Key Points:
- Supply chain related activities involve the production and distribution of a product, while value chain activities add value to the product
- The aim of a value chain is to increase a business's competitive advantage, while a supply chain aims to increase customer satisfaction
- Easyship can help you effortlessly integrate and optimize the management of both supply and value chains. This can result in improved efficiency and reduced costs, helping your store scale
Searching for the difference in value chain vs supply chain? This article breaks down the difference between supply chains and value chains, plus the objectives of both. Find out how Easyship can help you integrate the management of both chains, to push your store's competitive advantage and boost customer satisfaction.
What is a Value Chain
A value chain is a series of steps that go into creating a good or service, from its design to final product, to delivery with the end customer. The chain defines each production step in the process that's adding value to a product, including the sourcing of raw materials, manufacturing and marketing.
This step by step model creates a system that details the transformation of an idea into a finished product. This concept was introduced in the 1985 book, Competitive Advantage: Creating and sustaining superior performance, by Michael Porter. The Harvard Business School academic argues that business management can gain a competitive advantage by maximizing the value of each point in the chain. This concept breaks down a business's activities into two categories:
Primary Activities
The key steps in a value chain's primary activities can be broken down into five components:
- Inbound logistics. This includes the steps to order, receive, warehouse, transport and manage incoming inventory
- Operations. Procedures required to convert raw materials into finished goods
- Outbound Logistics. The activities required to collect, store and distribute the goods
- Marketing and Sales. Informing buyers about the products and services and converting them into customers
- Service. Programs to maintain and enhance the customer experience, like customer service, repairs, and refunds
Support Activities
Support activities can help make primary activities more efficient. In this model, this occurs as increasing the efficiency of the four support activities, will benefit at least one of the primary activities. They can be broken down into 4 key components:
- Procurement. How a business obtains raw materials
- Technological Development. The equipment, hardware, software, procedures and technical knowledge used to create the finished product
- Human Resource (HR) Management. All the activities involved in recruiting, hiring, training, developing, compensating and if necessary dismissing staff
- Infrastructure. This can include a company's systems and management team, like planning, accounting, finance and quality control
Supply Chain
While a value chain focuses on a business's internal processes, a supply chain is also focused on external activities. The term supply chain refers to the interlinked network involved in producing and delivering an end product. If this chain of resources and organizations covers more than one country, it can be referred to as a global supply chain.
Most modern supply chains cover a range of countries and businesses, creating a complex network of moving parts that can potentially experience disruptions or inefficiencies at any stage, no matter how skilled your operation management. While no two supply chains are the same, the steps below can provide a framework for analyzing your own:
- Extraction of raw materials
- Manufacturing into basic parts
- Assembling these parts into finished products
- Sale of the product to customers
- Delivering ordered product to end customer
In the case of a common eCommerce product, like a t-shirt, the cotton could be sourced from India. This could then be manufactured and printed in Mexico, then delivered to an end customer based in the US.
An effective supply chain allows an online store to meet consumer demand and potentially reduce costs. Supply Chain Optimization can be crucial in helping an online store scale and if done well can create a competitive advantage for your business.
Difference Between Supply Chain and Value Chain
There are some key differences between the two chains broken down in this article. While value chains focus on creating value for the customer, the supply chain focuses on the creation and delivery of a good or service. For example, the role of customer support in a value chain would be to increase your store's competitive advantages, while in a supply chain it would be to ensure customer satisfaction.
Alternatively, while a value chain's activities are primarily internal to an online store, the supply chain mainly involves a network of organizations outside the business. However, both can help create a competitive advantage within your eCommerce niche. For example, an efficient and effective supply chain can allow you to undercut the competition's prices, or offer a faster or even free delivery.
Importance of Integrating Value Chain and Supply Chain Management
Rather than comparing supply chain vs value chain advantages, there are a range of benefits if you can integrate management of the two. An integrated approach can lead to better coordination and communication between your online business and anyone else involved in any crucial step. This can help your store improve efficiency, reduce costs and boost customer satisfaction.
Integrating the management of both supply and value chains requires your store to merge operational and business management. This in turn allows you to manage the activities of both chains simultaneously, achieving success of the following two objectives:
- Supply Chain = Increase Customer satisfaction
- Value Chain = Increase Competitive advantage
Take Control of Your Supply Chain With Easyship
While supply and value chains are composed of different activities and optimization achieves different objectives, effective management of both creates a complementary outcome that can supercharge growth of your online store. Easyship integrates with leading eCommerce sales channels, from Shopify to Amazon and Squarespace to eBay. This allows you to seamlessly combine the operational and business demands of your online store in one easy to manage dashboard.
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