The difference between a value chain and a supply chain

The difference between a value chain and a supply chain is that a supply chain is the process of all parties involved in fulfilling a customer request, while a value chain is a set of interrelated activities a company uses to create a competitive advantage.

The idea of value chain was pioneered by Michael Porter. Five steps in the value chain give a company the ability to create value that exceeds the cost of providing its good or service to customers. Maximizing the activities in any one of the five steps allows a company to have a competitive advantage over competitors in its industry. The five steps or activities are inbound logistics, operations, outbound logistics, marketing and sales, and service.

Inbound logistics include receiving, warehousing and inventory control. Operations include value-creating activities that transform inputs into products. Outbound logistics include activities required to get a finished product to a customer. Marketing and sales
are activities associated with getting a buyer to purchase a product. Service activities include those that maintain and enhance a product’s value, such as customer support.

The supply chain comprises the flow of all information, products, materials and funds between the different stages of creating and selling a product. Every step in the process, from creating a good or service, manufacturing it, transporting it to a place of sale, and then selling it is a company’s supply chain. The supply chain includes all functions involved in receiving and filling a customer request. These functions include product development, marketing, operations, distribution, finance and customer service.

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