Transcript Accounting 3603

THE VALUE CHAIN
• The objective of most organizations is to
provide value to their customers.
• What does it mean to deliver value?
• Let’s peek in on a conversation at Joe’s
pharmacy . . .
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THE VALUE CHAIN
Well, Mr. Pharmaceutical
Salesman, your proposal looks
good, but your prices are about
5% higher than your competitors.
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THE VALUE CHAIN
That’s true, but we’re
comfortable with that
because of the valueadded that we bring to
this arrangement.
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THE VALUE CHAIN
What is that “value-added,”
and how do you convert it
into dollars?
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THE VALUE CHAIN
Blah—blah—blah–
customer service–
blah—blah—blah
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THE VALUE CHAIN
• Although “adding value” is a commonly used
buzzword, in its genuine sense, it means making
the value of the finished component greater than
the sum of its parts.
• It may mean:
–
–
–
–
Making it faster
Making it more reliable
Providing better service or advice
Providing something in limited supply (like O-negative
blood or rare gems)
– Providing enhanced features
– Customizing it
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THE VALUE CHAIN
• Value is provided by performing a series of
activities referred to as the value chain.
These include:
– Primary activities
– Support activities
• These activities are sometimes referred to
as “line” and “staff” activities respectively.
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THE VALUE CHAIN
• Value is provided by performing a series of
activities referred to as the value chain.
These include:
– Primary activities
– Support activities
• These activities are sometimes referred to
as “line” and “staff” activities respectively.
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THE VALUE CHAIN
• Primary activities include:
– Inbound logistics
Receiving, storing, and distributing the
materials that are inputs to the
organization’s product or service.
For a pharmaceutical company, this activity
might involve handling incoming chemicals
and elements that will be used to make their
drugs.
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THE VALUE CHAIN
• Primary activities include:
– Inbound logistics
– Operations
Transforming those inputs into products or
services.
For the pharmaceutical company, this step
involves combining the raw chemicals and
elements with the work of people and equipment to
produce the finished drug product that will be sold
to customers.
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THE VALUE CHAIN
• Primary activities include:
– Inbound logistics
– Operations
– Outbound logistics
Distributing products or services to customers.
For the pharmaceutical company, this step involves
packaging and shipping the goods to drug stores,
doctors, and hospitals.
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THE VALUE CHAIN
• Primary activities include:
– Inbound logistics
– Operations
– Outbound logistics
– Marketing and sales
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Helping customers to
buy the organization’s
products or services.
A pharmacy rep may
visit with drug stores,
doctors, etc. to inform
them about their
products and take
orders.
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THE VALUE CHAIN
Post-sale
support provided to
• Primary activities
include:
customers such as repair and
– Inbound logistics
maintenance function.
– Operations
A pharmaceutical firm will
– Outbound logistics
typically not be repairing it’s
– Marketing andproduct
sales (though the product may
be periodically reformulated).
– Service
The pharmaceutical company is
more likely to be providing
advisory services to pharmacists,
etc.
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THE VALUE CHAIN
• Value is provided by performing a series of
activities referred to as the value chain.
These include:
– Primary activities
– Support activities
• These activities are sometimes referred to
as “line” and “staff” activities respectively.
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THE VALUE CHAIN
• Support activities include:
– Firm infrastructure
Accountants, lawyers, and administration.
Includes the company’s accounting
information system.
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THE VALUE CHAIN
• Support activities include:
– Firm infrastructure
– Human resources
Involves recruiting and hiring new
employees, training employees, paying
employees, and handling employee
benefits.
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THE VALUE CHAIN
• Support activities include:
– Firm infrastructure
– Human resources
– Technology
Activities to improve the products or services
(e.g., R&D, Web site development).
For the pharmaceutical company, these activities
would include research and development to
create new drugs and modify existing ones.
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THE VALUE CHAIN
the resources (e.g.,
• Support activitiesBuying
include:
materials, inventory, fixed
– Firm infrastructure
assets) needed to carry out the
– Human resources
entity’s primary activities.
– Technology
– Purchasing
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In the pharmaceutical company,
the purchasing folks are trying
to get the best combination of
cost and quality in buying
chemicals, supplies, and other
assets the company needs to
run its operations.
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THE VALUE CHAIN
• Information technology can significantly
impact
the efficiency
and effectiveness
• Good
AIS value chain:
• UPS
spends
over $1 activities
billion a year
on
with which
the
preceding
are
information systems resulting in greater
carried out.
customer control over delivery, higher
driver productivity,
and lower
• An organization’s
value chain
cancosts.
be
• Bad AIS value chain:
connected
with the value chains of its
– Limited Brands tangled integration of over 60
incompatible
information
resulted in
customers,
suppliers,
and systems
distributors.
400 trailers trying to jam into a 150 trailer lot.
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THE VALUE CHAIN
Smith Supply Co.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
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For example, the inbound logistics of
Pharmaceuticals, Inc., links to the outbound
logistics of its suppliers.
Pharmaceuticals, Inc.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Customer Pharmacy
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
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THE VALUE CHAIN
Smith Supply Co.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
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And the outbound logistics of
Pharmaceuticals, Inc., links to the inbound
logistics of its customers.
Pharmaceuticals, Inc.
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
Customer Pharmacy
Inbound Logistics
Operations
Outbound Logistics
Marketing & Sales
Service
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