4 Examples of a Value Chain

John Spacey, October 24, 2018

A value chain is a sequence of activities that each adds value to a product, service or experience. Any activity that generates more valuable outputs than the cost of its inputs can be part of a value chain. Value chains are used to model economics at the level of an industry or firm. Any business model that is not part of a value chain can be considered rent seeking as it adds no value. The following are illustrative examples of a value chain.

Products

At the highest level, the production of a product typically has the following value chain.

Supply	Inputs required to make the product such as materials, components, parts, energy and natural resources.
Logistics	Processes of supply and fulfillment of orders including procurement, warehousing, transportation, distribution, reverse logistics and field service.
Production	The development and manufacturer of products. It is also common to separate product development as a separate value added step.
Demand Generation	The process of selling the product including all marketing and sales activities.
Distribution	The process of reaching the customer to deliver your obligations to them.

Services

Services are based on various layers of intangible value.

Supply	Inputs including energy, equipment and physical elements of a service, known as service tangibles, such as the food served by a restaurant.
Service Delivery	The operational work of delivering a service such as the logistics and kitchen operations of a restaurant. In many cases, information technology is viewed as a value added part of the service. For example, an airline would have no value without its systems for managing bookings, flights and other aspects of operations.
Marketing & Sales	The process of developing, branding, distributing, promoting, pricing and selling services.
Customer Service	Any touchpoints with the customer in the end-to-end customer experience adds value.

Ecommerce

The ecommerce value chain for sales of physical products. This differs from other ecommerce models such as Software as a Service.

Supply	In some cases, a manufacturer or service provider sell their own goods by an ecommerce channel. In this case, they add value at the supply level.
Inbound Logistics	The process of purchasing goods, processing inbound deliveries and warehousing goods.
Marketing	The promotion, pricing and sales of goods using ecommerce channels or retail shops using a bricks and clicks model.
Outbound Logistics	The process of assembling the order and delivering it to the customer.
Customer Service	Handling customer inquiries and requests such as returns.

Software as a Service

Software as a Service, or SaaS, is a business model that offers software that is hosted on a cloud platform. This allows customers to access scalable software without investing in data centers, hardware and software installations. The value chain for SaaS is mostly about technology with a thin layer of marketing and customer service. Some SaaS products sell themselves with word of mouth while others employ large global sales teams.

4 Examples of a Value Chain

Ecommerce

Economics

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