Value Chain vs. Supply Chain: What's the Difference?

October 10, 2023

Understanding the Supply Chain and Value Chain

In the evolving landscape of warehousing and operations, at Exotec, we continually hear about the prominence of the “supply chain” and the “value chain.” Both are fundamental to business success and, in many ways, they are intricately linked. In the backdrop of rapid supply chain disruptions differentiating between these two has become a crucial stepping stone for enterprises striving for success.

What Is Supply Chain?

At its core, the supply chain represents the continuum of processes driving the production and distribution of commodities to end-users. Spanning from the initial procurement of raw materials to the conclusive act of delivering products, every phase is meticulously interlinked. In today’s interconnected global stage, an optimized supply chain isn’t just an advantage—it’s a fundamental imperative.

Yet, in our experience, we’ve seen contemporary enterprises grapple with maintaining streamlined supply chains. These challenges range from precise demand predictions to intricate logistics propelled by worldwide operations, accurately predicting future demand, navigating labor shortages, and finding space for inventory storage.

What Is Value Chain?

Introduced by Michael Porter in the 1980s, the value chain has become foundational to modern business strategy. Porter’s paradigm offers a detailed view into the suite of activities businesses engage in to deliver a competitive product or service. But it’s more than just production—it’s about creating and adding value at every critical juncture.

Distinct from the supply chain, which traces the logistical journey of a product, the value chain emphasizes value enhancement throughout a product’s lifecycle—from its ideation to post-purchase customer service. This framework allows companies to ensure each activity, be it design, production, marketing, or support, is optimized for delivering the utmost value to the end consumer.

Orders being fulfilled with the Exotec Skypod system at Ariat's warehouse — Orders being fulfilled with the Exotec Skypod system at Ariat’s central distribution center

Ariat’s Journey: Bridging the Gap Between Value and Supply Chains

In the constantly evolving world of business, understanding the nuances between value chains and supply chains is vital. Ariat, a stalwart in equestrian footwear and apparel, stands as a testament to how these two chains, when strategically aligned, can pave the way for transformative success.

The Challenges:

Balancing Supply and Value Chain Demands: As Ariat experienced surging sales and an expanding product catalog, they felt the pinch on both fronts: the operational complexities of their supply chain and the need to continually enhance their value proposition. Matt Hardenberg, Vice President of Distribution at Ariat, noted the intensifying stress on their distribution network, mirroring the challenges businesses face when their supply and value chains grow in tandem.

Efficient SKU Management: In the face of a classic supply chain challenge, Ariat’s extensive and continually evolving SKU portfolio required a system that could keep pace and optimize storage capacity.

Human-Centric Value Addition: A cornerstone of the value chain, Ariat aimed to enhance the well-being and productivity of its staff. The objective was clear: transition employees from labor and time-intensive tasks, such as walking several miles each day in search of ordered goods, to roles that add more value to the company and its customers.

Results with Exotec:

Strategic Repositioning:

In aligning its value chain, Ariat shifted 80% of its picking labor to roles that emphasized strategic contributions and added more value.
Exotec’s solution allowed Ariat to seamlessly manage the influx of orders during seasonal peaks, facilitating efficient shipping processes while capitalizing on additional marketing opportunities.
From a supply chain perspective, ensuring any SKU could be accessed within two minutes was paramount, enabling prompt shipping for time-sensitive orders.

Modular Adaptability:

Even amidst the pandemic’s challenges, the system’s deployment took only 11 months, demonstrating agility in their supply chain adaptation.
Showcasing Exotec’s scalability in real-time, Ariat expanded its robotic fleet significantly within minutes in 2022.

Elevating the Customer Value Proposition:

Enhancements in Ariat’s shipping offerings, like next-day shipping and extended order cut-off times, underlined a bolstered commitment to customer value.

Partnering with Exotec enabled Ariat to skillfully navigate the intricate dance between value and supply chains, culminating in optimized operations, superior employee experiences, and a heightened customer service standard. For a comprehensive look at Ariat’s transformative journey, delve into the full case study here.

The Difference Between Supply Chain and Value Chain

Although both these chains play a cardinal role in business undertakings, their focus varies. The supply chain underscores a product’s comprehensive journey, enveloping every external facet from procurement to distribution. In contrast, the value chain hones in on a company’s internal mechanics, guaranteeing value augmentation at every interval.

Skypod robots retrieving order goods from storage racks within a central distribution center — Skypod robots retrieving order goods from storage racks

Optimizing the Value Chain with Exotec’s Skypod: A Deep Dive into Our Supply Chain Solutions

In the intricate dance of the value chain and supply chain, where each step contributes to overall business success, Exotec’s Skypod System emerges as a game-changer. By directly addressing key elements of both chains, our technology refines and elevates operations, ensuring businesses can meet and exceed their goals.

1. 3D Mobility and Robotics within Supply Chain Dynamics: Traditional automation within supply chains rely on 2D systems that often limit storage and retrieval efficiency. Our Skypod System, with its 3D robotic mobility, breaks this mold. By accessing bins at any height and ensuring rapid item retrieval, the Skypod system offers a supply chain solution that optimizes space and time, critical elements in today’s fast-paced business environment.

2. Adaptability & Efficiency: The Skypod system’s adaptability is a result of our software leveraging advanced algorithms that are continually refined. We tirelessly analyze data to enhance our software, collaborating closely with our customers to ensure it delivers value at every touchpoint, optimizing every facet of operations.

