Having defined processes within the business and having also established performance metrics deemed necessary to assess their respective health the building of Value Chains, providing a high level view of how aspects of the business operates, is essential.
A Value Chain provides the mechanism through which a sequence of relevant high profile activities or processes can be linked so that a targeted performance metric may be analysed.
Exploring a Source to Sell Value Chain for instance allows each step in the process from which raw materials are sourced through to their being changed into a product which will ultimately be sold to a targeted customer to be visualised simply.
Each step of the process has a cost associated with it as well as contributing to a change in the value (this could range from financial value to customer satisfaction), either positive, negative or no impact of the product to be sold.
Assessing the changes within the Value Chain provides the opportunity to identify parts of the process that are less than optimal and consequently adversely affect the end result. In identifying poor links in the chain remedial action can be taken to rectify potential problems.
It should however be noted that a Value Chain analysis should explore multiple performance metrics as there is likely to be some form of interdependence between them. The remediation of one link in the change for one metric may have adverse effects on either itself or another link for another metric.
The Value Chain provides a useful tool for both assessing the health of the business and the targeting of specific components that would benefit from Process Improvement or Re-engineering.