2-5.1 Importance of Value Chain Mapping and Analysis

Value chain mapping and analysis are the keys to unlocking process gridlock and achieving maximum process effectiveness. To begin, the item manager and the selected suppliers map the complete steps of providing a material or service, proceeding from the supplier to the end user, including the delivery and use of the material or service. What emerges is a picture of the intricate interlocking steps that span the supplier/purchaser relationship. The opportunities for change emerge from seeking three goals:

• Achieving the best/lowest total costs, including all process, transactional, and handling costs for the entire supply chain.
• Pursuing the fastest cycle time performance.
• Identifying and implementing “best-in-class” practices for each core activity, subprocess, or process.

The main purpose of value chain mapping and analysis is to create value that exceeds the cost of providing the product or service and generates a profit margin. The benefits of implementing various SCM improvements are quantified; bottlenecks and high- / low-cost value processes are isolated. Value chain mapping and analysis also provide an assessment of competency in core areas. KPIs for each category are used to identify efficiency and effectiveness.