BUSINESS STRATAGY

PART IV

Prepared By

P. K. Nakhate

SUPPLY CHAINS

• 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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• Each stage in the supply chain adds value, the interfaces between the stages require the exchange of information and e-commerce technologies can be utilised for many of these interfaces.

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• The product sold in shops and purchased for use in organisations are the result of a complex web relationship between manufactures, component suppliers, wholesalers, retailers and the logistic infrastructure that links together.

Porter’s Value Chain Model

 Porter (1985) introduced his model of the Generic Value Chain.

Porter’s model was essentially concerned with the internal activities of the company.

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The three (basic) primary activities of a product process are:

• Inbound Logistics: Handling goods that are bought into the company, storing them and making them available to operations as required.

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• Operations: The production process, in many cases a series of sub-activities that can be represented on a detailed value chain analysis.

• Outbound Logistics: Taking the products of the company, storing them if necessary and distributing them to the customer in a timely manner.

 To these basic primary activities Porter adds two further primary activities:

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⮚ Marketing and Sales: Finding out the requirements of potential customers and letting them know of the products and services that can be offered.

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• Service: Any requirements for installation or advice before delivery and then after-sales service once the transaction is completed.

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To support these primary functions there will be a company infrastructure that performs a number of support activities.

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Porter classifies these activities as:

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• Procurement: The function of finding suppliers of the materials required as inputs to the operations of the organisations. Procurement is responsible for negotiating quality supplies at an acceptable price and with reliable delivery. 

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• Technology Development: The organisations needs to update its production processes, train staff and to manage innovation to insure that its products and its overall range of goods and services remain competitive.

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• Human Resources Management: The recruitment, training and personnel management of the people who work for the organisation.

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• Firm Infrastructure: The overall management of the company including planning and accountancy.

•      Porter’s diagram of the generic value chain is reproduced at Figure below

The marketing and sales system can be interfaced with production and outbound logistics to improve the quality of service delivery, see figure

Fig. Value Chain Linkages

ICTs can also be used in other value chain activities; possible applications are:

• Human Resources Management using electronic media to advertise vacancies in the organisation;

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• Procurement using online searches to identify appropriate sources of supply;

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• Marketing using online advertising or portable sales terminals

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• Servicing providing online assistance and/or fault diagnosis.

Inter Organisational Value Chain

The value chain within a company is a microcosm of the overall value chain.

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The overall competitive advantage of an organisation is not just dependant on the quality and efficiency of the company and the quality of its products but also upon that of its suppliers and of any wholesalers and retailers it may use.

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The analysis of the overall supply chain is called the value system.

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Value chain differs considerably across trade sectors and between different organisations within a trade sector.

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Value systems in automobile assembly is summarised as follows:

• Automobile assembly uses a vast number of components; making of a car is a component assembly job.
• Some of the components, such as an engine and body panels, may be produced by the company (possibly in other plants), whereas most of the parts: lights, breaks, wheels, tyres, etc. are bought from suppliers.

• Components are delivered to the production line on a just-in-time manner basis; larger components might be ‘sequenced delivery’ with their arrival synchronised to match the order of the vehicles on the assembly line.

• The sales channel is the dealer network; each vehicle assembler sells through a chain of dealers tied by contract to that marquee.

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• Each dealer is assigned a sales territory and the cars are not normally available through any other sales channel.

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• Vehicle supply to the network is a mixture of the carmaker instructing the dealers what to stock and the dealers ordering to meet the demand.

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• The dealer network also has a system of swapping vehicles so that the specific requirements of a customer can be met.

Thank You