VALUE CHAIN ANALYSIS

• The main business definition of any organization is to

produce goods or render service to achieve their goals and
objective

• Value Chain refers to the interlinked undertakings that an

organization working in a specific industry engages in.

• The value chain concept is concretized in supply chain

management. Here value creation s greatly emphasized.
SUPPLY CHAIN MANAGEMENT
Is a broad continuum of specific activities employed by a company
which consists of the following:
1. Purchasing and supply management which includes sourcing,
ordering and inventory storing of raw materials, para and
services.
2. Production and Operation also known as manufacturing and
assembly

3. Logistics which is the efficient warehousing, inventory

tracking, order entry, management, distribution and delivery
to customers.

4. Marketing and sales which includes promoting and selling to

customers.
SUPPLY MANAGEMENT

It is a popular term used in purchasing which was formerly termed

procurement. It is a key business function which is responsible for:

1. Identifying material and service needs.

2. Locating and selecting suppliers; Negotiating and closing

contacts;

3. Acquiring the needed materials, equipment and services;

Monitoring inventory stock-keeping units; and

4. Tracking supplier performance.

SOURCING AN ORDERING

1. These are the steps to take when the organization needs to

source or raw materials or parts. Specify the need clearly by
writing down the details.
2. Identify and analyze possible sources of supply. Generally, more
than one supplier should be considered.

3. Ask potential supplier for their respective quotation, proposal and

bids.

4. Compare and evaluate submitted documents, then select the

suppliers. Both parties agree and determine the terms of
contract. Correspondingly, the negotiated order placement
follows.
SOURCING AND ORDERING

5. Prepare, place, follow up and expedite the purchase order. The

PO is a written requisition placement to purchase supplies.

6. Confirm that the order placed arrived at the right condition and
quantity. Forward the shipment to it's destination, proper document
and register the receipt and forward it to the accepting party/parties.

7. Lastly, invoice clearing and payment follows.

INVENTORY MANAGEMENT
Another facet of supply management is inventory management. The
role of inventory is to buffer uncertainty. It includes all purchased
materials and goods, partially completed materials and component
parts, and finished goods. The four broad categories of inventories
are:
1. All unprocessed purchased input or raw materials for
manufacturing. Companies purchase supplies for any of the
following reasons:
• To avail of quantity discounts
• To anticipate future price increases
• To safeguard against supplier problems
• To minimize transportation costs

• To avoid supply shortage

INVENTORY MANAGEMNENT

2. Work-in-process (WIP)

3. Finished goods include all completed product for

shipment
4. Maintenance, repair, and operating supplies (MRO)
include the materials and supplies used when producing
the products but are not parts of the products.
INVENTORY MODEL
Inventory management is ordering the right quantity of
SKUs at minimum inventory costs. Inventory cost is the sum
total of ordering costs an carrying costs.
Ordering costs (set-up costs) are variable costs associated at
placing an order with supplier like managerial and clerical cost in
preparing the purchase, while Carrying costs (holding costs) are
costs incurred for holding inventory in storage like handling
charges, warehousing expenses, insurance, pilferage, shrinkage,
taxes, and cost of capital.

This model assumes that replenishment is instantaneous

and stock outs are not allowed. Lead time refers to the span of
time (in days) it takes for the stock to be delivered from the time
it was ordered, while instantaneous replenishment is delivery of
stocks all at the same time.
PRODUCTION AND OPERATION
are processes that transform operational input into
output to satisfy customer needs and requirements. This
transformational process consists of manufacturing and
assembly.

Manufacturing
is the process of producing goods using people or machine
resources. It commonly refers to industrial production where raw
materials are converted into finished goods. Assembly is the
process of putting together raw materials into a desired output.
THE LOGISTICS CIRCLE
A popular term in supply chain management that includes
the supervision of certain sequential processes. This includes
warehousing, scheduling, dispatching, transportation, and delivery.
1. Warehousing is the function of physically packing of finished goods or
merchandising a building, rooms, or any space for temporary storage.
While these items are stocked in storerooms, they are timetabled for
release to customers or buyers.
2. Scheduling is the act off organizing these inventory units and
booking them for delivery.
3. Dispatching products are for transfer; this may include posting,
mailing, shipping out, transmitting, forwarding, or releasing
commodities.
4. Transportation scheduling and other logistics are necessary to make,
dispatching cost efficient. The goal is to minimize transportation costs.
5. Delivery to the specified site is undertaken. It closes the entire
logistics cycle.
MARKETING AND SALES

Products are produced and services are rendered for

ultimate release to customers. Therefore, there is a need to
market these merchandise to interested buyers. Companies
can adopt different modes of marketing to attract and sell to
customers. Aside from coming up with good and distinct
products, businesses can offer competitive pricing like special
offers, quantity discounts, and volume sales, among others.
They can aggressively promote the products through
advertisements in newspapers, magazines, radio, television
and other forms of promotional mediums.
GROWTH STRATEGIES
is a mode adopted by an organization to achieve its
main objective of increase in volume and turnover. Growth
strategies can be internal or integrative

INTERNAL GROWTH STRATEGIES

Internal growth strategies are approaches adopted

within the company. These broad growth strategies can be any
of the following: market penetration, market development,
product development and diversification.
Product/Market Mix Internal Growth Strategy
Current Products “New” Products
Current Markets Market Penetration Product Development
New Markets Market Development Diversification

