Lesson 1, Topic 1
In Progress

Porters value chain explained


Use the Porters tool (see the Miro board) in conjunction with this lesson to understand how value is created and the individual activities in your business are connected.

Primary (operational) activities
Inbound logistics
Also known as inventory, these are the activities that receive materials from suppliers. Even service-oriented businesses (pest control, barbers and hypnotherapists etc.) can have inventory. How are these materials received, stored, distributed (internally) and replenished? Value is maximised through relationships with suppliers.

Also known as fulfilment, these are the activities that create value. Value is maximised through optimising your fulfilment operating system.

Outbound logistics
Also known as delivery, these are the activities that connect your operational output with your client. These activities might be internal or external. For example, if you sell a product you may rely on a postage service for the actual delivery system. Value is maximised through systems (internal) and relationships (external).

Marketing and Sales
These are the activities that connect your organisation with clients and persuade them to engage you over a competitor. Value is maximised by the ability to demonstrate how well your organisation solves your client’s problems. When the connection between problem, solution and value is clear then the selling process becomes mechanical.

Also known as customer service, these are the activities that clients experience during the onboarding, delivery and post-delivery stages. Value is maximised through client satisfaction.

Secondary (support) activities
These are the activities that produce (order) inbound logistics. Value is maximised by negotiating the best rates.

Human Resources (HR)
These are the activities that relate to your people system. How do you hire, onboard, develop, promote, engage, motivate, reward, retain and fire the people in your organisation? Value is maximised through the alignment of individuals, leadership and culture.

Also known as IT, these are the activities that enable other functions through the collection, processing and storage of data (information. Value is maximised by keeping Operational Expenditure (OPEX) and Capital Expenditure (CAPEX) low. What are you paying for that you aren’t using or paying for two systems that have the same capability.

General infrastructure
These are all the other activities that a business does like management, accounting and admin.

Use the Porters Value Chain model and templates from our Miro board to your board.
The password is: FPCSMEISAWESOME