One of the hardest areas to get right, but also the most important, is logistics. Every business has a logistical supply chain. However, it is surprising when you hear a business owner complain that they cannot perform a task because the delivery is late or the materials the supplier is supposed to be delivering are out of stock, so operations must wait. This means the owner is not looking at his or her supply chain – something we call a value chain.

The reason the particular business model we are about to cover is known as a value chain is that it does exactly what its name implies. It adds value to the way a business is operated, which in turn can add value higher up the chain, which would mean giving the customers extra rewards and incentives to use your business because your business has been so well fine-tuned that you can afford to treat your customers.

Rewards and incentives aimed at your customers is not the final stop either. Making sure everyone within the supply chain is rewarded, especially your own employees will also help add overall value to your business.

Do you want to know more?

The value chain is basically a business concept that breaks down each individual area of the supply chain to your business and then going out of your business to the receiver of the service or value.

Even if your business is not in control of all areas of the supply chain. In most cases, businesses just want the goods delivered so they use an external company to deal with this. However, if that external company is having difficulties delivering to you on time, then you need to break down the reasons why.

A visit to the supplier could be the answer. Putting your own efforts into making your supplier more efficient and understand the difficulties they are having may help you discover a more convenient way to solve the issue of late deliveries.

Your supplier might be too polite to tell you that your order forms are late, don’t give them enough to deliver, or the delivery times are not ideal. For them, customer service is a priority, so obviously, the supplier is trying to deliver according to your schedule. However, sometimes is better to work with the supplier to find an amicable solution that suits both sides.

This is a little like a partnership, which is the overall idea of the value chain. You bring in all external stakeholders to your business and treat them as partners because by working together, you will all grow successful businesses.

Other areas to look at in the supply chain may not seem so obvious. To open up your mind a bit more to this concept, let’s look at an example of a company in New Zealand that is using the value chain to help businesses and residential owners save money on bathroom products.

Prosan Ltd – An Example of a Breaking Down The Value Chain

Prosan Ltd in New Zealand specializes in quality hand dryers for workplace bathrooms has used the value chain to deliver on time every time. The company also deals in bathroom consumables and washroom products delivering their goods across the country. It uses the value chain to make sure that every aspect of their value chain is constantly giving its customers value.

One of the ways Prosan has broken down the value chain is by offering its customers a cheaper solution to using hand towels or paper rolls. Their clientele ranges from public to private sector businesses and some domestic households that have also been impressed with Prosan’s educational cost savings program.

This program teaches businesses how they can save money in their facilities departments. On the website, you can see the cost savings calculators that allows site visitors to realize just how much they can save by using the hand drier systems.

The cost of hand towels or rolls can be considerably reduced just by using an electronic hand dryer. It seems crazy that a business will go onto such finer detail in the value chain as to think about how it can save money on hand towels. However, if you have 20 employees, try to imagine how much it costs to continue keeping them supplied with hand towels over a year. Then think about when you could have given a loyal customer a 10% discount but didn’t because you need to hit your target profits.

Other areas Prosan can help businesses save money are in areas as simple as soap dispensers. Rather than bars of soap in the toilet that get dropped, stolen (yes in some cases), dirty quickly, and are generally considered unhygienic, a simple soap dispense with refillable liquid soap can also help save costs in this department.

So there you have it. A quick look at what a value chain is. All you need to do is break down each process in your business and look to see where modern technology or sim0ple solutions can your company save money in the long run. Some companies have their value chain so well fine-tuned, their competitors cannot understand how they are offering better rates at the top of the value chain.

It is because the business owner thinks outside the box using simple economics to make sure that every penny the business spends is well spent!

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