The physical value chain
The physical value chain refers to the sequence of activities associated with delivering physical goods from the suppliers to the consumer, in which the raw materials, or commodities, are transformed into a finished product ready for sale. This includes the production and assembly of the product, packaging, warehousing, transportation, and distribution. As products become increasingly complex, the value chain expands, incorporating activities such as planning, design, engineering, testing, research and development, and sales and marketing. Through the physical value chain, organizations are able to leverage the raw materials and commodities they acquire to create products they can offer to their consumers at a price they believe they can make a profit on.
The physical value chain allows organizations to capture value by delivering an end product that customers are willing to pay for. This value is generated from the operations associated with transforming raw materials and commodities in the production process. Thanks to the availability of advanced technology, supply chain activities can be more efficient and electronically automated. For example, tools such as Transportation Management Systems enables inventory to be tracked as it moves through the value chain, including receiving, moving, and shipping. In addition, radio-frequency identification (RFID) technology can be used for tracking high-value products such as pharmaceuticals and consumer electronics.
In addition, improving operations in the physical value chain can help to increase sales and customer satisfaction by reducing delays in receiving the product. By introducing effective supply chain management solutions, organizations are able to reduce back orders, returns and disruptions in the delivery of their products. Other benefits of Supply Chain Management include improved customer service, better management of information and visibility in supplier management, improved inventory accuracy and reduction in waste.
The physical value chain is an integral part of the overall value chain, as it is responsible for transforming the raw materials into the finished product. It is responsible for ensuring that the product is delivered on time and in good condition. Organizations need to ensure that the activities in the physical value chain are managed properly and efficiently in order to optimize the customer experience and create customer loyalty. By improving the physical value chain, organizations are able to increase the customer satisfaction and achieve their desired business outcomes.
