Value Chain Maps show how products go from raw materials to ready for the shopping cart.

Value Chain Maps show how products go from raw materials to ready for the shopping cart.

Value Chain Maps have two major categories of components: activities and linkages. In many cases the map reaches it maximum explanative power only after the user begins to add annotations such as flow measures, like duration, or the quantitative value that each step adds to the map.

Activities generally fall into three categories.  The first category represents direct activities.  Direct activities create value.  Returning to our publishing example from Monday, the activity that turns a manuscript galley into a book directly adds value (unless the book does not sell), therefore is a direct activity.  The second category represents indirect activities.  Indirect activities exist to help direct activities run smoothly. Information technology groups and human resources are classic examples of indirect activities. In our publishing example, the Human Resource Department would make sure there are proficient printers so that the book can be printed (printing is the direct and staffing function the indirect).  The third and final category of activity is quality assurance (QA). These activities ensure that the product meets the standards.  In our publishing example, the inspection of the printed books to ensure all the pages are included and that the printing is in register would be an example of a QA activity.

The second category of components is linkages.  Linkages represent relationships that can be categorized into three broad groups.  The first is temporary, also called on the spot or transactional relationships.  These types of relationships exist for the cycle of the specific transaction.  For example, a publisher that buys a specific manuscript from an author in a one-time transaction would fall into this category.  These transactions require different levels of interaction and support than a long-term contract. The long-term contract is a network relationship, which is deeper and more involved.  These types of relationships reflect high levels of trust and differing levels of support.  A publisher that has Steven King under contract would leverage different services, activities and levels of support to deliver his books to the distributors.  The first two types of linkages represent the conduits that the product moves through. The third type of relationships represents influences on value chain.  Influences can provide external control or enabling services.  Examples may include government censorship boards, occupational health and safety regulations and organizations that provide transportation infrastructure.

These two basic components are required to create a Value Chain Map.  Drawing the basic map is just the beginning understanding and analyzing the map.  Measures and metrics that provide additional information should be added.  For example, if our publishing example had three delivery channels to the consumer: direct consumer sales, distributors and direct bookstore sales, adding the percentage of product and the profit margin for each channel would be useful when deciding how to allocate support like IT.  The data that you add to the map provides the color commentary to the map’s play-by-play description.

 

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