Porter Supply Chain Model

Firms create value trough series of activities. These activities are described as a value chain which includes specific activities for adding value to the products and services the firms’ offer. Michael Porter presents a value chain framework as a model that assists in analyzing the various functions cohesive and interrelated to each other in such a way that each function creates value to the products and service. This whole process of value creation or some specific activities can result in a sustainable competitive advantage for a firm.

The value chain activities can be segregated into the primary activities and support activities. Primary activities called line functions are further divided into inbound logistics, operations, outbound logistics, marketing and sales, and services. Inbound logistics are such activities relating to the receiving, storing, inventory management, and transportation etc. in other words inbound logistics are functions which are required up to the level of availability of raw material in the form in which it is required and at the place where it is required for the start of production. Operations are the activities needed to be performed from the level of raw material to the level of making the product or service available for sale. in its wider spectrum operations include assembling, machining, packaging, repairing the equipments, quality control, and testing. More specifically operations include all activities needed to convert the inputs into the outputs. The third major function to be performed in the primary activities is out bound logistics. Such functions include all happenings needed to make the finished products available in the customer’s stockrooms. Examples include warehousing, order completion, transportation, and distribution network. Marketing and sales are the functions to be performed for inducing buyers to purchase the product through advertising, publicity, product promotions, and public awareness programs. Further it includes making the products available to the final consumers at their door step through extensive retail management. It also includes pricing decisions. Service is the last but not least a very important primary activity which adds value to the products after they were actually delivered or sold to the customers. it include customer support, repair and maintenance, installation of the products at the customer location, training the customer to use the product, spare parts management, and up gradation of the products etc.

[large]Support activities are also called staff functions. In accounting terms they are referred to as overheads. The first support activity is the procurement function and includes procurement of raw material, parts, services and assets etc. The second major support function is human resource management which encompasses the activities related to recruitment, development and compensation of the employees.  An important function categorized in support activities is information technology management which consists of technology innovation, supporting research and development, designing the sound and efficient reporting system, and process automations. Other support activities can be grouped and in overall can be described as the infrastructure. The firm adds value to its product and service through its sound, transparent, efficient and effective infrastructure setup related to general administration, financial management, accounting, total quality management, and planning mechanism.