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The value chain

The production of goods and services is the resultof 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 supply chain

Manufacturing Inputs:

Components (e.g. wheels, seats, etc.) Sub-assemblies (e.g. engine, gearbox, etc.)

Sales and Distribution:

Wholesale (e.g. import agent)

Retail (e.g. local main dealer)

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Logistics chains

Transport

Storage Paperwork (Orders, Invoices, etc)

Each supply chain transaction adds cost withoutadding intrinsic value.

e-Commerce can be applied to the supply chain toreduce costs or improve service.

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Porters value chain model

Primary Activities:

Inbound Logistics

Operations (Production) Outbound Logistics

Marketing and Sales

Service

InboundLogistics

Operations OutboundLogistics

Marketing& Sales

Service

Procurement

Human Resource ManagementTechnology Development

Firm Infrastructuresu ort activities

Margin

rimar activities

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Porters value chain model

Support Activities:

Procurement

Technology Development

Human Resources Management

Firm Infrastructure

InboundLogistics

Operations OutboundLogistics

Marketing& Sales

Service

Procurement

Human Resource ManagementTechnology Development

Firm Infrastructuresu ort activities

Margin

rimar activities

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Linked value chains

Inbound Logistics from Suppliers

Outbound Logistics from Customers

OutboundLogistics

InboundLogistics

InboundLogistics

Operations OutboundLogistics

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Porters value system

Overall organisational competitive advantage:

efficiency of the company

quality of its products

plus efficiency and quality of suppliers

efficiency of wholesalers (Channel)

efficiency of retailers

(Inter-organisational value chain)

FirmValueChains

SupplierValueChains

ChannelValueChains

BuyersValueChains

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Automotive assembly value system

Inbound Logistics:

Large number of suppliers

Vast number of components

Process:

Just-in-time (JIT) manufacture

Outbound Logistics:

Limited number of Main Dealers

Internal

Supplies

VehicleAssembler

Component

SuppliersDealer

NetworkConsumer

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Food supermarkets value system

Inbound Logistics:

Large number of suppliers

Vast number of products

Process:

Retail

Outbound Logistics:

Vast number of Consumers

Regional

Whse

Super-market

FoodProcessors

Consumer

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Insurance value system

InsuranceCompany

Agents

Consumer

InsuranceBroker

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Insurance value system

Inbound Logistics:

No significant suppliers(financial / re-insurance partners)

Process:

Administrative

Outbound Logistics:

Sales through agents

Sales through brokers

Direct sales

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e-Commerce in the value chain

Electronic Value Chain:

Reduced time frame Changed cost structures

Re-engineered Value Chain:

Just-in-time manufacture

Quick response supply

Efficient document processing

Competitive advantage

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Exercise 2

Outline the value system of an organisation you

know. Identify linkages where e-Commerce might

be usefully applied.