Module 1 1

Session 3
VALUE CHAIN VS
SUPPLY CHAIN MANAGEMENT

DR. NEERAJ ANAND

PROFESSOR- LSCM
EX ASSOCIATE DEAN – RESEARCH
SOB, UPES, DEHRADUN
EMAIL: [email protected]
MOB. 9997897491
Learning Outcomes (CO1) 2

 To understand the meaning of Value

 To differentiate Value Chain from Supply Chain.
Value 3

 Every organization has objective to create value to

satisfy customer needs.
 Value means perception of benefits associated with
goods or services or bundle of goods and services with
respect to what customer is willing to pay.
 Value is customer’s cumulated judgement of perceived
benefits leading to satisfaction or dissatisfaction with
product or services or both.
 Ex: Frequently traveling customer may be satisfied with
Indigo flights on account of reasonable price and
punctuality of arrival and departure of flights.
Value 4
 Value = benefit Perceived/Cost (Price) incurred on the
product/service.
 If the value ratio is high, products/services is perceived favourably by
the customer and the organization providing goods/services is likely
to be more successful.
 To increase value, following alternative actions could be practiced:
 Increase the perceived benefits of goods/services while keeping the
cost/price constant.
Ex: Good hospitality and behavior by the crew staff.
 Increase the perceived benefits of goods/services while reducing the
cost/price constant.
Ex: Quicker boarding at the counter (in the long run with more
service counters)
 Decrease the cost/price of the perceived benefits of goods/services
while keeping the perceived benefits constant.
Ex: Offering some discount on the ticket price while maintain the
same perceived benefits.
Value Chain 5
 A value chain is a high-level model developed by Michael Porter
used to describe the process by which businesses receive raw
materials
 Add value to the raw materials through various processes to create a
finished product, and then sell that end product to customers.
 Companies conduct value-chain analysis by looking at every
production step required to create a product and identifying ways to
increase the efficiency of the chain.
 The overall goal is to deliver maximum value for the least possible total
cost and
create a competitive advantage.
Ex: Bio-toilets in the planes and trains, Wall tiles and anti-skid floor tiles,
Immunity booster Aonla/alovira juice byPatanjali, Sanitized fruits &
vegetables, solar cart on airport/railway station, mobile banking, 108
Ambulance services etc.
Porter’s Value Chain Model 6

https://www.mindtools.com/pag
es/article/newSTR_66.htm
Value Chain: Significance 7

 A company's value chain allows it to create a competitive advantage over its

competitors.

 A strong value chain management team helps a company create high value and
a strong competitive advantage in any or all of the value chain's five steps.

 The value chain is made up of five interrelated activities that allow a company to
create value that exceeds the cost of providing its good or service.

 A strong value chain management team maximizes the value of each one of the
five interrelated activities:
- Inbound logistics
- Operations
- Outbound logistics
- Marketing and sales
- Service
Value and Supply Chains 8

 A value chain is broader in scope than a supply chain, and

encompasses all pre- and post- production services to create and
deliver the entire customer benefit package.
 A value chain views an organization from the customer's perspective –
the integration of goods and services to create value – while a supply
chain is more internally-focused on the creation of physical goods.
 RVA –Real Value Added activities, directly benefiting the customer.
(Ramp operations, biometric attendance, wheel chair, accelerators,
Conveyor Belt for luggage)
 BVA – Business Value Added activities, which are required to execute
business operations (Security check, GST/PAN No., IT Return, Bill of
lading etc.) but may not directly benefit the customers or perceived by
customers.
 NVA- Non-Value Added activities, which are neither adding value from
the business nor customer perspective.
 Ex: Delay in the boarding, security checks, wastage of food and idle
seats in the aircraft/train/bus.
Oil Supply Chain 9
Value Chain: Pre-production to Post -
Production 10
Stackers and Forklifts(MHEs) 11
Automated Material Handling 12
How to Add Value? 13

