Ten years ago, you had to stand and wait for hours in huge queues in the sweltering heat to book railway tickets. Today, IRCTC has launched its hugely successful e-commerce site, which allows you to book your tickets from the comfort of your home. The tickets booked on the internet are delivered to your home within 24 hours. Radhakrishna Food land Pvt Ltd is the exclusive third party logistics partner (3PL) for McDonald’s in India. The distribution centers of Radhakrishna Food land sources hundreds of items from over 50 suppliers provides warehousing and processing service for many perishable items (like fresh lettuce) that need specialized storage conditions and distributes the needed supplies to McDonald’s outlets all over India within 48 hours. Similarly at Wainwright Industries in St Peters Missouri employees produce stampings for General Motors van assembly plants that’s located six miles away. However, employees also operate a warehousing just in time (JIT) sequencing facility dedicated to serving that GM customer. This warehouse handles some 1,500 parts made by 50 different suppliers, including Wainwright’s products. Every seven minutes or so, a truck leaves the warehouse to make deliveries to the GM plant with the parts arranged in racks sequenced by color size, and style as they will be needed on the van assembly line.
As these examples show, closely integrated work activities among many different players are possible. They’re being made possible through value chain management. The concepts of value chain management are transforming operations management strategies and turning organizations around the world into finely tuned models of efficiency and effectiveness, strategically positioned to exploit competitive opportunities as they arise
In this article, we’ll define value chain management, describe its goals outline the requirements for successfully implementing it, explain its benefits and briefly review the obstacles to its successful implementation.
What is value chain management?
The performance characteristics features, and attributes or any other aspect of good and services for which customers are willing to give up resources.
Every organization needs customers if it’s going to survive and prosper. Even for non-profit organizations such as churches and government must have customers who use its services or purchase its products. Customers want some type of value from the goods and services they purchase or use, and these end users determine what has value. Organizations must provide that value to attract and keep customers. Value is the performance characteristics features and attributes or any other aspects of goods and services for which customers are willing to give up resources (usually money). For example, when you purchase Britney Spear’s new CD at Music World, a sundae at Nirula’s or a haircut form your local hair salon, you’re exchanging money in return for the value you desire from these products – providing music entertainment during your evening study time, alleviating your lunchtime hunger pangs, or looking professionally groomed for the job interview you have next week.
Value chain management at Boeing Company aims to create the highest value for customers. Boeing developed a computer program at a new facility that allows customers buying its 787 airplane to take a virtual three dimensional tour through their plane to view all of the customized options they selected. In this way, customers can custom configure their airplanes all at one facility instead of the old method of traveling around the world to visit individuals parts suppliers or seats, galley equipment and other interior features.
How is value provided to customers?
Through the transformation of raw materials and other resources into some product or service that end users needs or desire – in the form they want when they want it. However, that seemingly simple act of turning a variety of resources into something that customers value and are willing to pay for involves a vast array of interrelated work activities performed by different participants. That is, this entire process involves the value chain. The value chain is the entire series of organizational work activities that adds value at each step beginning with the processing of raw material and ending with a finished product in the hands of end users. The value chain can encompass anything from the supplier’s suppliers to the customer’s customers.