There is a lot of competition in almost every industry we look at. Whether it’s manufacturing, construction, real estate, or any other industry, we see that thanks to technology and globalization, there are more challenges and obstacles that a business faces than ever before.
People are looking for products or services that are higher in quality and don’t cost a lot. They also want superb customer service, and if a business wants to thrive in today’s market place, it has to offer all of these things to the customer if it wants continuous business success. It means that businesses everywhere have to create real value for their customers.
One of the ways that businesses can do that is through a value chain process. It is similar to a supply chain process but with a few additions. It also takes into account elements like advertising, research and development, and product or service design, among others. A value chain process ensures that the customers get what they want seamlessly and smoothly, and the company delivers it as effortlessly as possible.
If the value chain is implemented properly, it results in more competitive and effective business practices. By mapping your value chain, your business can get a lot of benefits in different ways.
You can bring about positive change inside your business, and you can transform your products and services. You can even enrich your connections with other businesses that you interact with and their groups of customers and clients.
You can enhance your delivery process, whether you have to deliver locally or if you have to use overseas freight for international delivery. If you want to get a considerable profit margin and create real-world value that exceeds the cost of having a product made and delivered, then you need value chain mapping.
What is a Value Chain?
A value chain is a term used to identify a wide range of processes and activities like marketing, distribution, research and development, production, design, and others that a business has to undertake to bring a product from the initial phase of designing to the last stage of delivery.
Value Chain VS Supply Chain
Generally, both a value chain and a supply chain are thought to be similar, but a value chain has more elements to handle than a supply chain.
Let us elaborate some more on this difference. When we talk about the supply chain, we are talking about the materials that are used to make a product, the manufacturing of the product, and the logistics of transportation that get the product from the factory or the warehouse to the store.
A value chain takes into consideration more elements like product design, marketing, and advertising, to name a few. It even takes into account the HR department, IT experts, lawyers, bankers, and anyone else that is directly or indirectly related to the product and its delivery into the right hands.
Goals of Value Chain Mapping
According to experts, there are a couple of goals that you want to prioritize when you map your value chain process. These are:
- Ensure that your cost is the lowest that it can be. This includes everything like production, transportation, handling, and everything else that is a part of the supply chain process.
- The entire process should be implemented in a fast manner so that the customers get what they want quickly.
- For each activity that we have in our supply chain process, we should find out the best practices and implement them.
Before you can accomplish all these major goals and any smaller goals that you have, your business needs to identify all the processes that are done starting from production.
The main thing to consider here is that these processes don’t end at the time of delivery. Once all these processes are identified, you have to analyze them and find out all the activities that are not worth your time and effort so that they can be eliminated.
This will improve your overall process. You will also find out the practices and steps that are directly related to providing value to your customers, and you can improve them and enhance them to give your customers the best experience that you can.
All of this will enable your business to deliver the highest quality products or services to your customers at the lowest cost possible.
Value Chain Mapping
Now that we know what a value chain is and how it is different from a supply chain let us see how we can successfully map it and manage it so that we can identify the good and bad practices and act accordingly.
The goal here is to identify various processes that are involved and identify the leaders of each process so that they can communicate with each other. This open communication will ensure that customers get what they want quickly and seamlessly.
Once you have found out all the processes and systems that are in place, you will have to manage all of them and even transform these processes and systems according to your needs.
You will have to find out the areas where you can introduce innovation and technology to eliminate mistakes, errors, and to add better practices. Think about every process and find out how you can cut the cost without putting the quality of your system or the quality of your product at risk.
Mapping your value chain is a great way for you to visualize your business processes and observe their impact on the company, its clients, and its customers.
Once you have identified all the activities in your business, the next step is to identify the activities that drive up the cost of your business. These are called cost drivers. These activities include:
- Work hours
- Machine usage and setup
- Wage rates
- Materials used to make products
Once you know all the cost drivers, you can easily optimize them and reduce overall cost.
The other thing that you have to identify is the number of activities that help create a valuable experience for your customers. These include:
- Marketing strategies
- Knowledge of products and services
- Customer support
- Meeting customer expectations
When you focus on these activities, you automatically enhance your customer’s overall experience by providing value.
In today’s highly competitive world of business, if a company can create real value for its customers and give them advantages that others cannot, they can increase their overall profit and get the edge that their competitors don’t have. One of the most effective ways for your business to do that is by mapping your value chain processes.