Applying

Applyingthe
theValue
ValueChain
Chain to
toCost
CostAnalysis:
Analysis:
The
TheCase
Caseof
of Manufacturing
Manufacturing

STAGE 1. IDENTIFY THE PRINCIPLE ACTIVITIES

PURCHASING

PARTS
INVENTORIES

R&D
TESTING,
COMPONENT
ASSEMBLY
DESIGN
QUALITY
MFR
ENGNRNG
CONTROL

GOODS
INVENTORIES

SALES DISTRI- DEALER &

&
BUTION CUSTOMER
MKITG
SUPPORT

Applying
Applyingthe
theValue
ValueChain
Chainto
toCost
CostAnalysis:
Analysis: The
TheCase
Case
of
of Manufacturing
Manufacturing (continued)
(continued)
STAGE 2.
IDENTIFY
COST
DRIVERS

PURCHASING

PARTS
INVENTORIES

--Plant scale for each

component
-- Process technology
-- Plant location
-- Run length
-- Capacity utilization

-- Level of quality targets

-- Frequency of defects

R&D
COMPONENT ASSEMBLY TESTING,
DESIGN
QUALITY
MFR
ENGNRNG
CONTROL

Prices paid
--Size of commitment
depend on:
--Productivity of
-- Order size
R&D/design
--Purchases per
--No. & frequency of new
supplier
models
-- Bargaining power
-- Supplier location

GOODS
INVENTORIES

-- Plant scale
-- Flexibility of production
-- No. of models per plant
-- Degree of automation
-- Sales / model
-- Wage levels
-- Capacity utilization

-- No. of dealers
-- Sales / dealer
-- Level of dealer
support
-- Frequency of defects
under warranty

SALES
&
MKITG

DISTRI- DEALER &

BUTION CUSTOMER
SUPPORT

--Cyclicality &
predictability of sales
--Customers
willingness to wait

Using
Using the
the Value
Value Chain
Chain to
to Identify
Identify
Differentiation
Differentiation Potential
Potential on
on the
the Supply
Supply Side
Side
MIS that supports
fast response
capabilities

Training to support
customer service
excellence

Unique product features.

Fast new product
development

FIRM INFRASTRUCTURE
HUMAN RESOURCE MANAGEMENT
TECHNOLOGY DEVELOPMENT

INBOUND

OPERATIONS

LOGISTICS

Quality of
components &
materials

Defect free
products.
Wide variety

OUTBOUND

MARKETING

LOGISTICS

& SALES

Fast delivery.
Efficient order
processing

Building brand
reputation

SERVICE

Customer technical
support. Consumer
credit. Availability of
spares