VALUE CHAIN SYSTEM
The value chain concept was created by Michael Porter and explained in his book “Competitive Advantage”, published in 1980. The value chain is a series of activities that create and build value- culminating in the contribution of total value to the organization. Porter used the concept of value chain as a systematic approach to examining the development of an organization’s competitive advantage in the marketplace. In using the value chain concept, the total activities undertaken by a business are split into Primary Activities and Support Activities. Primary activities relate to inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities include procurement, technology development, human resource management, and firm infrastructure. INTEL
No doubt, Intel has emerged as the market leader in the design and manufacture of microprocessors, having an almost unbeatable advantage over its competitors. Yet Intel has realized that the best way to retain its market position is to make it easy and efficient for people to do business with the company. Since 1998, Intel has developed and used an e-business strategy to maintain relationships with its customers, employees and suppliers. The company’s goal is to become a 100% ‘e-business enabled’ corporation. In terms of the value chain concept, Intel has made remarkable progress and reaped tangible benefits in the volume of business it does on the Web, as well as created savings of time and money for both itself and its customers. (Pallato, 2001) Let us analyze Intel’s strategy in terms of the primary value chain activities: Inbound Logistics
Prior to implementation of its e-business initiative, Intel used the traditional methods of pen, paper and telephone to place and track its supplies and suppliers. Furthermore it ordered supplies only in response to customer orders. Consequently the company lost out on many business opportunities, where it could not meet emergency demands, changing customer needs or large orders for want of adequate stock. However this all changed with the launch of its e-business initiative in 1998. Today, Intel uses the Internet to speed the flow of information between itself, its suppliers and customers. By tracking its deliveries and supplies over the Web, the company has reduced its order and manufacturing lead times. It tracks its supplies from various countries all over the world. Intel’s goal is to move towards a 100% automated system for its supplies and purchases. Operations
Intel uses its Web based e-business system to aid in the quick exchange of details and queries pertaining to customer orders, design specifications and proprietary information. Design specifications and models can change every 6 months. Intel has many made-to-order deals with big volume direct customers and this almost instantaneous system can shave off a week or two in design and delivery of the final product, enabling the product and its suppliers to take full advantage of its novelty and price in the market.
Intel uses its web based system to track deliveries to customers and resellers. It can thus expedite delivery by noting friction points, ascertaining the reasons and smoothing shipments there. Using its ‘vendor driven’ inventory management system, Intel can maintain its inventory levels to respond to fluctuating customer demand, make reliable forecasts and shipments on time. Marketing & Sales
Intel has also improved time to market for its products to customers. By putting its customer order entry system on the Web, it has reduced errors by 75%. It can take orders round the clock, where more than 25% of its transactions occurring after normal business hours. Its ability to establish links with over 75,000 system resellers worldwide has led to considerable increase in its sales volumes. Online sales doubled from US$ 1 billion to US$2 billion a month. Hundreds of Intel suppliers...
References: 1. http://www.termpapergenie.com/intels.html.
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