Value Chain and IS/IT

1. Value Chain and IS/IT • Discussion questions • What is the Value Chain (VC)? • Identify the primary activities of the VC • Identify the secondary activities of the VC • How is the “service” activity different from “marketing and sales”? (Don’t “sales” people provide “service”?) • Differentiate between “procurement” activity and “inbound logistics” • Why study about Value Chain in an IS/IT class? • Value Chain Linkages (Internal and External)

2. Value Chain Primary Activities • Inbound Logistics • Involve relationships with suppliers and include all activities required to receive, store, and disseminate inputs • Operations • All activities required to transform inputs into outputs • Outbound Logistics • All activities required to collect, store, and distribute output

3. Value Chain Primary Activities (Continued) • Marketing and Sales • Inform buyers about products/services • Induce buyers to purchase products/services and facilitate their purchase (Stimulate demand for products/services) • Collect and pass on feedback from customer back to various units in firm and estimate expected sales volume • Service • Activities required to keep the product/service working effectively for the buyer after it is sold and delivered

4. Value ChainSupport or Secondary Activities • Procurement • Acquisition (actual purchase) of inputs, or resources, for the firm • Human Resource Management • Activities involved in recruiting, training, developing, compensating, laying off personnel

5. Value ChainSupport or Secondary Activities(Continued) • Technological Development • Technology purchased/adopted/developed to bear in the firm’s transformation of inputs into outputs • Infrastructure (General Administration) • Activities include accounting, legal, finance, planning , public affairs, government relations, quality assurance and general management

6. Value Chain and IS/ITExamples • Inbound Logistics • Automated Warehousing System; JIT inventory systems • Operations • Computer-Controlled Machining Systems • Outbound Logistics • Automated Shipment Scheduling Systems • Tracking Systems

7. Value Chain and IS/ITExamples (Continued) • Sales and Marketing • On-line Ordering Systems for customer • Sales forecasting • Service • Equipment maintenance systems • Procurement • Computerized Ordering Systems and EDI

8. Value Chain and IS/ITExamples (Continued) • Technology Development • Computer-Aided Design Systems • Human Resource Management • Multi-media database systems • On-line recruiting • Intranet for employee benefits (retirement benefits, medical benefits etc.) • Infrastructure • Electronic scheduling; financial systems, accounting systems, decision support systems etc.

9. Value Chain LinkagesInternal and External • Internal Linkage: Efficiency and/or competitive advantage gains due to links between two or more VC activities of a firm • Example: (Operations and Outbound Logistics; Information exchanged – Completed order status) • External Linkage: Efficiency, partnership and/or competitive advantage gains due to link between one VC activity of firm and external entity (e.g., customer, supplier etc.) • Example: Ford ‘s Supplier and Accounts Payable (Infrastructure); Information exchanged – Payment Information)