Another key management concept that facilitates successful value delivery to the customer is the Key Account Management (KAM) where effort is to develop long term business relationships with the key customers of the company. This paper will assess the principles of Value Chain Analysis and the Key Account Management and their usefulness as management tools in delivering customer value successfully. 2.Overview of Value Chain Analysis “ The Value Chain Analysis identifies separate activities, function, and business processes that are performed in designing, producing, marketing, delivering, and supporting a product or a service” (Porter 1985).
The chain of interlinked activities, which comes together to finally meet a customer need in the form of a product or a service includes raw material sourcing, logistics, production, sales & marketing as well as other support services. There are generic activities as well as ancillary activities in the value chain. At each stage, the business objective is to create and add value and generate a component of the final profit so that the value generated at each point is greater than the cost incurred in performing that particular activity. By analyzing a company’ s value chain, the cost components being incurred at each stage as well as the capital being tied up to each function is highlighted, allowing strategic decisions to be made in terms of cost management.
It also allows the company to identify its strengths and weaknesses at each stage of the operation (Thompson & Strickland 2003). This facilitates a company to identify the key areas, which need its focus in terms of competency building and weaknesses against which contingency planning has to be in place.
It also identifies areas of strength, which can be highlighted in its positioning strategies. 3.Key Elements of a Value Chain Inbound Logistics is one of the primary activities of a company and some companies tend to combine the procurement and inbound logistics under one unit for the value chain analysis. Here the focus in on activities such as receiving goods, raw materials, and other supplies from vendors, quality inspections, storing, and inventory management (Thomson & Strickland 2003). In a bid to capture the value down the supply chain, some companies use strategies such as locating their key suppliers closer to their warehouse or manufacturing facilities.
Use of modern Information Technology systems to streamline and manage the process and by employing high caliber logistic personnel this valued activity is further strengthened. Operations segment of a company value chain includes all activities associated with converting inputs into final product form which may involve production, assembly, packing, equipment maintenance, facilities, and operations such as retailing (Thomson & Strickland 2003). The use of quality management programs will enhance the output and measures of the operation geared towards improving productivity will benefit the cost reduction aspects.
The use of ERP and other decision support systems will facilitate better resource optimization and a high level of business responsiveness based on quality and timely management information. Depending on the field of business, the value addition within the operations segment of the value chain will differ. For a manufacturing company, the transformation process of inputs to outputs will differ markedly from that of a service organization.
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