Introduction:

a) Value Chain can be defined as a model that considers how supply chain activities can add value to products and services delivered to customers.

b) By analysing different parts of value chain managers can redesign internal and external processes to improve the efficiency and effectiveness.

c) In equation form, it can be represented as: Value= (Benefit of each VC activity-Its cost) + (Benefit of each interface between VC activities – Its cost)

Traditional Value Chain Model:

a) Traditional value chain analysis consists of two types of activities such as:

• Primary activities: Activities that contribute directly to getting goods and services to customers (such as inbound logistics, including procurement, manufacturing, marketing and delivery to buyers, and support and servicing after sale).
• Support Activities: Activities that provide the inputs and infrastructure that allow the primary activities to take place. Support activities include finance, human resources and information systems.

b) Traditional models of the value chain have been re-evaluated with the advent of global electronic communications.

c) Some of the key weaknesses in traditional value chain model are as follows:

• It is most applicable to manufacturing of physical products as opposed to providing services.
• It is a one way chain involved with pushing products to customer. It does not highlight the importance of understanding customer needs through market research and responsiveness through innovation and new product development.
• The internal value does not emphasize the importance of value networks.

Revised Value Chain Model:

a) The revised value chain starts with the market research process, emphasizing the importance of real time environment scanning made possible through electronic communication links with distributors and customers.

b) For example, leading e-tailers now monitor, on an hourly basis, how customers are responding to promotional offers on their website and review competitors offer and then revise them accordingly.

c) As new product development occurs the marketing strategy will be refined and at the same time steps can be taken to obtain the resources and production processes necessary to create, store and distribute the new product.

d) Through analysis of value chain and looking at how electronic communications can be used to speed up the process, manufacturers have been able to significantly reduce time to market from conception of a new product idea through to launch on the market.

e) In addition to changes in the efficiency of value chain activities, electronic commerce also has implications for whether these activities can be achieved internally or externally. These changes can be referred to as value chain disaggregation or reconstruction.