Value Chain vs Supply Chain: Key Differences Explained

Businesses, especially those that regularly deal with eCommerce logistics, are constantly on the lookout for various processes and strategies that will enable them to boost efficiency, growth, and, in the end, profitability. That’s why many of them start looking more into their supply chain operations in search of ways they can optimise them. 

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But it’s important to note that the supply chain itself is not the only factor that needs to be taken into consideration. Instead, learning a bit more about value chain vs supply chain operations and their key differences can really set your business apart from the rest.

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In short, while the supply chain focuses on sourcing the materials, creating goods and delivering them to the end user, the value chain focuses on providing the user with real value even once they’ve purchased the products.

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So, in order to fully understand the main differences between these two models and see how each of them can help improve business operations, let’s do some digging.

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What Is the Supply Chain

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Put simply, the supply chain refers to the entire process of delivering goods to end users. It starts with finding and sourcing materials, creating the product and finally selling it to a paying customer. So, creating goods, manufacturing them, transporting them to a place of sale, and finally selling them are all a part of the supply chain. 

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There are five main stages of the supply chain:

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Ideally, every supply chain needs proper management that will ensure that all of the processes are optimised, which will lead to reduced costs, enhanced efficiency, and improved customer satisfaction.

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By streamlining all of the operations within the supply chain, businesses can easily minimise delays and ensure that products are available when and where they are needed.

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What Is the Value Chain

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The main difference between supply chain and value chain lies in the added value. As an idea, the value chain was first introduced by Michael Porter, an American academic, in his book Competitive Advantage: Creating and Sustaining Superior Performance back in 1985. According to Porter, companies need to add more value to their products even before the manufacturing starts, so they can become an even more valuable asset to the consumer once bought.

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Namely, although both value chain and supply chain have the end user in mind, the value chain “thinks” about the end user during each step of the product development.

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Although it may sound like the value chain may be a less profitable approach, the reality is quite the opposite. The activities within the value chain can be divided into two main categories:

So, in short, in order to become profitable, the value chain needs to focus on meeting consumer demand with business production.

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Let’s now see how different activities in the value chain bring more value to end users.

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• Product development - In order to bring more value to customers, businesses must first understand what customers want. That’s why they need to conduct extensive research and development in order to be able to define, prototype, and improve products, so that they align perfectly with customer demand.

• Customer service - Is there to provide relevant information to consumers, so that they can make an informed decision when purchasing products. Additionally, customer support is there to offer after-sales care and support instead of just focusing on making the sale process easier.

• Marketing and sales - Here, the business gets the opportunity to explain to their customers how they will benefit from purchasing the product and which of their expectations will be met. 

• Supply chain - Supply chain activities are there to ensure that the business has all the necessary ingredients to manufacture the products. It’s also there to provide quality control and quality assurance, as well as ensure product availability. Finally, supply chain activities also deal with order fulfilment and distribution.

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How Are Value Chain and Supply Chain Connected

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Although the supply chain vs value chain are different, they actually complement each other very well. Whereas supply chain operations focus more on obtaining the materials needed for the production of goods, among other things, the value chain can be applied to ensure that those products will bring more value to customers once created.

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It’s also very important to note that the value chain wouldn’t really be able to function without a well-developed supply chain. But it goes the other way around as well - without a good value chain in place, the supply chain would provide consumers with products that are subpar and don’t really meet their expectations.  

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Key Differences Between Value Chain and Supply Chain

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Now, even though the value chain wouldn’t really be viable without a supply chain, it’s important to also focus on some main differences between these two approaches. 

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The supply chain can, in theory, function without the value chain - but not very well and not for very long. That’s because: 

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• Focus and objectives are different in these two chains. While the supply chain primarily focuses on efficiency and cost reduction, the value chain focuses on value creation and differentiation. So, it’s safe to say that since the value chain seeks to enhance the customer experience and build a unique position in the market by delivering superior products or services, it should be a crucial part of every supply chain.