3. Seamless Integration: Recognizing the importance of seamless operations, our Skypod system’s API-driven architecture integrates seamlessly with most existing Warehouse Management Systems (WMS). By ensuring a smooth transition, we ensure that businesses can quickly leverage the benefits of the Skypod system, enhancing both their supply chain efficiency and value proposition to clients.

4. Safety and Ergonomics: Any discussion on value chains is incomplete without considering the human element. With the Skypod system, robots take care of repetitive, physically intensive tasks such as traveling several miles each day in search of ordered goods within an enclosed environment. This improves working conditions, boosting workplace safety, and mitigating labor shortages. The result is a more enjoyable workplace while making the entire operation more productive.

5. Scalable Modular System: As businesses grow, their supply chain complexities often grow with them. The Skypod system’s modularity addresses this directly. Unlike traditional systems, the Skypod system decouples storage from throughput, enabling businesses to save on capital expenditures by being able to expand one without having to expand the other. Need more throughput? Simply add robots within minutes. Robots can even be rented to meet peak season demand. Storage racks and picking stations can be added within a few short weeks with minimal disruption to ongoing operations. This all keeps businesses prepared to scale with confidence into the unpredictable future.

In summary, Exotec’s Skypod System isn’t just another piece of warehousing technology. It’s a strategic asset meticulously designed to optimize both the value chain and supply chain. By blending cutting-edge technologies, we offer businesses the tools to lead in their respective industries, ensuring efficiency, adaptability, and unparalleled value creation.

Exotec’s Approach: Bridging the Gap Between Value Chain and Supply Chain

In the intricate dance of modern business, understanding the nuances between the value chain and the supply chain is pivotal. Exotec stands at the forefront, offering solutions that not only recognize this distinction but seamlessly weave them together for maximum operational efficiency.

We don’t just provide technology; we imbue it with a vision. At Exotec, our holistic perspective ensures that while our partners achieve unparalleled efficiency in supply chain management, they also optimize each element of their value chain. This dual focus sets businesses up for current and future success in the face of ever-changing business, market and supply chain dynamics.

In a world where the lines between the value chain and supply chain are increasingly blurred, our commitment is to ensure they work in harmony. As businesses grapple with the complexities of balancing operational needs with strategic imperatives, Exotec emerges as a beacon, guiding them to achieve both with unmatched excellence.

The future will see even more intertwining of the value and supply chains. And with Exotec as your partner, you are not just prepared for this convergence – you lead it. Dive deeper into how our solutions bridge the value and supply chain gap, ensuring your business remains a trailblazer in the industry.

With Exotec, your journey through the intricacies of value and supply chains isn’t just about navigation—it’s about leadership and setting benchmarks for the future.

Glossary:

Supply Chain: A system of organizations, people, activities, information, and resources involved in producing a product or service and moving it from supplier to customer.
Value Chain: A model that illustrates the series of activities a company undertakes to create a product or service, focusing on the value-addition at every stage.
SKU (Stock Keeping Unit): A unique identifier for each distinct product and service that can be purchased. It aids in inventory management and tracking.
3D Robotic Mobility: Advanced robotics capability that allows robots to move in three dimensions, enhancing efficiency in warehousing environments.
Warehouse Management System (WMS): Software that controls and administers warehouse operations, from inventory management to order fulfillment.
Ergonomics: The study of designing and arranging workspaces so that people work efficiently and safely.
API (Application Programming Interface): A set of rules that allows different software entities to communicate with each other.
Picking Labor: The process of selecting and gathering products in a warehouse to fulfill customer orders.

FAQs:

What is the difference between supply chain and value chain?
- The supply chain primarily focuses on the external processes that a product or service undergoes as it moves from the initial supplier to the end customer. In contrast, the value chain delves into a company’s internal operations, detailing activities that add value to the product or service.
Why is it essential to understand the difference between value chain and supply chain in business?
- Recognizing the distinction enables businesses to optimize both their internal and external processes. This dual optimization can significantly enhance a company’s competitive advantage and profitability.
Can a company’s supply chain and value chain be interconnected?
- Yes. While they cater to different aspects, optimizing one often leads to enhancements in the other, as both are inherently intertwined.
How do systems like Exotec’s Skypod system influence the supply chain and value chain?
- The Skypod system enhances the supply chain by offering flexibility and speed in order fulfillment. It impacts the value chain by improving internal processes, leading to better customer experiences and added value.
What is 3D Robotic Mobility in Warehousing?
- 3D Robotic Mobility refers to robots’ capability to move in three dimensions – horizontally, vertically, and depth-wise. This increases efficiency, especially in high-density storage warehouse environments like those facilitated by Exotec’s Skypod System.
How does Exotec prioritize safety and ergonomics in its systems?
- With the Skypod system, robots take care of repetitive, physically intensive tasks such as traveling several miles each day in search of ordered goods within an enclosed environment. This improves working conditions, boosting workplace safety and mitigating labor shortages. The result is a more enjoyable workplace while making the entire operation more productive.
What is the significance of a scalable modular system in warehousing?
- A scalable modular system allows warehouses to easily expand or reduce storage based on needs. Our modular system enables businesses to seamlessly adapt to whatever supply chain, market, or business changes come their way and to be prepared to quickly take advantage of new opportunities such as expanding inventory, expanding to new markets, or introducing new products.