Identifying the Value Chain Using value stream mapping to identify and link the organization’s core processes

BA 553: Business Process Management2 Value Chains The value chain categorizes the generic value-adding activities of an organization The value-chain concept has been extended beyond individual firms. It can apply to whole supply chains and distribution networks Identifying value chain processes enables process improvement efforts to be focused on the processes that could potentially add the most value to the customer The goal of identifying and improving the value chain is to offer the customer a level of value that exceeds the cost of the activities, thereby resulting in a profit margin The firm's profit margin then depends on its effectiveness in performing these activities efficiently. A competitive advantage may be achieved by reconfiguring the value chain to provide lower cost or better differentiation accessed on 16 March accessed on 16 March 2010.

BA 553: Business Process Management3 Value Chain: Primary Activities Inbound logistics: the receiving and warehousing of raw materials, and their distribution to manufacturing as they are required Operations: the processes used to transform inputs into finished products and services Outbound logistics: the warehousing and distribution of finished goods Marketing and sales: the identification of customer needs and the generation of sales Service: the support of customers after the products and services are sold to them

BA 553: Business Process Management4 Value Chain: Secondary (Support) Activities Administrative infrastructure management: organizational structure, control systems, company culture, etc. Human resource management: employee recruiting, hiring, training, development, and compensation Technology development: technologies to support value-creating activities Procurement: purchasing inputs such as materials, supplies, and equipment

BA 553: Business Process Management5 Value Chain: Graphic View These activities are typically shown in a graphic format first developed by Michael Porter, the person who first wrote about value chains: Porter, M. (1985), Competitive Advantage: Creating and Sustaining Superior Performance (Free Press: New York).

BA 553: Business Process Management6 Specific Value Chain View The primary activities of inbound logistics, operations, outbound logistics, marketing and sales, and service are often written in a different format: Inbound logistics Operations Outbound logistics Marketing and sales Service

BA 553: Business Process Management7 Example Value Chain: Wireless Phones When focusing on a particular organization, the generic primary activities are made specific to the organization’s products or services. This may also change the number of categories, as shown below: accessed on 16 March 2010.

BA 553: Business Process Management8 Example Value Chain: Oil and Gas Company Drill for oilSupply oilRefine oil Manage assets Trade oil on the market Identify opportunities Perform analysis Conduct studies Schedule drilling Conduct drilling operations Transport product Develop market view Manage customer Manage demand Plan sales and operations Manage replenishment Manage refinery scheduling Manage blending Manage refinery operations Maintain refinery models Conduct reporting Maintain long- range business plan Maintain strategic plan Develop new business Trade oil and commodities Schedule movements Manage credit Manage contracts

Example Value Chain: Pharmaceutical Co. BA 553: Business Process Management9 accessed on 7 February 2015

BA 553: Business Process Management10 Example Value Chain: Dept. of Corrections Post- sentence detention and supervision Intake and evaluation Confinement Post- incarceration supervision

BA 553: Business Process Management11 Example Value Chain: University Recruiting/ retaining Student intake and orientation Academic advising Providing courses (including online) Career services

Detailing Processes Inside the Value Chain In the next presentation, we will explore how the processes within each area of the value chain are documented in a process network, also called the organization’s “process architecture” BA 553: Business Process Management12