The Value Chain

1 Cell | Firm Infrastructure

1 Cell I Human Resource Management
1 Cell | Technology Development
I Cell | Procurement

Inbound Operations Outbound Marketing Service

Logistics Logistics & Sales

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Primary Activities

4.1 Linking Outputs, Outcomes, and Organisations

The primary activities represent an expanded version of the ‘Input:Process:Output’
equation employed by production and process engineers to model their own functional
activity. A comparison of the the Value Chain and the Input:Process:Output cycle
indicates that Input equates to Inbound Logistics, Process equates to Operations, and
Output corresponds to Outbound Logistics. In the case of the Value Chain model, this has
been extended to include the downstream activities of Marketing, Sales, and Services.
This entire sequence represents the range of activities or Processes in which the
organisation is engaged - basically answering ‘what the organisation does.’ The Support
Activities represent the positioning of‘service’ type deliverables for deployment when
and as required across the chain ... each cell in the resulting matrix represents a mixture
of Primary and Support activities coming together to make their contribution to the final
‘net value’ or Margin.

The value chain model also serves to link one organisation to another in a sequence from
raw materials through to final end product (and customer). ‘Value’ creation then becomes
a successively accumulating ‘Joint Value’ as each sequential participant in the chain
makes their own contribution. Along the way, however, each such link looks to
simultaneously contribute to those further down the vertical chain but also to extract their
own benefits, and in this way they become the customer of the preceding supplier and the
supplier in turn to the next player in the chain. An industry value chain for pip fruits such
as apples and pears is outlined in Figure 5-9.

SC3. Strategic Management, Block 5

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Support Activities
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Margin
Figure 5-9 Apple and Pears (Pip Fruit) Process Value Chain ’

After picking, the fruit is moved from orchard to pack-house where it is washed, quality
checked, graded, and packed into cartons supplied by the carton manufacturer. The carton
has been produced to carefully determined specifications designed to keep the fruit in an
‘orchard fresh' state as it moves from location to location in the chain. The carton
manufacturer has these logistical needs in mind and has them set down as part of their
output specifications. They could include the following:
· the strength and rigidity of the materials used (to cope with handling and packing
stresses and damage)
· the provision made to protect the fruit from movement (and therefore bruising)
· the use of appropriate internal linings and wrappings to safeguard the contents
from contamination by liquids and gases that can degrade or destroy the quality of
the fruit and hence its economic worth - possibly causing cancellation of the
order and or termination of the contract
· the use of internal linings that allow the fruit room to transpire and breath with
safety (slowing down but not stopping normal metabolic activity)
· the carton designed to function as both a means of carriage for the fruit but also to
act as a display stand at the point of sale (the fruit can be advertised and promoted
as not having been touched by a succession of human hands - handling bruises
and contaminates)
· the outer dimensions of the carton configured to make the most economic use of
 space in the storage containers used by the transporters and freight forwarders
along the way (efficiency gains for producers, transporters, and retailers alike).

The final Outcome from building these functionalities into the carton is the delivery of
the fruit of an ‘Orchard Fresh' quality standard, and the creation of a set of values in the
deliverables that can also be incorporated into the Brand. Hence the final economic
value
of all the transactions, from farm gate to customer plate, is achieved.

These ‘mutually beneficial' transactions along the way can be depicted quite well in
Output and Outcome terms. As mentioned previously, each step in the chain can be
defined as a sequence of Outputs and Outcomes that allows for close inspection and
’supervision of performance to ensure conformity to specification. Although many of