If you’ve been exploring career options in business or manufacturing, you may have come across the terms supply chain management and value chain management. If you’re like most people, you’re not sure exactly what the differences are between them. Supply chain management and value chain management are both related to the processes involved in getting goods from the design board, through manufacturing and into the hands of consumers. However, each discipline views the process from a unique standpoint, and with different objectives.
Learning the difference between supply chain management and value chain management can help you gain a better understanding of manufacturing, retailing, consumer demand and other aspects of global trade.
Supply Chain Management
The objective of supply chain management is to manage the flow of products from suppliers to consumers. A whole series of related processes take place along the supply chain; they must be properly controlled in order for the company to deliver goods to end users while remaining competitive.
Supply chain management consists of five main elements:
- Planning and designing a product to meet consumer demand
- Sourcing the materials or components needed to produce the goods
- Manufacturing the product
- Delivering the product to the buyer
- Accepting returns of defective products
In supply chains, the primary focus is on costs of materials and efficient delivery. Effective supply chain management reduces costs to the consumer and increases profits for the manufacturer.
Successful supply chain managers bring great value to their employers. They contribute to the organization’s success by fulfilling roles such as:
- Choosing and managing suppliers of components or raw materials.
- Strategic planning for production and delivery to support marketing efforts, special offers and seasonal demand.
- Monitoring inventory and product flow to avoid supply shortages.
A career in supply chain management often starts by earning an MS in Supply Chain Management. This advanced degree provides a strong foundation of business knowledge, along with the specialized skills needed to compete for the most desirable supply chain management jobs.
Whether you visualize a career with a manufacturing company, service provider, retailer or operations center, supply chain management could be a great choice.
Value Chain Management
Value chain management is also concerned with the flow of goods to consumers, but takes a different approach. You might say it’s the complementary view of the process. The difference between the two is that in supply chain management, the flow is down – from the source to the consumer. In value chain management, the flow is up – from the consumer to the source.
In value chain management, the consumer is seen as the source of value. Consumers create value for manufacturers when they demand products. The focus is not on the cost of goods, as in supply chain management, but in creating value in the consumer’s eyes.
To properly manage the value chain, companies often split operations into primary activities, such as logistics and production, and support activities, such as human resources, marketing and information technology. Creating a profitable value chain requires a connection between what customers value, or want, and what the company produces.
Value chains are strategic, placing heavy focus on:
- Research and Development
- Product Testing
- Social Trend Analysis
- Economic Conditions
Value chain managers are typically responsible for analyzing issues and opportunities, and providing insight in order to maximize value created for a business. They may use supply modeling to explore options and mitigate shortages. Other duties might include preparing product plans, or collaborating with customer service and marketing departments on activities that add value to the consumer.
Careers in supply chain management and value chain management are diverse, and can be truly rewarding and exciting. Competing for positions in these related, yet distinctive fields requires a top-notch education, such as that provided by a graduate program in supply chain management.
Now that you know more about differences and similarities between supply chain and value chain management, you’ll be better prepared to choose the career that fits your abilities, interests, and career goals, and plan your educational path accordingly.