The value chain
The chain of steps which are required to make and distribute a product is called the “value chain”. Business people use the value chain to analyse in which steps most of the value is added, and in which steps most of the costs are added. Unravelling costs and value trough the total chain provides crucial information for the business strategy. It shows where the “non value added” activities are (which should be eliminated) and it shows, it shows where cost cutting is required and it shows where addition value might be added.
See Fig 3.4.
An example is the design of transport packaging: the designer should not focus on low costs of the packaging as such, but should focus on costs and value aspects later in the chain,
such as transport efficiency and the advertisement function at the shelf in the retail shop.
In terms of the P of People (of the developing countries), the value chain reveals on of the most urgent problems to be solved. The problem is that the front end of the chain for most products is be done in the developing countries, but the added value in this front end (in terms of money) is rather low (for most products not more than 10%-15%), far to low to get to a fair distribution of prosperity in our world. This Benefit / Value Ratio for the developing countries should be improved. This is not only a matter of good government of the western multinationals. It is also a matter of the local governments, which should enforce good labour conditions to local suppliers (levelling the playing ground of these local suppliers).
- the concept of Value
- product types
- product-service bundles
- the value chain
- value creation
- assessment of value
Figure 3.4. The basic idea of the EVR: combining the value chain of Porter and the LCA chain