Value Chain Example

(This problem gives an example of each step of Michael Porter's Value Chain).

Assume you have opened an internet site to buy and sell used music CDs to other students. Describe the value chain for your new business:

The value chain: raw materials, inbound logistics, warehouse and storage, production, customer service, marketing and sales, outbound logistics, and finished product and storage.

Upstream management includes raw materials, inbound logistics and warehouse and storage. In the case of this online CD trading company, our raw materials would be anything we put into the business to get our finished products. This could include gaining a license to sell the CDs, as well as the CDs we must buy before we can begin selling CDs.

The next step inbound logistics would be the obtaining of the CDs before sales start; you need to have CDs in your possession before you can begin selling and buying more CDs. This process would include a method to get the CDs delivered to you. Such as setting up a system where students can sell you their music CDs and ship them to your storing location.

This brings us to the next step of the value chain, Warehouse and Storage. In this phase, we must have a place to hold all of the merchandise until the next sale. For this project, in could be a garage or basement or even an extra room in the house. The CDs can be stored and sorted there for future sales.

Production and Manufacturing does not apply for this project, since the materials are already fully made. However, the CDs need to be sorted and made ready for future sale; this could include dusting off the cases or replacing broken cases and possibly cleaning the CDs and repairing any scratches made to the surface.

At this point, we are ready for finished product storage. We have already made sure each CD is fit to be sold and have repaired any damage to the CDs. We can finish sorting them and getting them ready to be shipped off.

Outbound logistics includes moving the goods from storage into the customer’s possession. In this case, we can use the Fed Ex system and mail each package of CDs off to students as they are purchased, while keeping a record of each purchase and distribution. Marketing and Sales includes organizing and designing the website for the company. Each CD or package of CDs should be posted to the site with a description and price. There should be a clear picture of the item and an item number to make it easier to keep track of each item as it is bought or sold. The site should be designed with colors that attract the eye and draw to the attention to the products. The site should also be user friendly and not difficult for the user to figure out or access. To gain popularity, we could share the company’s information on social media sites such as Facebook, Twitter and YouTube. The purchasing process should be as easy as possible for the customer as well, since we do not want to deter them at this stage.

Customer service is also very important; the site should also offer a place for the students to ask questions, or express their concerns. This section of the site could include an email or phone number for the students to call if they have any questions about the product or any step of the purchase or delivery process. Since students will be able to spread word about the site, either positive or negative, it is very important to be helpful and prompt when answering students concerns.

Sources: Problem taken from the textbook 'Fundamentals of Information Systems' by Stair and Reynolds