While the terms “supply chain” and “value chain” are often used interchangeably, they focus on distinctly different aspects of a business. Understanding and being able to optimize both is essential for any growing brand.
Value Chain vs Supply Chain
At its core, the supply chain is about operational management and offering customer satisfaction, while the value chain is about business management and providing a competitive advantage.
A supply chain is often described as a tool of business transformation—a way to reduce costs and maximize customer satisfaction by delivering the right product at the right price and the right time. The value chain, however, is a way to gain a competitive advantage, allowing a brand to beat its competitors by fulfilling customer demand.
While both chains end with the customer receiving a product, the value chain focuses on how the brand will be competitive and profitable, and the supply chain focuses on how a brand can efficiently and effectively meet customer needs.
What Is the Supply Chain?
The entire supply chain includes activities in sourcing, logistics, and fulfillment and is primarily concerned with operational management and facilitates the production and delivery of the brand’s products.
The supply chain’s primary objective is to provide customer satisfaction. Key steps in a flexible supply chain strategy are:
- Sourcing: Finding the best supplier for goods needed to produce the products
- Procurement: Acquiring goods and services, within a brand’s guidelines, including whether products and services need to be fair trade, carbon-neutral, sustainable, local, etc.
- Conversion: Processing of raw materials
- Assembly: Putting the pieces of the products together
- Logistics: Sending the actual finished product out to customers
What Is the Value Chain?
The value chain’s primary objective is to provide a competitive advantage. Key steps in value chain management are:
- Inbound logistics: Receiving, warehousing, and controlling inventory to ensure quick turnaround times for customers
- Outbound logistics: Getting the final products to the customer’s door and having a strong sales network
- Marketing and Sales: Making customers aware of a brand’s products and getting them to purchase the products
- Service: Maintaining and enhancing a product’s value, such as customer support and an easy return process
Key Differences: Value Chain vs Supply Chain
Because of the overlap in some of the areas of both, it’s easy to think of the value chain and the supply chain as the same thing. Here are some of the key differences.
- The supply chain focuses on operational management, while the value chain focuses on business management
- The supply chain facilitates the production and distribution of the product, while the value chain adds value to the product
- The supply chain starts with the request and ends with delivery, while the value chain starts with a customer’s request and ends with product development
- The supply chain offers customer satisfaction, while the value chain provides a competitive advantage
How Does the Supply Chain Work with the Value Chain?
The value chain starts with customer demand and concludes with product development, while the supply chain begins with a product request and ends when the product is delivered to the customer. The two chains work in conjunction with each other, and making sure the supply chain picks up where the value chain leaves is critical for any modern brand.
In addition, there can also be ways for brands to add value to the supply chain. For example, in the case of outbound logistics, adding a service to remove an old appliance while delivering a new one is a way to add additional customer value.
How to Optimize the Value Chain vs Supply Chain
A brand needs to balance supply, demand, production, distribution, operations, and sales to optimize the supply chain and should consider the customer experience at every step. The value chain needs to add value at every step of the way.
A key element of both value chain and supply chain optimization is having access to historical and current data so that brands can make data-backed decisions about any changes—and measure the impact.
The most successful brands are investing in the technology and platforms needed to centralize data and tailor experiences through tracking measurements. Customer analytics and supply chain digitization offer brands the insight they need to know and understand their customers, and allow them to apply specific fulfillment methods to fit those needs. When companies lack the data and flexibility to cater to customer expectations, they risk losing them to a competitor that can.
Flowspace’s OmniFlow Visibility Suite fulfillment software provides real-time visibility into inventory, orders, and fulfillment activity, centralizing all order sources in a single dashboard.
Order fulfillment is another important part of the great supply chain that includes production inventory management, warehouse and storage, receiving, pick and pack, shipping and returns. This area of the supply chain has massive potential for optimization, especially if a brand chooses to go with a third-party logistics partner like Flowspace.
The Flowspace Network Optimization algorithm identifies the optimal warehouse fulfillment centers across the country so brands can provide the fastest, most cost-efficient shipping to their customers. Faster, more affordable shipping has benefits for both a brand’s value chain and supply chain and is increasingly something customers are coming to expect.
Learn about how Flowspace’s fulfillment solutions can help you optimize your supply chain. Let’s start a conversation today.