The Generic Value Chain

The Generic value chain, is a concept from business management that was first described and popularized by Michael Porter in his 1985 best-seller, Competitive Advantage: Creating and Sustaining Superior Performance. A high-level model of how businesses receive raw materials as input, add value to the raw materials through various processes, and sell finished products to customers. A value chain typically consists of:

(1) Inbound distribution or logistics, (2) Manufacturing operations, (3) Outbound distribution or logistics, (4) Marketing and selling, and (5) After-sales service. These activities are supported by purchasing or procurement, research and development, human resource development, and corporate infrastructure. Here we discus these five chains regarding different industries which will really help to knowing how generic value chain is important and how its working in different industry as these industries follow the generic value chain in ours industry.

1. Inbound Distribution or Logistics of Wal-Mart:

Wal-Mart Overview

When Sam Walton opened the first Wal-Mart Discount City store in 1962, he instilled in his employees a philosophy composed of four basic beliefs: excellence in the workplace, respect for the individual, outstanding customer service, and always having the lowest prices. The company has stayed true to these principles since 1962 and they have lead to an extreme competitive advantage. Currently, Wal-Mart stands alone as one of the most successful retailers of all time and has overpowered its competitors with its superior ability to combine value chain activities. However, sustaining competitive advantage can be a daunting task. Wal-Mart has been able to attain their competitive advantage through its key value chain activities: inbound and outbound logistics, advanced technology development, brand reputation with suppliers and consumers, and will be able to sustain competitive advantage for the future. Conclusions and Recommendations In order to sustain its competitive advantage, Wal-Mart needs to continue to focus on its core competencies. Its success comes from the combination of key value chain activities. The firm currently uses an integrated strategy focused on a broad target market and this strategy is supported by the combination of superior logistics, technology development, every day low prices, and brand reputation. These capabilities have distinguished Wal-Mart in the retail industry and will allow it to sustain its current dominance in the Americas even though its sustainability has been questioned by industry experts, market analysts, consumers, and competitors. The next challenge for Wal-Mart to overcome will be transporting its distinct competencies to its international operations so that it can fuel growth and become a dominant force on the global stage. Analysis External Environmental Conditions: Generally favorable but changing. Sociocultural Segment. Shoppers are decreasing the amount of time spent shopping. Grocery shopping is being viewed as a need to do instead of want to do. As a result, consumers now travel fewer isles and ultimately spend less time in the store. Technological Segment. The linking of several different systems (ex. wireless communications) used by retailers has provided a near flawless flow of information and better resource management. Large retailers now rely on intranets and extranets for information sharing within the organization and with external entities. Other technological developments include smart cards and radio frequency data communication.

Wal-Mart Seeking Control of Inbound Logistics:

One of the most important reasons for Wal-Marts success has been its inbound logistics. Wal-Mart pioneered the development of a hub-and-spoke distribution system. Its central distribution warehouses are strategically located to serve clusters of Wal-Mart stores which lead to minimized shipping times. For the most part, todays supplier distribution systems rely heavily on the use of selfprocured air and truck delivery. These transportation modes come with significant environmental and social touch points. With increase control, Wal-Mart may be positioned to address: Heavy energy consumption to weight ratios Heavy emissions to weight ratios Increased road and infrastructure costs Large distribution and warehousing footprints Road and air traffic congestion

Within our professional consulting experience, businesses need to similarly develop process of policies to address sustainable distribution practices across all freight transport modes. Key components of a sustainable logistics strategy include: Sustainable model to product distribution. Integrated transport philosophy coordinating all transportation modes. Openness to explore alternative transportation. Aligned values with freight and end-customer delivery partners.

The successful implementation of any sustainable business decision takes buy-in and commitment from key stakeholders. Driven by the eventual pass-through saving to its customers, Wal-Mart is leveraging its massive purchasing power and existing logistics resources to implement a new supply chain model. One of the most important reasons for Wal-Marts success has been its inbound logistics. Wal-Mart pioneered the development of a hub-and-spoke distribution system. Its central distribution warehouses are strategically located to serve clusters of Wal-Mart stores which lead to minimized shipping times.

