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Know the Differences & Comparisons

Difference Between Supply Chain and Value Chain

Last updated on July 26, 2018 by Surbhi S

Supply Chain Vs Value ChainSupply Chain refers to the integration of all activities involved in the process of sourcing, procurement, conversion and logistics. On the other hand, value chain implies the series of business operations in which utility is added to the goods and services offered by the firm so as to enhance customer value.

Supply Chain is the interconnection of all the functions 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

  1. Comparison Chart
  2. Definition
  3. Key Differences
  4. Conclusion

Comparison Chart

Basis for ComparisonSupply ChainValue Chain
MeaningThe 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 fromOperation ManagementBusiness Management
ConceptConveyanceValue Addition
SequenceProduct Request - Supply Chain - CustomerCustomer Request - Value Chain - Product
ObjectiveCustomer SatisfactionGaining 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:

  • Integration
  • Sharing of Information
  • Development of product
  • Procurement
  • Production
  • Distribution
  • 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:

Porter's Value Chain

  • 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: Involve 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:

  1. 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.
  2. The concept of Supply Chain is originated from operational management, whereas value chain is derived from business management.
  3. 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.
  4. 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.
  5. The major objective of the supply chain is to gain complete customer satisfaction which is not with the case of the Value Chain.

Conclusion

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.

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Comments

  1. Thuy says

    August 20, 2016 at 1:19 am

    I find your analysis very helpful, excellent presentation, thank you immensely!

    Reply
  2. beth says

    June 19, 2017 at 4:25 pm

    very clear and helpful. thank you!

    Reply
  3. supply chain solutions says

    October 10, 2017 at 12:48 pm

    Nice information. Thanks for sharing.

    Reply
  4. Bjorn Jager says

    November 5, 2017 at 3:56 am

    Very interesting and good presentation. Thank you!

    Reply
  5. Ahmad says

    September 20, 2018 at 1:27 pm

    thank u very much. it was really much useful.

    Reply
  6. Oguguo Njoku says

    October 4, 2018 at 7:01 pm

    Very educative and easy to comprehend.

    Reply
  7. Vincent Kisenyi Byansi says

    May 15, 2020 at 8:47 am

    Well clarified between the two chains moreover in very simple and clear sentences.

    Reply
  8. Ersin says

    May 30, 2020 at 9:12 am

    I have clearly understood the difference between two terms . Thank you very much .

    Reply
  9. Amy says

    October 5, 2020 at 10:14 pm

    Thanks you so much for this information. I was having a hard time understanding the whole process in classes. Now I understand the whole process much better and am able to explain it in my own words and apply it to a real business.
    Thank you!

    Reply
  10. Wendell says

    January 27, 2021 at 10:07 am

    Very helpful. Thank you

    Reply
  11. Akram H Chowdhury ex MP says

    July 21, 2021 at 12:33 pm

    It was so clear and interesting. Now I have a clear understanding of the differences. Thanks.

    Reply
  12. Dumisani Theophelus Ntuli says

    January 28, 2022 at 10:27 pm

    Very useful indeed

    Reply

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