Value Chain

In order to effectively manage the supply chain, organizations need to have a good understanding of what it means. The definition of value chain actually refers to the sequence by which companies obtain raw materials, apply value to them during production, processing, and distribution to produce a finished product, and finally deliver the completed product to customers. A supply chain represents the logical processes it takes to get an item or service from inception to delivery, often dealing mainly with aftermarket and OEM parts. A value stream map is required to identify how different elements of the supply chain work together to provide customers with a service or product. Supply chain management helps in identifying where and when to optimize internal processes and external supplier relationships for maximum productivity, while minimizing expenses and eliminating waste. It identifies choke points or areas that require improvements in the way certain activities are conducted and can lead to increased or decreased productivity.

Inbound logistics strategy deals with five steps to ensure adequate levels of quality and timely delivery of goods. The five steps include product development, identification, development of goods, thorough testing, and on-time delivery. In addition, these strategies seek to mitigate risks associated with poor product performance, supplier capabilities, delivery time, and competition. When an organization adopts an inbound logistics strategy, it builds up the basic structure of its supply chain, as well as the infrastructure necessary to support it, through a series of processes that include development of a competitive advantage, the improvement of internal processes, and the prevention of and reduction of wastage through efficient inbound logistics.

Apart from the benefit of reducing costs, another main advantage of inbound logistics is the related information and knowledge it provides about the status of goods. Goods that enter the supply chain at different phases are reflected in the information system. This allows managers to make informed decisions about the allocation of resources. Moreover, a company's stock level in particular goods also gets reflected in the system. Thus, even when a company is involved in a global supply chain, its stocks of good will be accurate. The availability of such information also makes it easier for a company to monitor its inventory levels.

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