value chain

(redirected from Value Chains)

Value Chain

The set of activities whereby a company take raw materials and turns them into finished products by adding value at each step. For example, take a conglomerate that controls every step of a supply chain. It may have a timber division that cuts down trees, which adds value to the wood because it can then be used. It then sends the timber to the milling division, which adds value by refining the timber into planks of wood. The carpentry department refining the planks adds value by making them into a table, which can then be sold to a customer.

The value chain analyzes how much value each activity adds to the final product against how much each step costs. The two may not be equivalent; making a table may add a great deal to the wood's value without costing very much. Analyzing the value chain is one strategy a company can use to identify and cut costs in a way that maximizes profit.

value chain

References in periodicals archive ?
Manufacturing Paradoxes: Foreign Ownership, Governance, and Value Chains in China's Light Industries.
For LDCs, this means that they can now engage in one or more stages of the production process as they do not need to know everything about a final product to participate in global value chains.
Suppliers have value chains that create and deliver the purchased inputs used in the customer's value chain.
The health care value chain is constructed of component value chains (employers, MCOs, hospitals, physicians) that interconnect and form a new one focused on the patient.