Logistics Value chain

Value chain is the horizontal perspective on how an organization employs a sequence of processes through which the value of a product is enhanced by properly distinguishing a product or service from others in the market in a way that consumers will favorably value it and be willing to pay for at the stated market price or cut costs to a minimum where the product cannot be sufficiently distinguished.

Customers define value as the benefit or advantage that a commodity will offer him or her. The value of a product to a consumer is subjective and therefore not relative to price. The value of education is of benefit in the long term making the tuition fee minimal in the long term.

Producers define value as what consumers are willing to pay for a product after processes have been employed to enhance product suitability to the customers. The difference between production cost and market prices gives a margin reflecting to the producer how much value he or she has added to a product.

If a product is viewed as of benefit to consumers then they are willing to pay for the prices dictated by such needs as offered by the producer. If consumers show less interest in a product the producer tends to lower the price of that commodity.

Logistics is closely related to supply chain management. Supply chain management involves all the process that a producer has to look into to finally have a commodity that the customers are willing to purchase at the recommended retail price. This include availability and cost of raw materials, through the value adding process, to the finished product and finally to the market place. In the bigger picture every step adds value to the final product and adding value in each stage is a just but a small part of the overall picture of the supply chain.

Supply chains compete rather than individual firms in current markets. This is where logistics come in such that an organization will deal with a particular supply chain only if it adds value to it end product with sufficient profit margins.

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