Value Chain Analysis: What It Is and How to Use It

Remember, it’s not just about individual activities; it’s about how they dance together in the grand choreography of value creation. From procuring raw materials and shipping them to factories to delivering a final product to the end consumer, there are dozens of steps in the value chain process. This is the hardest step as it requires a deep investigatory look at each of the primary and secondary activities.

Balancing efficiency improvements with maintaining product or service quality can be challenging. Utilizing raw materials effectively can be valuable for businesses looking to optimize their value chain and improve overall efficiency. Here is an example where I have worked as a consultant to improve processes through conducting value chain analysis. As you can see in the image below, we have played with different layouts inside the plant to ensure that the output will have the highest possible value while keeping the costs at the lowest possible level. While this can be useful for identifying areas of improvement within a specific business unit, it unchain ignores the interdependencies between different units within an enterprise.

How can value chain optimization increase the ROI for my company?

From initial planning to scheduling and inventory, optimization will help promote greater visibility across the entire value chain. Traditionally, most companies do not learn the extent of their inventory deficiencies until they complete extensive surveys. Value chain optimization can ruffle feathers by providing counter-intuitive recommendations for asset optimization.

What are the benefits of using Value Chain Analysis?

Value chain optimization helps redefine a company’s processes, improve collaboration, reduce value leaks, and increase innovation to ultimately make better and more robust decisions across your operation’s lifecycle. As more companies adopt plant digitalization technology and practices, it becomes easier to maximize profits, reduce emissions, and increase production with value chain optimization. Given the enormous complexity of supply and value chains, an Industrial AI solution is best suited to perform this task.

As organizations face increasing pressure to remain competitive, leaders must ensure that every part of the business, from operations to customer service, contributes to the larger organizational objectives. Misaligned value chains can slow growth, diminish profitability, and create inefficiencies that undermine strategic goals. Two common competitive advantage strategies include low-cost providers and specialization/differentiation of products or services. On the other hand, support activities encompass the indirect functions that facilitate the optimization of primary activities. Although they may not directly contribute to creating the product or service, support activities are vital in making primary activities more efficient and cost-effective.