Value Chain
The value chain is a framework developed by Michael Porter to understand how businesses create value and competitive advantage. It is made up of the operational activities that are performed in order to deliver a product or service to customers. Within the logistics industry, value chains can be used to describe the supply chain processes that move products from manufacturers to retail stores and help ensure that goods arrive on time and at their intended destination.
There are several key steps within a typical value chain for logistics operations. These include:
- transportation and storage,
- material handling,
- shipping and receiving,
- inventory management,
- vendor management,
- tracking and tracing of goods,
- compliance with legal requirements related to the movement of goods across borders or jurisdictions,
- customs clearance activities,
- managing relationships with suppliers,
- dealing with unexpected disruptions,
- supporting customer service activities.
Each of these steps is critical to ensuring that the value chain runs smoothly and effectively.
One of the biggest challenges faced by logistics companies is how to streamline and optimize their value chains in order to improve efficiency and reduce costs. The key factors that are considered when evaluating a logistics company’s value chain include:
- asset utilization (the percentage of time that each asset is being used or not being used),
- the pricing structure for shipments (fees for using various assets or locations),
- total shipment cost,
- the potential return on investment.
These factors can be used as key performance indicators to help measure the success of a given logistics company’s value chain management practices.
Overall, improving the efficiency and effectiveness of a company’s value chain can be a major source of competitive advantage. It is important for logistics companies to continuously strive to find ways to improve their value chains in order to remain ahead of the competition.
Related Links
Porter’s Value Chain
Value chain
What is Logistics and Supply Chain Management?; Supply Chain Opz: What is Logistics and Supply Chain Management?
Difference Between Supply Chain and Value Chain (with Comparison Chart) – Key Differences
Porter’s Value Chain – Strategy Skills Training from MindTools.com
Value Chain Definition
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