“The value chain concept offers management a means by which they can evaluate both existing and new strategic opportunities to create customer and partner value. Essentially the value creation system is an analytical tool; it facilitates the identification and evaluation of strategic alternatives” (Walters & Rainbird, Cooperative innovation: a value chain approach, 2007).
This chapter shall not channel an extensive part of the discussion towards simply understanding the basics of the value chain. However, it would be inappropriate to proceed without establishing a concrete understanding of the essence of value chain management. In terms of the origin of its concept, the value chain is a development of what was formerly considered to be the supply chain (Rainbird, 2004).
“Value chain management is much more than just optimizing each step in the supply chain. For example, say we switch to a less expensive package. It might save money, but it may cost the customer or the end-user more to dispose of it and it might make the product look cheap, both of which would detract from the overall value of your product. Alternatively we may try reducing warehousing costs by consolidating inventories. However, if that action increases delivery time, it may force customers to inventory more items on site, increasing their costs and reducing the value of the products to them” (Mohammed, Shankar, & Banwet, 2008).
The referring of an organization and its chain members as value chain members is to build on the rudimentary idea of the supply chain and to expand it so that it covers the supplier side as well as the distributor sides of the company.
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