Value Chain Analysis Essay

1172 Words 5 Pages
Many organizations do not achieve the profits they anticipate by using incorrect methods or models to determine the true costs of products and services. This failure to correctly assess the costs associated with business not only affects the profit margin, but the organizations competitive advantage as well. In order to asses whether the organization is failing to realize optimum resource allocation, the organization should look at the methodology first popularized by Michael Porter titled the Value Chain Analysis (VCA). "VCA seeks to define the entire chain through which goods are supplied to a customer" (Booth, 1997, 2). The VCA can be a powerful tool in increasing an organization's competitive advantage; by correctly …show more content…
It is important to note however, that the value chain can be applied to service industries as well. For example, in healthcare, the raw materials would be replaced with patients, in the insurance industry the uninsured drivers could be considered raw materials. Stabell and Fjeldstad (1998), stated that inbound logisitics can even even apply to technology as inbound logistics can be "…receiving, storing, and disseminating inputs to the product" (p 417). Inbound logistics could be simplified by stating that it is the most basic requirement to begin the organization's processes; be it raw materials, patients, customers, or inputs. Let us assume that the organization is going to develop a new technology for physicians. The organization is going to develop a form of wireless PDA that is about the size of a clipboard. Instead of carrying a paper file into every patient appointment, the doctor will have this smart-pad that they can use to input patient data. Throughout the day, the physician hooks up the smart-pad to his office PC through a USB cable, and the information is transmitted into the patient history. Inbound logistics would include identifying what materials will be needed as well as what software will be needed to support the new technology. Inbound logistics would need to determine what components will be outsourced, which will be built

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