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technologies
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Chapter 2: The value chain
™ The production of goods and services is the result
of the efforts of many organisations – a complex
web of contracts and co-operation known as the
supply chain or the value system.
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The Value Chain
™ The ultimate goal of any business is to
provide value to its customers.
™ A business will be profitable if the value it
creates is greater than the cost of producing
its products or services.
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The Value Chain
™ An organization’s value chain consists of nine
interrelated activities that collectively describe
everything it does.
™ The five primary activities consist of the activities
performed in order to create, market, and deliver
products and services to customers and also to
provide post-sales services and support.
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The Value Chain
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Primary Activities
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Inbound
Outbound
Operations
m Logistics
Logistics
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Marketing
Service
c and Sales
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The Value Chain
™ The four support activities in the value chain
make it possible for the primary activities to
be performed efficiently and effectively.
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The Value Chain
Support Activities
Infrastructure
Technology
Human
Resources
Purchasing
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The Value System
™ The value chain concept can be extended by
recognizing that organizations must interact
with suppliers, distributors, and customers.
™ An organization’s value chain and the value
chains of its suppliers, distributors, and
customers collectively form a value system.
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The Supply Chain
Raw Materials
Supplier
Manufacturer
Distributor
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technologies
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applications
Retailer
Consumer
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How An AIS Can Add Value
To An Organization
™ An AIS adds value...
– by providing accurate and timely information so
that five primary value chain activities can be
performed more effectively and efficiently. This
is done by:
– improving the quality and reducing the costs of
products or services.
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How An AIS Can Add Value
To An Organization
An AIS can…
– improve efficiency.
– improve decision making capabilities.
– increase the sharing of knowledge.
™ A well-designed AIS can also help an
organization profit by improving the efficiency
and effectiveness of its supply chain.
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Information and Decision
Making
™ What is information?
™ The term data refers to any and all of the
facts that are collected, stored, and
processed by an information system.
™ Information is data that has been organized
and processed so that it is meaningful.
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Data Needs For Activities
Generic Example
Agent
Resource
Event
Agent
Sales Transaction
Inventory
electronic
commerce Payment
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strategy
Cash
technologies
and
applications
Customer
Sale
to Supplier
Payment
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Cashier
Supplier
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Information and Decision
Making
Characteristics of Useful Information
Relevant
Timely
Reliable
Understandable
Complete
Verifiable
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Information and Decision
Making
™ What is decision making?
™ Decision making involves the following steps:
1
2
3
4
Identify the problem.
Select a method for solving the problem.
Collect data needed to execute the decision model.
Interpret the outputs of the model.
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The supply chain
™ Manufacturing Inputs:
ƒ Components (e.g. wheels, seats, etc.)
ƒ Sub-assemblies (e.g. engine, gearbox, etc.)
™ Sales and Distribution:
ƒ Wholesale (e.g. import agent)
ƒ Retail (e.g. local main dealer)
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Logistics chains
™ Transport
™ Storage
™ Paperwork (Orders, Invoices, etc)
™ Each supply chain transaction adds cost without
adding intrinsic value.
™ e-Commerce can be applied to the supply chain to
reduce costs or improve service.
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Porter’s value chain model
support activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound Operations Outbound Marketing
Logistics
Logistics & Sales
Margin
Service
primary activities
™ Primary Activities:
ƒ Inbound Logistics
ƒ Operations (Production)
ƒ Outbound Logistics
ƒ Marketing and Sales
ƒ Service
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Porter’s value chain model
support activities
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Inbound Operations Outbound Marketing
Logistics
Logistics & Sales
Margin
Service
primary activities
™ Support Activities:
ƒ Procurement
ƒ Technology Development
ƒ Human Resources Management
ƒ Firm Infrastructure
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Linked value chains
Outbound
Logistics
Inbound Operations Outbound
Logistics
Logistics
Inbound
Logistics
™ Inbound Logistics
—from Suppliers
™ Outbound Logistics
—from Customers
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technologies
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applications
Porter’s value system
(Inter-organisational value chain)
Supplier
Value
Chains
Firm
Value
Chains
Channel
Value
Chains
Buyers
Value
Chains
™ Overall organisational competitive advantage:
ƒ efficiency of the company
ƒ quality of its products
™ plus
ƒ efficiency and quality of suppliers
ƒ efficiency of wholesalers (Channel)
ƒ efficiency of retailers
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Automotive assembly value system
Internal
Supplies
Component
Suppliers
Vehicle
Assembler
Dealer
Network
Consumer
™ Inbound Logistics:
ƒ Large number of suppliers
electronic
ƒ Vast number of components
commerce
™ Process:
“
strategy
ƒ Just-in-time (JIT) manufacture
technologies
™ Outbound Logistics:
and
ƒ Limited number of Main Dealers
applications
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Food supermarkets value system
Regional
Whse
Food
Processors
Supermarket
Consumer
™ Inbound Logistics:
ƒ Large number of suppliers
electronic
ƒ Vast number of products
commerce
™ Process:
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strategy
ƒ Retail
technologies
™ Outbound Logistics:
and
ƒ Vast number of Consumers
applications
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Insurance value system
Agents
Insurance
Company
Consumer
Insurance
Broker
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Insurance value system
™ Inbound Logistics:
ƒ No significant suppliers
(financial / re-insurance partners)
™ Process:
ƒ Administrative
™ Outbound Logistics:
ƒ Sales through agents
ƒ Sales through brokers
ƒ Direct sales
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e-Commerce in the value chain
™ Electronic Value Chain:
ƒ Reduced time frame
ƒ Changed cost structures
™ Re-engineered Value Chain:
ƒ Just-in-time manufacture
ƒ Quick response supply
ƒ Efficient document processing
™ Competitive advantage
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