 More effective synchronization: with various partners across the supply chain.
(Mirchimarket.com, trucksuvidha.com)
 Greater customer satisfaction and customer loyalty:
Improved customer services (Etehad airlines, Gati, Amazon, Google, Facebook,
BIAL, IGI Terminal 3 etc.)
 Vertical Integration and Value Network: Backward and Forward integration,
collaborating with various supply chain partners.
Ex: E-Commerce companies and practicing omni channel
 Outsourcing: IT, Security services, Manpower training etc.
 Off Shoring: Shifting process capabilities from domestic to other countries.
Ex: IOCL, IRCON, IATA, ICAO, ONGC
 Green Supply chain: Reducing GHG
Ex: Delta Airlines, IGI Airport New Delhi, Airbus and Boeing expanding
MRO and other facilities to other countries. Metro trains using biofuel.
 Reverse Logistics: Nokia pioneered in collecting used handsets.
How to Add Value? 14

 PLC Management: Malls, Resorts, Hotels, airlines,

airports, Metro rail etc. providing services to all age
groups.
 Adaptive SC Solutions: Netflix, Vande Bharat
campaign, Bharat Biotech and Serum Institute of India
providing vaccine, Oxygen Rail by Indian Railways etc.
 Tie-up/Joint Venture: IGI Airport and first PPP Kochi
airport
 E-freight Corridor between Kabul and Mumbai,
supported by Kale Logistics for quick import/export of
goods.
Green SC 15
Patric Penfield defined green supply chain as “ the process of using environmental
friendly inputs and transforming these inputs into outputs that can be reclaimed and
reused at the end of their lifecycle thus, creating a sustainable supply chain.”
• A green supply chain is a supply chain that is not only optimal for the organization,
but is also optimally relative to its ecological impact.

It revolve around 4 Rs:

 Reduce

 Reuse

 Recycle

 Recover

Also it always focuses on merging environmental aspects with the ultimate objective of
the organization as a whole.

Ex: Waste to Energy by IOCL and other companies. Flyash being used for bricks etc. Pine
needles briquette are used as fuel in Uttarakhand. Rock Garden, Chandigarh – made
use of waste glass items, bangles and others. Furniture being produced out of waste
packing material, petrol out of plastic etc.
Green Supply Chain 16
Green Initiatives 17

 Cloud computing (Data Storage in google drive)

 Blockchain (Digital Distributed Ledgers)
 Handheld devices (Paperless operations)
 Smart Power Grid (Automated control rooms)
 Wind power generation (Rajasthan/Gujarat)
 Solar power generation (UPES)
 Trains/planes using biofuel.
 SAFA – Sustainable Air Freight Alliance
 Corporates and regulatory authorities have started
practicing green supply chain to implement various
functions such as e-passport, aadhar, online IT and
GST, e-way bill, e-pass for citizen for inter state
movement etc.
References 18
 https://www.mindtools.com/pages/article/newSTR_66.htm
 Porter, Michael E., "Competitive Advantage". 1985, Ch. 1, pp 11-15. The Free
Press. New York.
 Rowe, Mason, Dickel, Mann, Mockler; "Strategic Management: a methodological
approach". 4th Edition, 1994. Addison-Wesley. Reading Mass
 https://prezi.com/wh5bgqtp_suk/the-aviation-industry-value-
chain/?frame=c013f1b8b8848bbe0fec28313a8cc74a85192ac5
 https://www.intechopen.com/books/green-practices-and-strategies-in-supply-
chain-management
 https://www.sdcexec.com/sustainability/press-release/21120553/delta-air-lines-
inc-delta-commits-1-billion-to-become-first-carbon-neutral-airline-globally
 researchgate.net/publication/317936918_Green_Supply_Chain_Management-
Challenges_and_Opportunities/figures?lo=1
 https://www.taxibot-international.com/news-cfon/k2izw28i20/TaxiBot%C2%AE-is-
being-deployed-in-Amsterdam-by-Schiphol-Airport
 https://www.thehindubusinessline.com/economy/logistics/use-of-taxibots-to-
restart-in-delhibengaluru-airports-next-month/article31890836.ece
 https://www.researchgate.net/publication/320961690_The_Implementation_of_E-
Business_Value_Chain_on_enterprises_in_the_sector_of_Information_Technology_
and_Communications/link/5b9423eda6fdccfd542a3b47/download