Start typing & press "Enter" or "ESC" to close
  • Learning Solutions
    • Learning Solutions

      Experience the power of experiential learning. The learning solutions can be tailored to your specific learning objectives for your next course or in-company training.

      • Understand the End-to-End Supply Chain
      • Supply Chain Fundamentals
      • End-to-End Supply Chain Management
      • Supply Chain Segmentation
      • Supply Chain and Market Expansion
      • Working Capital Management
      • Supply Chain Finance
      • Experience S&OP and IBP
      • Sales and Operations Planning
      • S&OP and Multichannel SCM
      • Integrated Business Planning
      • Manage Supply Chain Disruptions
      • Supply Chain Resilience
      • Supply Chain Risk Management
      • Supply Chain Finance
      • Create a Sustainable Business
      • Carbon Footprint Optimization
      • Sustainable Business
      • Circular Business Transition
      • Develop Data Literacy
      • Data Analytics in Supply Chains
  • Business games
    • Business games

      Discover the power of experiential learning. Our business games offer a life-like experience based on corporate best practices. This as close to reality as you can get!

      • Business Games
      • Discover The Cool Connection
      • Discover The Fresh Connection
      • Discover The Blue Connection
      • Discover The Triple Connection
      • Getting started
      • Education
      • Incompany training
      • Literature
      • Mastering the Supply Chain
      • Supply Chain Meesterschap (Dutch)
      • Mastering the Circular Economy
      • Inchainge Leadership Program
  • Resource Center
    • Resources

      Inchainge offers a holistic approach to learning. Discover our resources and gain free access to our Harvard-style teaching cases and whitepaper. New materials coming soon!

      • Teaching cases
      • Blogs
      • Webinars
      • Whitepapers
  • Knowledge base
    • Knowledge base

      In today’s connected world, people expect and demand easy access to accurate information. Our knowledge base is a self-serve online library with information about topics related to our business games. Learn more about the key terminology, concepts and methods from our knowledge base!

      • Alignment
      • Sales & Operations Plannning
      • Integrated Business Planning
      • ⟶ view more topics
      • Blended learning
      • Delivery formats and scalability
      • Experiential learning
      • Learning cycle
      • Flipped class room
      • ⟶ view more topics
      • Learning
      • Soft skills
      • Building (virtual) teams
      • Leadership skills
      • ⟶ view more topics
      • Supply Chain
      • Data analytics
      • Logistics footprint
      • ⟶ view more topics
      • Sustainability
      • Carbon footprint
      • Circular Economy
      • ⟶ view more topics
      • Value Chain
  • Trainings & Events
    • Trainings & Events

      Stay on top of our upcoming events, trainings and workshops. Discover how to participate in our flagship events for students, professionals and educators!

      • Trainings & Events
      • Upcoming events
      • Flagship events
      • Global Student Challenge
      • Inchainge Connect Educator Conference
      • Global PRO Challenge
        • History of the Challenge
        • Global PRO Partner
      • Global Educator Challenge
  • About
    • About Inchainge

      Celebrating 10 years of Developing Value Chain Leaders. Our game-based learning simulations are in use all around the globe and present an innovative approach to learning that puts participants at the heart of a lifelike simulation. Learn more about who we are and who we work with!

      • About
      • Learn more about us
      • Meet our team
      • Testimonials
      • Partnership
      • Become a partner
      • Partner network
      • Education associates
      • Customer support
  • News
  • Contact
What's new? Online Demo: Game-based learning solution on Circular Business Transition
  • my.Inchainge
What's new? Check out our brand new business game on sustainability, The Triple Connection!
  • my.Inchainge
  • Get a PDF file with this topic
  • Value Chain
  • What is value chain?
  • Value chain vs supply chain
  • The relationship between value chain and supply chain
  • Why is value chain important to business?
  • Value chain analysis
  • Michael Porter’s value chain analysis
  • Want to know more?
  1. Inchainge Home
  2. Knowledge base
  3. Value Chain

Value Chain

Written by: Inchainge | 3 minute read | Last updated on: September 9th, 2022
Share on:

A value chain can increase the efficiency of a business by adding the most value possible at the lowest possible cost. But what is a value chain exactly? And how is it connected to the supply chain? In this article, Inchainge discusses everything you need to know about the value chain.

