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Value Chain Essay

1448 words - 6 pages

ARTICLE: Value chain analysis in interfirm relationships: a field study and Interorganizational cost management and relational context.

A value chain is a chain of activities for a firm operating in a specific industry. The business unit is the appropriate level for construction of a value chain, not the divisional level or corporate level. Products pass through all activities of the chain in order, and at each activity the product gains some value. The chain of activities gives the products more added value than the sum of the independent activity's value. It is important not to mix the concept of the value chain with the costs occurring throughout the activities. A ...view middle of the document...

Supply management is a relatively new concept in business. Previously, management theory suggested that the overall efficiency of the technical core or production function could be significantly improved if the core could be isolated or buffered to the greatest extent possible from an often erratic and uncertain external environment. Today, companies are working more closely with their supplier so that they can be more responsive to the changing needs of their customers.
The emergence of tactical decision making such as make-or-buy decision more complicated than the neo-classical economic perspective indicates. The development of cost management techniques that cross boundary between buyers and suppliers is to reduce cost through collaborative efforts. Tactical decisions making consists of choosing among alternatives with an immediate or limited end in view. Some tactical decisions tend to be short-run in nature. However it should be emphasized that short-run decisions often have long-run consequences. For instance, a company is considering producing a component instead of buying it form supplier. The immediate objective may be to lower the costs of making the main product. This tactical decision may be a small part of the overall strategy of establishing a cost leadership position for the firm. Tactical decisions are often small-scale actions that serve a larger purpose.
Both articles were discussed about relation of value chain analysis as a tool to improve supply chain operations by performing benchmark analyses, strategic what-if analyses and cost monitoring. To be more effective of cost management, firms enact interorganizational cost management during product design and the characteristics of the relational context associated to them. The most important and indispensable among firms in business relationships are interfirm relationships and networks. There are four elements required to have for the successful implementation of a supply chain management program. i. trust, ii. long-term relationships, iii. information Sharing and iv. individual strengths of organizations.
Dekker was focused on the use of value chain analysis in buyer-supplier relationships for coordinating supply chain interdependence. VCA is regarded as a core analytical tool of strategic management accounting (SMA). The value chain introduced by Porter (1985) has been analyzed by SMA. The core idea of the analysis is to break up the value chain into strategically relevant segments to better understand the behavior of costs and the sources for more efficient. Identifying supply chain improvements may result benefit and investments from coordination of supply chain activities, the exchanges of sensitive cost information and the division of costs. The role of management accounting also important in interfirm relationships, there are; i. the make-or-buy decision that can lead to the initiation of a partnership, ii. the use of management accounting in the...

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