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In business, there are certain processes that need to be done if anyone is to see any profits. One such process is implementing an effective value chain. It's sometimes easy to confuse the value chain with the supply chain. There is a difference between the two, though seemingly subtle, but a big difference. We are going to take an indepth look at what a value chain is and we'll also review some similarities and mostly the differences between that and a supply chain.

Michael E. Porter's definition of Value Chain

Simply put, a value chain is the set of input activities that a company carries out in order to create value for its valued customers. Sounds like a mouthful but it's really simple. In order for companies to make money, they have to create a product. This often involves finding the raw material for manufacturers or just simply packaging and marketing for retailers.

What you need to ask yourself is how your company takes whatever business input it has and transforms that into outputs to be presented to its customers. The trick is doing this in such a way that the outcome of the whole process is having an output that is of higher value than the whole process of creating it.

How much profit a business makes is determined by the quality of the value it creates. The reason every highend store charges considerably more for their goods and services is because they have created better value for their customers. Either that or they just simply target wealthier clients who can spend more. But with wealth comes higher standards and expectations, which means the store has to be able to provide better and more suited products to satisfy their clients' demands and expectations. Simply put:

The value a business creates and captures
the cost of creating and capturing that value
= their profit margin

Porter proposed a generalpurpose viewpoint of the value chain. He says that the way a company creates value for its customers determines costs and thus affects profits. He said that there are several factions or elements involved in the value chain:

The Primary Elements involve the physical creation of a product, packaging, marketing, sale, and maintenance. The Support Activities on the other hand involve a process and departments that help the Primary Elements come into play. Things like the procurement office, human resources department, technical department, and the business's infrastructure. All these factions go into play when the value chain is concerned.

The Differences Between Value Chain and Supply Chain.

In layman's terms, a supply chain is what ensures that the products you value so much actually get to you. Some of the things we use are manufactured halfway across the world from your local convenience store. A supply chain, therefore, involves bulk storage and transportation. The major difference between a supply chain and a value chain is the simple fact that within a supply chain, there is no valueadded. In a supply chain, all that is being done is a conveyance. One product or material is taken from one company or from one end and transported to the other. Of course, there are procedures involved such as proper storage and careful transportation but that is about it. In value chains, as much as there is the transportation and some storage involved, the main purpose of a value chain is to add value to the product so as to make it presentable to the client. This is often achieved via packaging, marketing, and sales.

Our goal in working with supply chains is to find ways to increase efficiencies through accuracy and automation. This focus allows us to see a rapid ROI for our customers as well as increases the value to the end consumer in the form of excellent customer service.

If you are currently running Intacct or Quickbooks and would like to schedule a free consultation to see if QStock is right for you as your next potential Warehouse management system, Contact Us Today by filling in the form below. We would love to hear about your business and how QStock can help you achieve your business goals.