Which of the company’s costs correspond to the primary value chain activities

Review the information in Concepts & Connections 4.1 concerning Boll & Branch’s average costs of producing and selling a king-sized sheet set, and compare this with the representative value chain depicted in Figure 4.1. Then answer the following questions: 

Which of the company’s costs correspond to the primary value chain activities depicted in Figure 4.1?

The cost of goods corresponds to the primary value chain activities. It is important to note that the primary activities of value chain involve inbound logistics, operations, outbound logistics, marketing and sales, and service. The primary activities within the value chain of Michael Porter are used to provide a competitive advantage for a company in any of the five activities, so that it has an advantage in the industry in which it operates (Martel and Klibi, 2016). According to figure 4.1, to benefit from the primary activities of the value chain of Michael Porter, a company must begin with a generic value chain and identify the company-specific activities within the generic value chain. After defining company-specific activities, a company must find patterns and links between activities. This means that, if the value of one activity increases the value of a second activity, there is a link (Blanchard, 2013). A company can then gain a real competitive advantage through the coordination and optimization of related activities.

Which of the company’s costs correspond to the support activities described in Figure 4.1?

All the support activities identified in figure 4.1 correspond to the firm’s cost. It is important to note that product R&D, technology, and system development all work with what would be significant to the company to produce products faster or proficient at a lower cost. Human resources activities deal with the recruitment, hiring, training, and development of employees required for the company’s operations, and the management, accounting, and other activities that may not be directly related to the production of bed sheets are required by the General Administration (Blagun & Il’chuk, 2013). Traditionally, overhead is allocated to a job or function on the basis of direct working hours, machine hours or direct labor dollars in a work order cost system and process cost system (Martel and Klibi, 2016). Nevertheless, new technologies have changed the manufacturing environment in some companies so that the number of hours worked or dollars earned by employees is no longer good indicators of how much overhead is needed to complete a job or process products through a specific function. Activity-based costs (ABC) are used in these companies to allocate overhead costs for jobs or functions (Blanchard, 2013).

What value chain activities might be important in securing or maintaining Boll & Branch’s competitive advantage? Explain your answer.

The value chain activities that may be valuable in acquiring or securing a competitive advantage for a firm such as Boll & Branch ‘s primary activities are supply chain management, which deals with activities, costs and assets related to the purchase of the raw materials (Raw Cotton) necessary to make the sheets. It also covers operations to convert inputs to the final product. Product R&D, technology, and system development all deal with the way in which the company can produce the product faster or more efficiently and at a lower cost (Martel and Klibi, 2016). Activities related to the procurement of products and materials from external suppliers include resource planning, procurement, negotiation, placement of orders, inbound transport, storage, handling and quality assurance, many of which are responsible for coordinating with suppliers on planning, supply continuity (inventory), coverage and research into new sources or programs. Procurement has recently been recognized as a core source of value, driven largely by the increasing trends to outsource products and services, and the changes in the global ecosystem requiring stronger relationships between buyers and sellers (Blanchard, 2013).

References

Blagun, I., & Il’chuk, P. (2013). Configuration and coordination strategies of activities in the value chain. The Russian Academic Journal, 25(3). doi: 10.15535/41

Blanchard, D. (2013). Supply chain management best practices. Hoboken, N.J.: Wiley.

Martel, A. and Klibi, W. (2016). Designing Value-Creating Supply Chain Networks. Cham: Springer.