• The scope of activities also differs as the supply chain is mostly concerned with logistics and operational efficiency. In contrast, the value chain focuses on activities that contribute to improved customer satisfaction, including marketing, sales, and customer service.

• The impact on business strategy these two approaches have differs in the way businesses measure success and efficiency. While a well-optimised supply chain will lead to cost savings and improved efficiency, the value chain is the thing that will help businesses differentiate themselves from competitors. 

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How to Implement Value Chain Practices into the Existing Supply Chain to Boost Efficiency

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By this point, it should be clear that if increased efficiency is your final goal, you should aim at implementing the value chain in your supply chain for the best results. 

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But how do you do that? And is it even possible to make such changes to your supply chain without causing major disruptions? The short answer is yes.

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Inbound logistics

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During this stage, businesses can use the value chain to quickly and efficiently procure goods that will bring more value to consumers. What’s more, the value chain can also be used to ensure just-in-time delivery of goods, thus preventing over and understocking, as well as the need for overly complex inventory management.

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Manufacturing and production

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In this part of the supply chain, the added value will come in the form of reduced product cost and improved product quality. This can be achieved with the help of technology - which will require an initial investment but will be able to speed up processes, ensure better product quality and minimise errors. 

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Outbound logistics

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Finally, businesses can add value to outbound logistics by optimising shipping routes, securing strategic warehouses/fulfilment centres, co- and outsourcing, streamlining work in process, as well as collaborating with retailers and digital delivery services. All of this will ensure that products reach consumers quickly and efficiently, which will significantly improve overall customer satisfaction and loyalty. 

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Of course, adopting this approach will require some adjusting, especially if new technologies are being introduced in the already-existing supply chain. This may require some investing in new pieces of tech as well as staff training, but all of the initial investments will be well worth it in the end.

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Add Value to Your Supply Chain with Bezos

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If you feel like your current supply chain can be better optimised and more efficient, yet you’re unsure how to achieve this yourself, it’s okay to rely on us here at Bezos to take some load off of your shoulders. 

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We can help you offer more value to your consumers and streamline your supply chain so that everyone feels satisfied in the end. 

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Our fulfilment services include:

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• Taking care of your orders for you - both locally and internationally

• Tailoring our solutions to your specific needs

• Seamlessly applying automated processes that are easy to integrate and provide real-time tracking of every order

• Complete transparency

• Dedicated customer support

• Sustainable and eco-friendly practices

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So, if you wish to add more value to your supply chain, sign up with Bezos today and let us help you boost your efficiency, help your business grow, and, of course, improve your business’s profitability.

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Schlussfolgerung

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In the end, although value chain vs supply chain supply are often used interchangeably, they are two separate things. However, it’s important to emphasise that they are both crucial when it comes to satisfying consumer needs and improving a company's bottom line.

Therefore, any business that’s looking to grow and connect with its customers by offering them real value should really consider making the value chain an integral part of its supply chain operations.

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Häufig gestellte Fragen

What is the difference between supply chain and value chain?

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The main difference between the supply chain and the value chain is that the supply chain focuses on sourcing materials and delivering goods, while the value chain emphasises offering value to customers, even after a sale has been made. 

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What is an example of a value chain?

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For example, suppose a business produces and sells furniture. In that case, its value chain will include finding and obtaining raw materials — like the wood, stuffing and fabric used for creating different furniture pieces, as well as the entire manufacturing process, marketing, sales and support that are focused on bringing real value to the end user.

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What is the difference between a value chain and a process chain?

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In short, the value chain is a series of activities performed by businesses that focus on delivering valuable products to the market. The process chain, on the other hand, is basically a diagrammatic representation of the flow of information and/or materials in the value chain.

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How are supply and value chains similar?

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Both supply and value chains focus on efficiency in business processes. Various activities within each chain can help businesses lower costs, improve performance and boost overall customer satisfaction.

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