Market penetration
suggests that for an organization to increase its growth, market
penetration could be actualized by selling more of its current products
or services to its current customers or buyers. It is the least risky for any
company to pursue. For example, if we are selling a six-pack of Coca-
Cola, then we can push for a 12-pack, 24-pack, and so on.
Market development
is the process where a company can sell more of its current
products by seeking and tapping new markets. For example, if a
company has a chicken fast-food chain in Luzon, then it can open new
outlets in Visayas and eventually, in Mindanao
Product development
is an internal growth strategy where the company sell “new”
products to an existing market. In this strategy, there is a need for
the organization to be more creative in coming up with
differentiated products and services. The products or services need
not be new in its guest essence but instead, may be results of
product/ service enhancement, redesign, or reinvention

Diversification
is a product/market growth strategy that involves creating
differentiated products for new customers. In short, it is “new”
products for “new” customers. Oftentimes, it is going to another
product/ service are that is NOT related to one’s current business
or operations.
Competitive Strategies

Organizations cannot avoid permeating competition

existing in the business environment. Thus, competitive strategies
are designed to deal with this so-called reality of hyper
competition..

Competitive strategies are essentially long-term action

plans prepared with the end goal of directing how an
organization will survive and compete. These strategies are
formulated to help organizations gain competitive advantage
after evaluating and comparing their strengths and
weaknesses against their competitors.
COMPETITIVE STRATEGIES
1. Low-cost leadership strategy
Its objective is to offer products and services at the lowest cost
possible in the industry.
2. Broad Differentiation Strategy
Its objective is to provide a variety of products, services or
product/service features that competitors do not offer or are not able
to offer to consumers.
3. Best-cost Provider Strategy
It is a combination of the low-cost leadership and broad
differentiation strategy.
4. Focused/Market-Niche Differentiation Strategy
It is implemented when the organization concentrates on a
limited market segment and creates a market niche based on
differentiated features like design, utility and practicality.
OTHER COMPETITIVE STRATEGIES

1. Innovation Strategy
Its goal is to radically catapult or leapfrog the organization by
introducing completely new and highly differentiated products and
services that give an organization a competitive posturing.
2. Operational Effectiveness Strategy
Its objective is to make an organization perform better by
making the structure lean, streamlining wasteful and inefficient
processes, harnessing better facility and equipment maintenance , and
increasing work force productivity.
3. Economies of Scale
It lowers cost because of volume. Meaning, the more
product/service id produced, the lower the cost itself.
4. Technology Strategy
The advantage of leaning toward technology is cannot be
overemphasized. Technology can be applied system-wise through
digital integration.
LIFE CYCLE STRATEGY

The life cycle of any product/service refers to the lifespan that a

commodity/service undergoes from its introduction stage to its
growth, maturity and decline stages.
1. Introduction Stage- the period of launching the product/service for
acceptance. In this phase, the product/service is new; hence, there
is a need to create awareness.

2. Growth Stage- the phase where the product/service gains

acceptance by the consumers. In this phase, sales and profit slowly
increase and emphasis is now on continuous market development and
improvement.

3. Maturity Stage- the period where the product has reached its
penultimate level. Here, the established product tends to remain
steady and the number of competitors increases.

4. Decline Stage- the period where the product/service begins to reach

or is reaching its lowest point. Here, sales and profits decline and price
competition is intense.
Stability Strategies

There are businesses that doing fine, they choose not to

implement any growth strategy. They are comfortable with their
current market niche. On the other hand, some organizations that
have not decided to expand and become big. They are just content
with what they have.
Retrenchment Strategies
There are different modes of dealing when a company encounter serious
difficulties, these are the following:

1. Liquidation - most radical action a company takes when a company is

losing money. The business may be terminated and its assets sold.
2. Divestment - implemented when a company consistently fails to reach
the set objectives. The stockholders preferably set is as a separate
corporation.
3. Turnaround strategy - needs to implement restorative strategies when
the organization has reached a significant level of non-performance,
non-productivity, demoralization, and unprofitability. In turnaround
strategy, the organization should focus on the following areas: climate
and culture, products and services, productions and operations,
infrastructure, and finances.
a. Climate and Culture - the toughest and most challenging area
for any organization undergoing a turnaround strategy. The
new CEO comes in and takes over the critical organization.
Employees feel certain ambiguity and hesitancy, they are
unsure how the new CEO will manage the organization.
Essentially, the strategy is to first study the organization and
audit the job descriptions of each of the employees vis-à-vis
their functionality in their departments.

b. Products and Services - a review of the products offered and

services rendered is needed; ask questions like what
products/services are marketable in the industry, which of these
products and services need some improvements or major
redesign, and what distinct features can be introduced to attract
buyers.
c. Production and Operations - easiest phase to sort out and manage.
The CEO can look into the processes of the organization, determine
which processes are redundant and defective, and undertake
piecemeal improvements.

d. Infrastructure - must be correctly assessed and appropriate

interventions are introduced or reinforced. Technology is the best
infrastructure strategy that can bring about radical improvements.

e. Finances - when the organization's finances are waving a red flag.

Organization is losing money or is marginally profitable. Once the
aspects of climate and culture, products and services, production and
operations, and infrastructure have been adequately confronted and
substantial interventions have been successfully implemented, the
financial aspect will take care of itself.