Why is there a need for Value Chain Management in every business? Why do they need it in the first place? To begin with, Value Chain Management or VCM is a process that every company utilizes to regulate and magnify their activities in monitoring and managing their operations. There are tons of benefits associated with VCM, such as increased efficiency, reduced costs, and so on.
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The value Chain is the bread-and-butter of any business or company and could also be termed the cog in the wheel. Value chains are why companies effectively function. Therefore, understanding the difference between a good and bad value chain is crucial for a company.
The market value of the global value chain management sector has increased from USD 15.85 billion in 2019 to USD 37.41 billion in 2027. Despite the pandemic, this is a massive spike.
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What is Value Chain Management?
When a product is manufactured, there are plenty of components involved, and managing and monitoring all these components is what makes VCM. The different features are:
- Quality Control – As a quality control measure, it is significant for the products under evaluation to meet the standards set by the company.
- Distribution – Once goods are manufactured, they are transferred from the manufacturer and sent to the buyer. This process is known as distribution.
- Production – The process of creating goods from raw materials is called production.
- Costing – To identify the cost of manufacturing so it is easy to determine the price of the end products is known as cost.
Value Chain Management is related to value chain analysis. The latter is intended to research different business departments like operations and logistics. As a powerful combination, they can yield maximum benefits for any industry.
Let’s explore a little bit more about Value Chain Analysis.
Value Chain Analysis Explained!
Value Chain Analysis in strategic management is widely used by companies to boost their business methodologies. Through this tool, companies analyze the overall activities of a firm.
The goal is to identify the activities that draw maximum benefit and help the other activities improve enough to add advantage in terms of competition.
Top 10 Benefits of Value Chain Management
1. Easy Information Flow
In any company, information flow is the way for employees to transfer their information. With the help of Value Chain Management, a company gets exposed to better communication which leads to making impeccable business decisions.
2. Increased Profits
The gross revenue and margin of any industry or company see significant growth because of value chain management since it mainly focuses on the areas that are left behind and need improvement.
3. Straightening Customer Needs, Service, and Support
Once you implement impactful VCM, it significantly enhances customer support and service. Additionally, it also offers the flexibility to a company to upscale its manufacturing process.
4. Reduced Costs
As mentioned earlier, value chain management helps in optimizing the value chain, hence reducing all kinds of costs with the help of inventory control and waste elimination.
5. Efficient Quality Control
Quality control is establishing testing and evaluation standards. With the correct use of VCM, any company can streamline its control process efficiently and effectively by stating criteria for suppliers that align with the quality standards.
6. Effective Planning
A planning process can be efficiently used across multiple departments through VCM. In addition to spending less money, a company also gets the flexibility to wrap projects quickly, which offers room for more resources. Furthermore, a good VCM lets others interact, and thus, planning becomes a hassle-free process.
7. Maintaining Standards
In any company, there is a dire need to standardize all processes linked with manufacturing and with the help of VCM, it becomes possible. They need standardization to regularize repetitive procedures and continuously grow business. Employee productivity and work quality also experience significant growth.
8. Managing Resources
Resource management with the help of value chain management becomes much more efficient due to better process optimization.
With the help of VCM, the payment processes linked with product manufacturing have also improved. It is vital to figure out existing financial hardships and then improve them parallelly with your current finances while simultaneously keeping track of profit margins and revenue generation.
10. Growth in Competition
Value Chain Management allows you to have an added advantage in competition. After all, every company wishes to be the best over others, and with VCM, it becomes a possibility. The primary components that provide a competitive edge are operations, logistics, and the market. Therefore, this advantage significantly grows as there is an increase in productivity.
Implementing a robust value chain management system could help your industry bag countless benefits, many of which are mentioned above. Not only does it help your industry to grow in every aspect, but it also allows you to track your manufacturing process.
To learn more about Value Chain Management and its processes, you can go for the Global Master Certificate in Integrated Supply Chain Management under upgrad. The concepts taught in this course are the basics of supply chain management, integrated planning, supply chain globalization, operational performance, financial analysis, inventory management, warehousing, integrated logistics strategy, and strategy development. You can also participate in quizzes and assignments to gain a better grip on the subject matter.
What is the difference between Value Chain and Supply Chain Management?
Even though the two are closely related, there is a major difference between the two. The process of receiving raw materials in a business is termed the value chain. On the other hand, the supply chain takes all the interested parties into consideration to fulfill the customer’s demands. The concept of a value chain comes from business management, whereas that of the supply chain originates from operational management. Finally, value chain focuses on a product or service and intends to offer value only to them, whereas supply chain starts when a request for the product is raised and the end customer receives the final product.
What is Supply Chain Management?
Supply Chain Management is the process of laying down the complete plans and management of different activities starting from conversion, operations, logistics, etc. Furthermore, it is also about maintaining relationships with channel partners and continuously collaborating with them. A value chain in supply chain management ensures all the business-related activities are involved in creating a product from start to finish. This includes production, distribution, etc. Supply chain management is a visible process where the company echoes the activities of customers and suppliers.
What are some of the benefits of Value Chains?
The value chain framework plays a significant role in helping industries and organizations to weigh their positive and negative costs. The different ways in which value chain analysis could benefit a business is by finding the defective joints and fixing them with proper actions. Second, it lets you gain an upper hand over your market competitors. Third, the analysis makes it easy to understand areas that need improvement. Furthermore, it works on optimizing activities in such a way so there is maximum output and ends up simultaneously reducing other extravagant expenses.