VALUE

CHAINS IN ECOMMERCE

VALUE CREATION

Necessarily processing, converting, improving or

adding value to a particular product (from its
original state) thereby giving more appeal, utility or
value to a new product that promises a level of
satisfaction to prospective clients or customers.

Service of value - kind of service rendered by the

firm that is being paid for by the clients.
Value creation process doing or rendering the
service itself.

VALUE CHAIN SYSTEM

the series of activities and process as well as the
supply of raw materials or needed inputs involved
in producing a product or delivering a service.

Raw materials

Backward
channel

Business
Organization

Supply Chain

Forward
channel
Distribution chain

Value chain system

C
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SUPPLY CHAIN MANAGEMENT

Series of activities involved in the production or

processing of a product or of a service
Set of activities involved before the creation or
production of a product or the kind of services to
be rendered by the business firm to the public at
large, or the specific market it wants to serve.
It
is
how
organizations
(suppliers,
manufacturers, distributors, and customers) are
linked together.
Evolving supply process

SUPPLY CHAIN MANAGEMENT

Total system approach to manage the supply

chain i.e the entire flow of information, materials,
and services from raw-material suppliers through
factories and warehouses to the end customer.
Strategic management of distribution channels
and processes that support the entire business
process.

DISTRIBUTION CHAIN
MANAGEMENT

Parties involved in moving the products from the

confines or perimeters of business producing the
product ( downstream activities)
Covers all the other parties with direct and
indirect roles in moving or causing the transfer
of the product from its origin to various places or
countries and all the way to final consumption or
user stage

VALUE CHAIN (IN BRIEF)

Covers all the areas directly and indirectly

involved in doing the business of value creation
from the stage of procuring the basic raw
material all the way to delivery of the finished
product to the customer
Process involved in converting a product from raw
material to its finished, saleable and consumable
stage.
Way of organizing the activities of a business so
that each activity adds value (value added
activity) or productivity to the total operation of
the business.
Sum total of the supply and distribution chain.

GENERAL COMPONENTS OF A VALUE

CHAIN

Primary activities operations in the business

organization where most of the value creation
efforts are made or done.
Secondary activities- support activities that
are undertaken to support the value creation
activities both at the level of supply and
distribution chain or the entire value chain
system.

PRIMARY ACTIVITIES
1. Inbound logistics

Activities associated with raw materials or inputs

procurement activities covering vendor selection,
comparative shopping, negotiating supply contracts,
and just-in-time arrival of goods.
They form part of the backward channel or supply
side of the business.

PRIMARY ACTIVITIES
2. Operations

activities involve the actual conversion of raw

materials into a finished product.

3. Outbound logistics

activity sequel to the inbound and processing

activities particularly such aspects as storage,
distribution and shipping of the finished product.

PRIMARY ACTIVITIES
4. Marketing and sales

Activity deals with prospective clients including the

ultimate customers or end-users.

5. Services

Activity focuses on after-sales services to the

customer whether end-user, a processor or secondary
producer.

SECONDARY ACTIVITIES
1.

Corporate infrastructure

2.

Human resources

3.

The support backbone activities of the business

operation.
Unique activity of matching the right people to the
job expected.

Research and technology development

Adds value in a way it improves the product and the

business processes in the primary activities.

INDUSTRY VALUE CHAINS

Set

of activities performed by
suppliers, manufacturers,
transporters, distributors, and
retailers that transform raw inputs
into final products and services
Internet reduces cost of information
and other transactional costs
Leads to greater operational
efficiencies, lowering cost, prices,
adding value for customers

E-COMMERCE AND INDUSTRY

VALUE CHAINS

E-COMMERCE AND FIRM VALUE CHAINS

INTERNET-ENABLED VALUE WEB

BUSINESS STRATEGY
Plan for achieving superior long-term returns on
the capital invested in a business firm
Four generic strategies

Differentiation
Cost

Scope

Focus

IMPORTANCE OF VALUE CHAIN

Backward channel

Composed of the companies or organization providing

raw materials or other forms of inputs for the
company to undertake its value creation process.
Suppliers of the business concern

Forward channel

Distribution side of the business or parties involved

beyond the production and storage line.
This group includes organizations acting as
distributors, dealers, agents, indentors, importers,
transport/delivery firms and other organizations
closing in to the ultimate users

REVAMPING THE VALUE CHAIN

a.

b.
c.
d.
e.

Abandon traditional business methods and shift

to e-business technologies and use of the
Internet;
Use direct-to-end-user sales/marketing
methods;
Simply product design;
Offer basic, no frills product/service;
Shift to a simpler, less capital-intensive, or
more flexible technological process;

REVAMPING THE VALUE CHAIN

f. Find ways to bypass use of high-cost raw
materials;
g. Relocate facilities closer to supplier or
customers;
h. Drop something for everyone approach and
focus on a limited product/service; and
i. Reengineer core business processes.

INFORMATION SUPPORT SYSTEM

Support activities
Organization: office automation
Human resource: skills database
Technology: computer-aided design and manufacturing
Purchasing: online link to suppliers
Inbound
logistics
Automated
warehousing
system

Outbound
Operations logistics
Process
Controlled

Manufacturing

Online
order entry
system

Marketing
and sales
Market
analysis
product
profitability

Primary activities

Services
Remote
machine
diagnostic

VALUE CHAIN IN THE E-COMMERCE

ERA

Allows the so called seamless chain scenario

or one that electronically connects various
organization either in the supply or distribution
chain side thereby ensuring timely information
sharing and efficient logistical operations both at
the supply and distribution aspects of the
business.
Expediency and efficiency both in the backward
and forward channel of the business

INTERNET TECHNOLOGY
BENEFITS:
a.
b.
c.

Powerful tool for better supply chain

management;
Critical to internal operation
Extremely useful for collaborative data sharing
with distribution channel partners online
systems reduce transactions costs.

CUSTOMER-ORIENTED VALUE
CHAIN

It takes the form of a circular model to emphasize

the philosophy that the customer and not the
business organization itself- is the focus to which
all the other activities are directed to.
Central to this kind of value chain model is that
there exists an information system directly
connecting the various functional unit thereby
allowing a scheme somehow assuring that
customers needs and wants are addressed by all
functional units and in a way, competitiveness is
assured.

Sales and
marketing

Se

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r

Information system

Pr
oc
ur
em
en

Customer
Ou
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bo
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nd
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ist

i cs

od
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P

on
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uc

Customer oriented value chain