Introduction to

Value Chain
What we will cover-

• What is Value Chain Analysis?

• Value Chain Analysis (Porter)
• SIPOC Analysis
• Supplier
• Input
• Process
• Output
• Value Stream Mapping
• Excel Value Chain Mapping Model
What is a Value Chain?

A value chain is a business model that describes the full range of activities needed to create
a product or service. For companies that produce goods, a value chain comprises the steps
that involve bringing a product from conception to distribution, and everything in
between—such as procuring raw materials, manufacturing functions, and marketing
activities.

A company conducts a value-chain analysis by evaluating the detailed procedures involved

in each step of its business. The purpose of a value-chain analysis is to increase production
efficiency so that a company can deliver maximum value for the least possible cost.
Advantage?

• Low-cost provider – value chain analysis focuses on

costs and how a company can reduce those costs.
• Specialization – value chain analysis focuses on the
activities that create a unique product or
differentiation in service.
Advantage?

• A value chain is a step-by-step business model for transforming

a product or service from idea to reality.
• Value chains help increase a business's efficiency so the
business can deliver the most value for the least possible cost.
• The end goal of a value chain is to create a competitive
advantage for a company by increasing productivity while
keeping costs reasonable.
• The value-chain theory analyzes a firm's five primary activities
and four support activities.
Is this a Value Chain?
Competitive Advantage

IT IS IMPORTANT TO
KNOW THE VALUE
ADDED AT EACH LEVEL
OF THE VALUE CHAIN!
Is this a Value Chain?

INR 100 PMT INR X PMT INR Y PMT INR Z PMT INR F PMT

Transportation Smaller Packs – Margin 20%

Transportation and and INR 10
warehousing warehousing Transportation
INR 4 INR 2 INR 5
Distributor Margin 10% Whole seller Margin 8
Margin 12%
Value Chain
Participants
Actor, Factor and Supporter

• India vs Pakistan Cricket Match

• Who is the Actor?

• What was the Factor?
• Who was the supporter?
Actor, Factor and Supporter
Risks in Value Chain
Value Chain
As Per Michael
E. Porter
The Value Chain (Porter)
The Value Chain (Porter)
Value Chain (Porter)
Support Activities
Primary Activities
Linkages

Inbound Operations Outbound Marketing & Service

Logistics Logistics Sales
Example
SIPOC Analysis
What is SIPOC?

A SIPOC (suppliers, inputs, process, outputs, customers)

diagram is a visual tool for documenting a business
process from beginning to end prior to implementation.
SIPOC (pronounced sigh-pock) diagrams are also referred
to as high level process maps because they do not contain
much detail.
SIPOC
Value Stream
Mapping
What is Value Stream Mapping?

The Value stream mapping process allows you to create a

detailed visualization of all steps in your work process. It is
a representation of the flow of goods from the supplier to
the customer throughout your organization.
What is Value Stream Mapping?
What is Value Stream Mapping?
Value Stream Mapping Process?
Value Stream Mapping Process?
Value Chain Excel Template
Example Value Chain
That’s all for this Session!