Value Analysis

Sanjay.S.Parmar
 What is Value chain
• Value chain is the set of linked value – creating
activities the company performs to design
produce, market deliver, and support a product.
•
• Value change analysis helps the manager
understand the behavior of costs and the
existing and potential sources of differentiation
•
• Creating value is a powerful idea in the business
world. Managers often use the value chain to
focus on activities that the must be performed
to convert their plans into actions.
Value chain diagram
 Primary activities
• Primary activities: - Primary activities are that
create and deliver the product


1. Inbound Logistics:

 The receiving and warehousing of raw materials,
and their distribution to manufacturing as they are
required.
 Inbound Logistics Technologies
a. Transportation
b. Material handling
c. Material storage
d. Communications
e. Testing
f. Information systems
 Cont…
 2. Operations:
 The processes of transforming inputs into finished
products and services.
 Operations Technologies
a. Process
b. Materials
c. Machine tools
d. Material handling
e. Packaging
f. Maintenance
g. Testing
h. Building design & operation
i. Information systems
 Cont…
3. Outbound Logistics:
 The warehousing and distribution of finished
goods.
 Outbound Logistics
a. Technologies
b. Transportation
c. Material handling
d. Packaging
e. Communications
f. Information systems
 Cont…..
4. Marketing & Sales:
 The identification of customer needs and the
generation of sales.
 Marketing & Sales Technologies
a. Media Audio/video
b. Communications
c. Information systems
 cont….
5. Service:
 The support of customers after the products
and services are sold to them.
 Service Technologies
a. Testing
b. Communications
c. Information systems
 Support activities
• Support activities: -
 Support activities are that which aids the
individuals and groups engaged in primary
activities.


1. Procurement :- Purchasing the raw materials,

components, and other inputs used throughout
the value chain
2.
3. Technology and systems development: -Research
and development, process automation,
telecom and wireless systems, and other
technology used to support values activities
 conti…..
3.Human resources management:- Recruiting


developing, compensating and retaining

employees as well as labor relations activities


4. Firm infrastructure: - Activities related to general



management, accounting and finance, legal and

regulatory affairs, safety and security,
management information systems and other
overhead functions

Linkages Between Value Chain
Activities
• Value chain activities are not isolated from one
another.
•
• Rather, one value chain activity often affects the
cost or performance of other ones.
•
• Linkages may exist between primary activities as
well as between primary and support activities.
 Analyzing Business Unit
Interrelationships
• Interrelationships among business units form the
basis for a horizontal strategy. Such business
unit interrelationships can be identified by a
value chain analysis.
•
• Tangible interrelationships offer direct
opportunities to create a synergy among
business units. For example, if multiple
business units require a particular raw material,
the procurement of that material can be shared
among the business units. This sharing of the
procurement activity can result in cost
reduction. Such interrelationships may exist
simultaneously in multiple value chain
 Outsourcing Value Chain
Activities
• A firm may specialize in one or more value chain
activities and outsource the rest. The extent to
which a firm performs upstream and
downstream activities is described by its
degree of vertical integration.
•
• A thorough value chain analysis can clarify the
business system to facilitate outsourcing
decisions. To decide which activities to
outsource, managers must understand the
firm's strengths and weaknesses in each
activity, both in terms of cost and ability to
differentiate.