Value Chain Management

Length: 737 words

It is always been the goal of every businessman to minimize their operational costs to maximize their profits. Having the optimal profits of the business would mean a capital for possible expansion of the company’s operation or better yet improve their operations by investing into new machineries. Because of this, entrepreneurs are constantly searching for new ways in which their company could cut costs and put more efficiency on their production line.

Different “twists” in the organizational structure and the like are sometimes tried by top managers in order to attain high level of efficiency and effectiveness. Purchasing of cheap yet high quality raw materials is also one of the ways that companies result into to cut costs. If the company being discussed has the power to monopolize the market, then, it can set the price of their product higher in such a way that they could earn the extra profit since they have the power to dictate the market price of the product.

Some are resulting to cartel in order to avoid competition and at the same time having the power to charge higher prices. But some businesses, strange as they may seem, are use to

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hire only one or two managers on their every store branch just to cut costs. This strategy would definitely turn down their operational costs but is still very risky since the success of the business will now depend more on the competitiveness of the manager. Based form contemporary business management, a store is oftentimes supervised by more than two managers to perform all the functions and duties well.

Now the question is how does Value Chains such as Big Lots and Value City able to operate with only one or two managers that supervises the operation of the stores? It is therefore important for us to understand how this strategy works to identify if whether it can be used by other business entities. This paper aims to discuss how Value Chains operates with only one or two managers just to cut operational costs of the company. At the end of the paper, it is expected that the reader of this paper to understand how the said kind of business operation structure works.

Value Chain Management This is defined as the ‘high level’ structure of the process of receiving raw materials as inputs for the businesses, adding ‘value’ to the raw materials by a variety of procedure before selling it to the consumers (Kotelnikov, 2001). This covers all the steps in the in the operation of the company even from the purchasing of the raw materials from your suppliers’ suppliers to the consumers and later on to the end users.

The main objective of this is to give the end user the maximum value of the product but still minimizing the operational costs. The main players that are considered here in the process are the company itself, the company’s supplier and the company’s supplier’s supplier (WMEP, 2003). It is under in this process that the other “simple” employees will be motivated in such a way that they will no longer be supervised most of the time of the managers of the company. Waste reduction is also experienced by that company who shifted to value chain management.

This helps any company by saving/cutting the costs of operations and thus will have more of the resources in the future, probably, in the expansion of the company or investment on new machineries. The empowerment of the employees and the reduction in the wastes leads to the customers’ greater satisfaction together with the aid of the suppliers’ partnership. With the suppliers partnership, the quality of the product is improved, flexibility increases, the pace of the production increases and the operations are just in time (Kotelnikov, 2001).

It is said that if a company is into supply chain, the said company can switch to value chain by putting into realization the “Lean Manufacturing Principles” for this principle is the one responsible for the empowerment of the employees, cut the wastes and all the other aspects that improves the supply chain into a more “profitable” yet customer oriented company. Moreover, value chain management is not just giving more attention to the maximization of the “profits” of the company by making your product cheaper relative to the other thus attracting customers, but also not letting value of the product/s of the company to be downgraded.

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