Supply Chain is the interconnection of all the activities that starts from the manufacturing of raw material into the finished product and ends when the product reaches the final customer. Value Chain, on the other hand, is a set of activities that focuses on creating or adding value to the product. These two networks help to provide quality products to the customer at a reasonable price. Most of the time supply chain is juxtaposed with the value chain. In this article, we have compiled all the substantial differences between supply chain and value chain. Have a look.
Content: Supply Chain Vs Value Chain
|Basis for Comparison||Supply Chain||Value Chain|
|Meaning||The integration of all the activities involved in the procurement, conversion and logistics of the product is known as Supply Chain.||Value Chain is defined as the series of activities, that adds value to the product.|
|Originated from||Operation Management||Business Management|
|Sequence||Product Request - Supply Chain - Customer||Customer Request - Value Chain - Product|
|Objective||Customer Satisfaction||Gaining competitive advantage|
Definition of Supply Chain
Supply Chain is a connection of all the parties, resources, businesses and activities involved in the marketing or distribution through which a product reaches the end user. It creates a link between the channel partners like suppliers, manufacturers, wholesalers, distributors, retailers, and the customer. To put simply, it encompasses the flow and storage of the raw material; semi-finished goods and the finished goods from point of origin to its final destination i.e. consumption.
The process which plans and controls the supply chain operations is known as Supply Chain Management. It is a cross-functional system that manages the movement of raw material, within the organization and the movement of finished goods out of the firm along with full customer satisfaction side by side. The following activities are included in the supply chain:
- Sharing of Information
- Development of product
- Services to customer
- Performance analysis
Definition of Value Chain
Value Chain refers to the range of activities that adds value at every single step in designing, producing, and delivering a quality product to the customer. Value Chain Analysis is used to evaluate the activities within and around the organization and relating to its ability to provide value for money, goods, and services.
The concept of Value Chain Analysis was first evolved by Michael Porter in 1985 in his renowned book “Competitive Advantage”. In his opinion, two major steps involved in the value chain analysis are:
- Identification of individual activities
- Analyzing the value added in each activity and relating it to firm’s competitive strength.
Porter split business activities into two main categories, for the purpose of Value Chain Analysis:
- Primary Activities:
- Inbound Logistics: It deals with receiving, storing and distributing of inputs.
- Manufacturing operations: Conversion of inputs into finished products.
- Outbound Logistics: It is concerned with the collection, storage, and distribution of product or service to customers.
- Marketing and Sales: Involves activities that create awareness among the general public regarding the product.
- Services: All those activities that increase the value of product or services.
- Support Activities: These activities help the primary activities and include procurement, technology development, human resource management and infrastructure.
Key Differences Between Supply Chain and Value Chain
The following are the major differences between supply chain and value chain:
- The integration of all the activities, persons, and business through which a product is transferred from one place to another is known as supply chain. Value Chain refers to a chain of activities that is indulged in adding value to the product in every single step till it reaches the final consumer.
- The concept of Supply Chain is originated from operational management, whereas value chain is derived from business management.
- Supply Chain activities include the transfer of material from one place to another. On the other hand, Value Chain is primarily concerned with providing value for price product or service.
- The order of supply chain begins with product request and ends when it reaches the customer. Unlike value chain, which begins with the customer’s request and ends with the product.
- The major objective of the supply chain is to gain complete customer satisfaction which is not with the case of the Value Chain.
Supply Chain is described as a tool of business transformation, which minimizes costs and maximizes customer satisfaction by providing the right product at the right time at the right place and the right price. Conversely, Value Chain is a way of getting a competitive advantage, through which a company can beat its competitors along with fulfilling customer requirements.