29 October 2020
Competition in business is fierce. To stand out, companies must provide a high level of value for its customers. Organizations are not just driven to produce high-quality products and services, but to also offer a high level of customer service.
How does a business know what sets it apart? This is where your value chain comes in.
A value chain is similar to a supply chain; however, it involves even more moving parts like research and development and product design. It consists of every activity needed to create your brand’s product or service, from ideation to distribution.
Let’s look into how your business can benefit from updating your value chain, keeping it performing at its best.
The components of the value chain
The concept of the value chain was introduced by Harvard Business School’s Michael E. Porter. The value chain, according to Porter, consists of a mix of primary and support activities.
Before a business can improve its value chain, it must first understand where each activity fits in.
Primary activities within the value chain
The primary activities within the value chain include inbound and outbound logistics and marketing and sales activities.
Your marketing and sales strategies help you appeal to your target audience. This is done through methods like advertising, any promotions, and determining your product pricing.
Support activities within the value chain
Support activities are also crucial in your value chain. Your business’s support activities include activities like human resources, procurement, and infrastructure.
Performing a value chain analysis is critical for success.
Your value chain analysis is essential for gaining greater visibility into all activities about your products. Performing a value chain analysis will enable businesses to continue to provide valuable services to their customers.
This matters in industries of all types, whether you’re selling a tangible product or providing a service. The more value you create around these products, the more it will be worth to your customers.
How do you know where you can help grow your brand’s value? This is where a value chain analysis comes in. The analysis enables you to see where you can create more value for your customers, employees, and partners.
Your value chain analysis should consist of the following:
Determine your company’s core activities
The value chain analysis starts with identifying all activities that are needed to deliver your brand’s solutions to market successfully. This includes your primary and support activities that are required to complete your product.
Analyze the value of these activities
At this stage, you’ll look at all activities and consider what can be added to provide additional value. You’ll need to know how each activity offers value not only to customers but to your business.
These activities should be compared to the benefit you’re looking to gain. For example, are you trying to stand out from the competition, or does it cost your differentiation? Whatever the goal, you’ll want to make sure your activities support it.
Perform a cost analysis
The next step is to look into how much your activities are costing your business. This includes things like raw materials, but also time savings. This will show you which areas are not cost-effective so you can take steps for improvement.
Without this insight, your business would carry on with time and labor-intensive activities with little return on investment.
Evaluate areas for changes
After you’ve analyzed your activities, the last step is the evaluation. In this stage, your business should evaluate whether these changes are worth being made, taking costs, and considering other factors.
To do this effectively, start with the simple changes before addressing the more difficult tasks.
The importance of reporting on the data
Once you incorporate changes into your value chain, data reporting is critical in knowing what’s working and what’s not. Without the ability to look into your data and find areas for improvement, your business will be missing out on critical information.
To truly improve your value chain, you’ll need visibility into these critical areas. Change can be difficult, and it can be even harder to convince the C-level to see your vision. Without data to back up your business needs, you may find it difficult to get approval for your suggestions.
A reporting process will help visualize your value chain analysis and allow you to make your case with valuable data to back it up.
Reaping the benefits of an exceptional value chain
Performing the right activities within your value chain will enable you to offer a valuable service for customers while gaining a measurable return on investment.
This makes your brand stand out from competitors, establishes trust, creates a loyal customer base, and instills a culture of continuous improvement.
All improvement starts with having visibility into your data. It also relies on finding the right suppliers for your business needs. Suitable suppliers will save you money while providing a high-quality product and service for your customers.
When your business begins searching for and assessing potential suppliers, it’s essential to use sources that provide relevant results. Doing so will help save time in the discovery phase. Kompass does this by enabling businesses to search for B2B trusted suppliers and specific products with our unique and detailed classification worldwide.
Get in touch with us today to learn how we can help you analyze your data and improve your brand’s overall performance.