Business Basics –
Profit from the “Value Chain”?
By Joanne Mansell.
We all know that any chain is as strong as its weakest link. The value chain is the key to profit in your business – which links do you need to reinforce or redesign?
article is an overview of the value chain and will give you ideas on where to
reinforce or redesign your business. Like
many useful business models, the value chain comes from the work of Michael
points about the value chain:
has a value chain, with the same elements.
The differences are that businesses may outsource or de-emphasise certain
the value chain of your competitors you may gain insights into how to better
structure your own business.
The value chain
relates your business to your customers. Even if your customer is an individual you are still linking
to them by performing or assisting with an activity on their value chain.
These tend to be based around saving time or money for the customer by
doing a job better than they could.
The value chain
is one of the most important concepts in business to grasp.
part of business profitability is margin. How well you manage the components of the value chain
ultimately determines your margin.
The value chain
is broken up into Support Activities and Primary Activities.
(“systems”) being quality systems and management systems including accounts
and payroll. These admin systems (payroll and accounts) are often seen by
small business as a “necessary evil” and are addressed with diligence and
efficiency. GST and BAS have forced
many small businesses into looking at “the books” quarterly – ideally you
will be doing checks monthly against targets and your business plan.
Resource Management is
crucial to small business. Everyone
involved in the business represents the business.
If you are hiring someone to do the “little jobs” like banking,
typing or answering phones beware that you get what you pay for and what you are
paying for is the first impression your customers receive of you.
Beware of legal action and responsibilities with insurance, dismissal and
training of employees.
Development can be
a great way for small business to appear bigger.
1800 and 1300 numbers are becoming affordable, as is having your own fax
machine and website. Investing in
machinery (even a computer or upgrades) can streamline other processes such as
ordering, accounting and marketing.
of supplies is important to small business.
Whether it is not running out of paper when you have reports to print or
as major as raw components to manufacture your product you need quality supplies
at a minimum cost and possibly even on credit or consignment.
to be a concern mostly to manufacturing or producers of a product and not to
services, many of which is small business.
Your business design should account for information as an inbound
commodity – whether it is orders, leads, feedback, suggestions or information
(such as trends) you need to have systems for inbound logistics.
are the core of most businesses. This
is what produces the product or output of your business.
The temptation to small business is to spend time and money here at the
detriment of other elements of the value chain.
logistics how to
you deliver your product to your clients? Small
businesses who are making the most of technology can fax or email paperwork or
intellectual property type products which makes them competitive by their
responsiveness. In this “no
waiting” generation it may “pay” you to spend more on outbound logistics
(couriers or express post) than providing a slower or less reliable product
delivery. Consider the linking of outbound logistics with service –
would it be of interest to your customers to have you install the product rather
than just deliver it?
and Sales is an
often overlooked area for small business.
Particularly with a small budget there is a tendency to dabble and hope
or rely on word of mouth. There is
truth in statistics that it is cheaper to get a repeat sale from a client than
win a new client. It may appear
easier to get new leads by new advertising but perhaps the maximum benefit is in
increasing lead generation (changing the wording of advertising) or conversion
isn’t just for service industries. Where
else does service fit along your value chain – for many businesses this will
be with outbound logistics. What
information could you provide to customers?
summary – some questions to get you started in maximising the profit in your
could/should you change about YOUR value chain?
elements can you outsource?
the key value chain element for your business – what do you DO?
are you doing well?
aren’t you doing well?
help you streamline or redesign your value chain?
inbound logistics need to be added, updated or revised?
you provide better service?
does your value chain fit with CUSTOMERS?
keys in reaching any customers relate to satisfying a need within their value
are you involved with on your customers value chain?
reflected in your marketing?
a better (or additional) place to link with your customers value chain?
How does your value chain compare with COMPETITORS?
Is there technology or systems you are not taking advantage of?
How do they handle in or outbound logistics?
What HR procedures do they have?
How are they marketing their connection with customers value chains?
Are you connecting to customers in the same way as those you perceive as competitors?
more information on these concepts, or to book a business or life coaching
session with the author, Joanne Mansell please phone 0416 181 654.
The first half hour consultation is complimentary.
For more articles (including business planning basics) see www.kaizencoaching.com.au
Mansell, Kaizen Coaching – “Mind, Body, Life Fitness”
(c) Kaizen Coaching 2000-2014. Trademarks Kaizen Coaching, Building an Extraordinary Business and Sportsmind are used with permission of their respective owners.