including value added supply chain into your business.

  • Enhancing the product range – This helps your customers to avail a wider range of products and services when you add value-added services.
  • Being shelf-ready – The right pricing, tagging, and attractive display settings can increase the number of customers that eye on your product. It streamlines the process of getting your products onto the shelves.
  • Customization – This is one of the key components in a value-added supply chain. Personalizing a service or product is one of the most sought-after trends. Your value added services can print your customers’ names or faces on the phone case, print their log on the t-shirt, tea mugs, etc.
  • Efficient inventory management – When you customize and enhance product tiers, it becomes easier to maintain inventory. In turn, it will reduce the carrying and loading costs.
  • Minimizing the suppliers – You can ask your suppliers to maximize their supply and reduce the number of suppliers you add daily. It helps you auto-pilot your supply chain as well as reduce maintenance costs.

Wrapping up: How can value added supply chain definition affect your business

The definition itself is subject to what your business is like. Therefore, you cannot take value added supply chain definition as an ideal because it is subject to the nature of the business. What value do you decide to add, and what measure will decide whether or not your business will profit. Nonetheless, it is advisable for enterprises to adopt a value added supply chain procedure to their system to maximize the company’s output efficiency.

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