Supply Chain vs Value Chain: Difference and Comparison

For a successful business, multiple departments work in sync. The brand value of the company enhances the image of the business.

A supply chain is a link between the company and the suppliers. It helps the business in producing, distributing, and providing customer service.

The value chain is an analysis of the enterprise. They examine the activities and find competitive opportunities to add value to the products.

Key Takeaways

1. The supply chain focuses on the flow of materials and products from suppliers to customers, while the value chain encompasses all activities that add value to a product.
2. The value chain includes marketing, sales, and customer support, which are not part of the supply chain.
3. Supply chain management aims to optimize logistics and operations, while value chain management strives to improve overall business performance.

Supply Chain vs Value Chain

Supply chain is the sequence of activities involved in the production and delivery of goods or services, from raw materials to the end consumer. Value chain is a combination of all activities that add value to a product or service, including research and development, marketing, and customer service.

The supply chain is a flow of materials, products, and funds in creating and selling the product to the customer. The supply chain is part of operational management.

Each aspect of the supply chain works precisely to ensure the business’s smooth functioning. A successful supply chain increases the efficiency of the enterprise.

A value chain is an opportunity to add value to the business. It enhances the value of the business products. Ensuring to work on any shortage, prepare product plans, and work with others to get a competitive edge.

The value chain focuses on innovation, research and development, and marketing strategies.

Comparison Table

Parameters of Comparison	Supply Chain	Value Chain
Understanding	It is an integration of all activities related to the product reaching a customer.	It is an integration of activities to add value to the product related to business management.
Relation	Relation to operation management.	Related to business management.
Concept	Movement of product.	Adding value to the product.
Objective	Customer satisfaction.	Competitive edge in the market.
Sequence	It starts with the product and ends with the customer.	It starts with the customer and ends with the product.

What is Supply Chain?

The supply chain is a network between the company and its counterparts to produce and distribute a product or a service. The supply chain begins from the initiation till the results.

The supply chain includes marketing, operations, finance, customer service, and other departments essential for the product or service. 

The supply chain consists of information, activities, resources, people, and steps taken to get the product or services from the original form to the customer. The supply chain helps to reduce costs, increase efficiency, and optimize the usage of resources. 

Importance of Supply Chains:

A series of procedures are involved in getting the product or service to the customer. It includes procuring the raw materials and transforming the same into a finished good.

Transportation, warehousing distribution, and retailing are part of the supply chain. To ensure all the elements are in sync. 

Managing the supply chain is a crucial part of the business process. Many elements in this chain involve specific skills and expert advice.

If a single link is affected, it will disrupt the entire chain. Affective supply chain management help in cost-effectiveness and business profitability. 

Steps in Supply Chain:

• The initial step is to plan the inventory and manufacturing process to ensure a smooth balance between supply and demand.
• To Source the materials and manufacture the final product.
• Assemble and test the product to finalize the product.
• Packaging, transporting, and delivering the product
• To provide customer services if required.

There are different models of supply chains based on the company and the business’s specific needs. The supply chain is an essential element of the business.

What is Value Chain?

A value chain is a business model for transforming a product or service from an idea to reality. The value chain enhances the business efficiency to deliver the best at a minimal cost.

The value chain gives a competitive edge to the enterprise.

Understanding value chain:

The increasing competition for offering the best price, product innovation, and customer loyalty are the primary needs for the company to strive. The company constantly examines the factors affecting the buyer’s choice and sentiments and works towards retaining the competitive edge in the market. 

The company must keep the confidence of the customer and work towards the customers being loyal. Michael E. Porter of Harward Business School also introduced the value chain concept in a book. (Competitive Advantage)

Components of a Value chain:

Based on Porter’s book, to split the business activities into two categories, primary and support.

Primary consists of five essential or core components adding value to the business:

• Inbound logistics-These includes a function as a warehouse, inventory, and receiving materials.
• Operation-This the methodology to convert the raw materials to finished goods.
• Outbound logistics- The activity to distribute the final product to the supplies, reaching the customers.
• Marketing and sales- To outreach the right customers through advertising, sales promotions,
• Services- Enhance customer satisfaction by providing customer service, appropriate maintenance, guidance, refund, and exchange. 

Support activities:

The support activity strengthens the primary activity, and there are four support activities to increase efficiency.

• Procurement is the company’s policy to obtain war material.
• Technology development is the research and development team. The brain of the company works on the design, techniques, and automated process.
• Human resources involve hiring and retaining employees and working on business strategies to design the market needs and sell the product.
• Infrastructure includes the entire company team, such as planning, finance, and quality control.

The value system is a crucial element of the business. It increases the efficiency of the enterprise and adds value to the products.

Main Differences Between Supply Chain and Value Chain

1. The integration of all the activities, people, and logistics to ensure the product reaches the customer in the supply chain. The value chain is a chain of activities involved in adding value to the product.
2. The supply chain originated from operations. The value chain is about business management.
3. The supply chain order begins with the product and ends with the customer. Value supply is the customer’s expectation and ends with the product.
4. The supply chain ensures customer satisfaction. The value chain is not about customer satisfaction.
5. The supply chain is about the movement of goods or services. The value chain is about adding value to the cost of the product.

References

1. https://www.sciencedirect.com/science/article/pii/S0925527313002855
2. https://www.emerald.com/insight/content/doi/10.1108/EUM0000000006039/full/html

Last Updated : 13 July, 2023