Topics in this article
1. What is value chain?
2. Value chain vs supply chain
3. The relationship between value chain and supply chain
4. Why is value chain important to business?
5. Value chain analysis
6. Michael Porter’s value chain analysis
7. Want to know more?

What is value chain?

A value chain is a business model that describes the process or activities required by companies to add value to a product or service. It includes a range of activities required to bring a product to the customer starting from idea generation to distribution and anything in between. Here you can think of:

  • raw materials
  • manufacturing
  • operations
  • logistics
  • sales and marketing activities

Value chain vs supply chain

As discussed before, a value chain refers to all business activities which increase the value of the finished product or service in the eyes of the customer. Where, a supply chain represents the activities required to procure, produce and deliver the final product or service to the customer.

The value chain tends to be traced in the opposite direction to the supply chain. That is, from the customer back through the supply chain activities (distribution, storage, production, and procurement of raw material). The value chain also includes activities that are not associated with the typical supply chain. For instance: product development, marketing, and after-sales service.

The relationship between value chain and supply chain

Often people relate supply chain to value chain. This is because supply chain activities such as inbound logistics, manufacturing/production and outbound logistics, offers many direct opportunities to add value for customers.

More importantly, a successful value chain is dependent on how well supply chain activities are carried out. The example here below explains how basic value offered by a traditional supply chain can have added value by performing value chain.

Added value of supply chain to the value chain

Why is value chain important to business?

Value chain increases the efficiency of the business so that customers can receive the product with the most value-added at the lowest possible cost. The end goal of value chain management (VCM) is to create a competitive advantage for the company by increasing the overall margin.

Nonetheless, value chain management brings various benefits. These include:

  • improved flow of materials and products
  • reducing waste in the supply chain process
  • seamless flow of information
  • enhancing the overall customer experience

Value chain analysis

Value chain analysis (VCA) is a continuous process of identifying and evaluating the primary and supporting activities, required to add value at each step the product flows, to create value for customers. The purpose of VCA is to deliver maximum value at the lowest possible cost by increasing the overall efficiency.

Michael Porter’s value chain analysis

Porter laid down the concept of the value chain by splitting the value chain analysis into two activities that are primary and secondary. These are further divided into five primary activities and four supporting ones.

The five primary activities of Porter’s value chain are:

  1. Inbound logistics
  2. Operations
  3. Outbound logistics
  4. Marketing and sales
  5. Service

The purpose of these activities is to create value that exceeds the cost of creating this value, therefore generating higher profit margins.

Whereas, the value chain supporting activities are there to support primary activities to achieve its competitive advantage. The four main areas of the supporting activities are:

  1. Procurement
  2. Technology development (including R&D)
  3. Human resource management
  4. Infrastructure (systems for planning, finance, quality, information management, etc.)

The picture below provides more detail about Porter’s value chain.

Michael porter's value chain

Want to know more?

Our business game, The Fresh Connection, has a clear focus on the value chain and the flow of materials from upstream suppliers to downstream customers. The decisions to be made are split into the clear functional areas of sales, purchasing, production and supply chain. With a different team member responsible for each area, the experience gets very close to real corporate life, in which a functional split of responsibilities is the norm, rather than the exception. Besides our business simulation games, you can read more on subjects such as supply chain management, supply chain risk management or trade-offs in end-to-end supply chain management.

 

Now you know

Now you know everything about the value chain! You discovered what a value chain is, its connection to a supply chain, what entails Michael Porter’s value chain analysis, and why it is vital for every business. In short, the value chain consists of all activities that increase the value of a product or service. This starts from idea generation to distribution and anything in between. You can identify and evaluate all of these activities with a value chain analysis. The purpose of this analysis is to deliver the most value possible at the lowest possible cost. Furthermore, Michael Porter splits the value chain analysis into two types of activities: primary and supporting activities. Primary activities create value that exceeds the cost of its creation, therefore generating higher profit margins. Whereas, supporting activities are there to support primary activities to achieve its competitive advantage.

