"The traditional definition of supply chain was more on the supply side than demand. Value chain is the supply chain plus the demand chain," said Anil Gupta, principal of Applications Marketing Group.
According to Gupta, the traditional supply chain included doing whatever you need to do to supply a product. Value chain is everything that needs to happen to a product within a company that adds value to it. That might include design, procurement, manufacturing and any services on or related to the product. "All those things add value to the raw material," Gupta said.
"Products assume more value as they go through supply chain processes," said Bob Ferrari, managing director of Ferrari Consulting and Research Group. For example, value chain analysis looks at what it costs to produce a part outside the US, transport it back to the US and go through customs and brokerage, compared to what those costs might be in the US.
In terms of software, value chain management tools include supply chain management software.
"If you look at supply chain vendors, they also talk about demand planning and follow-up solutions," said Gupta. "They're really offering value chain software but they call it supply chain." Product design, distribution and order management are all components of the supply chain. "Supply chain vendors support some aspects of that," Gupta said. "They're offering a subset of what's included in the value chain."
About the author: Christine Cignoli is a Boston-based freelance writer who covers IT infrastructures and storage technology. She is a regular contributor to SearchManufacturingERP. Contact her through her website.
This was first published in December 2009