Sources
  1. What is Value Chain Analysis?
    https://www.visual-paradigm.com/guide/strategic-analysis/what-is-value-chain-analysis/
  2. The Supply Chain and the Value Chain: The Same but Different?
    https://www.supplychainsecrets.com/the-supply-chain-and-the-value-chain-the-same-but-different/
  3. Value Chain vs. Supply Chain: What's the Difference?
    https://www.investopedia.com/ask/answers/043015/what-difference-between-value-chain-and-supply-chain.asp
  4. A Simple Guide to Value Chain Analysis: How to Build More Efficient Sales Processes
    https://www.pipedrive.com/en/blog/value-chain-analysis

You might want to learn more about

Business games

A high-performing value chain needs the collaboration of team members from across the organization. Tearing down silos and creating the right cross-functional mindset, however, can be a serious challenge. So, what do you need in order to achieve success? Ideally, you’d like your team to experiment with different scenarios wherein they learn to overcome various obstacles.

The Fresh Connection

The Fresh Connection is an innovative web-based business simulation game. It engages participants in turning around a manufacturer of fruit juices. In teams of 4, participants will represent the functional roles of VP Purchasing, VP Operations, VP Supply Chain, and VP Sales.

Supply Chain Management

Successful supply chain management is indispensable for a successful business! Inchainge recognizes the importance of well-aligned and properly functioning value chains – understanding what supply chain management is and why it is so important is the first step towards a cross-functional mindset.

Supply Chain Risk management

Managing supply chain risk is important for every business. But why? And what types of risks should be managed? In this article, Inchainge discusses everything you need to know about supply chain risk management.

End-to-end Supply Chain Management

An end-to-end supply chain can have several benefits such as reducing labor and material costs. But what other benefits does an end-to-end supply chain have? And what are the trade-offs in supply chain management? Read everything you need to know about end-to-end supply chain in this article.

Dive into our
knowledge base

Alignment
  • Alignment
  • BMC Model
  • External Alignment and Collaboration
  • Integrated Business Planning
  • Key Performance Indicators
  • Sales & Operations Planning
  • Strategic Alignment
  • Total Cost of Ownership
Blended learning
  • Blended learning
  • Delivery formats and scalability
Experiential learning
  • Experiential learning
  • 70 20 10
  • Flipped classroom
  • Learning cycle
Learning
  • Learning
Soft skills
  • Soft skills
  • Building (virtual) teams
  • Leadership skills
Supply chain
  • Data analytics
  • End-to-end Supply Chain Management
  • LARG Supply Chain
  • Logistics footprint
  • Omnichannel
  • Supply Chain
  • Supply Chain Finance
  • Supply Chain Management
  • Supply Chain Risk management
  • Supply Chain Volatility
  • The Bullwhip Effect
Sustainability
  • Sustainability
  • Carbon footprint
  • Circular Economy
  • Does Green Governance drive the ride to a sustainable future?
  • Everything You Need To Know About Eco-Efficiency
  • Greenwashing: Everything you need to know
  • Is it possible to measure the Triple Bottom Line?
  • Sustainability v/s Circularity
  • The 3Ps Series: People
  • The 3Ps Series: Planet
  • The 3Ps Series: Prosperity
  • The Butterfly Diagram
  • The Value Hill
  • What are the 3Ps of Sustainability?
  • What do we know about the Triple Bottom Line?
Value Chain
  • Value Chain

Tags

Supply Chain Circularity TFC Branding HTML Clean CSS3 jQuery

Inchainge

Newsletter
Get the latest Inchainge news delivered to your inbox.
The Fresh Connection The Cool Connection The Blue Connection The Triple Connection Education Incompany training
We truly believe that going through an experience,
will result in a better understanding.
Inchainge B.V.
Emmalaan 5
3732 GM De Bilt
The Netherlands
    Follow us on:
Knowledge base
  • Alignment
  • Learning
  • Blended learning
  • Soft skills
  • Experiential learning
  • Supply Chain
  • Sustainability
  • Value Chain
Resources
  • Teaching cases
  • Webinars
  • Blogs
  • Whitepapers
About
  • About Inchainge
  • Meet our team
  • Become a partner
  • Partner network
  • Education associates
  • Testimonials
© Inchainge. All Rights Reserved. Privacy Policy Terms & Conditions Cookie policy
We use cookies on our website to give you the most relevant experience by remembering your preferences and repeat visits. By clicking “Accept All”, you consent to the use of ALL the cookies. However, you may visit "Cookie Settings" to provide a controlled consent.
Cookie SettingsAccept All
Manage consent

Privacy Overview

This website uses cookies to improve your experience while you navigate through the website. Out of these, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may affect your browsing experience.
Necessary
Always Enabled
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Non-necessary
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.
SAVE & ACCEPT