2. Manufacturing Operation of Logisticso of :

Toyota Indus Motor Co Overview

Mission Statment: "IMCs Vision is to be the most respected and successful enterprise, delighting customers with a wide range of products and solutions in the automobile industry with the best people and the best technology". The most respected. The most successful. Delighting customers. Wide range of products. The best people. The best technology. Mission of Toyota is to provide safe & sound journey. Toyota is developing various new technologies from the perspective of energy saving and diversifying energy sources. Environment has been first and most important issue in priorities of Toyota and working toward creating a prosperous society and clean world. HISTORY: Indus Motor Company (IMC) is a joint venture between the House of Habib , Toyota Motor Corporation Japan (TMC) , and Toyota Tsusho Corporation Japan (TTC) for assembling, progressive manufacturing and marketing of Toyota vehicles in Pakistan since July 01, 1990. IMC is engaged in sole distributorship of Toyota and Daihatsu Motor Company Ltd. vehicles in Pakistan through its dealership network. Heavy investment was made to build its production facilities based on state of art technologies. To ensure highest level of productivity world-renowned Toyota Production Systems are implemented. Mr. Y. Tsubaki is the Director of Manufacturing Operation
Here goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organization. Toyota motors purchase their raw material from all around the world. In order to maximize their availability of raw material Toyota motors maintain good relationship with their suppliers. Toyota use JIT (Just In Time) approach for handling of raw material.

Marketing Operations: This is where goods are manufactured or assembled. Individual operations could include organizing the parts to make new cars & the final tune for a new car's engine. Toyota motors are known for their reliability which comes from efficient operations.

Toyota Production System (TPS)

Toyota Production System is a repetitive modular process design which uses the formula of assembly design and modules to manufacture different variants of their models. So, in

order to manufacture and create value, there must be a standardized set of rules to follow. The four basic components under which TPS was designed include: Safety Quality Cost Productivity As stated earlier, TPSs main target is to produce more with less, which means removing all those steps that dont add any value to the final product. Moreover, focus on Kanban/Just in Time (JIT), continuous improvement, less inventory, pull concept, multitasking, employee empowerment and doing things right the first time.

The main goals of TPS are to manufacture highest quality automobiles, with the lowest possible cost and shortest possible lead time. TPS is based on working out a process as a team that promotes a culture of earning and giving respect. During the visit we saw various sign boards focusing on the importance of team work. The one board which we saw on entrance says:

Together We Achieve More The ten basic components of Lean Manufacturing through which TPS is designed are as follows: 1. Optimize throughput 2. Minimize inventory 3. Eliminate waste (MUDA/MURI/MURA) 4. Flexible process design (Multi-tasking) 5. Pull concept (JIT) 6. Quality (JIDOKA/KAIZEN/ANDONS) 7. Doing it right the first time (KANBAN) 8. Partner with collaborators/suppliers 9. Employee empowerment 10.Foster the culture of continuous improvement

Minimize Inventory (Small Lot Production) Due to the companys focus on reducing all the waste elements, the system minimizes inventory and lowers the cost. The main idea is to produce in small lots that reduce

wastage. Because large lots often bring with them element of risk by associating higher capital input, holding costs, extended lead times and increased chance of error. In contrast, small lots minimize inventory, lower costs, improve controls, less stocking, and assist in achieving economies of scale. Flexible Process Design (Multi-tasking) Small lot-size, efficient workforce, coherent process and assembly designs aids in flexible setups. These include quick change over of internal and external designs with respect to demand forecast and customer requirements. The concept is an integral part of Lean Manufacturing and fosters the culture of training workforce that supports multitasking. Full Concept Since the company aligns its production targets on the basis of Pull concept from the customers, this enables them to produce under the umbrella of JIT. JIT means to produce what is required, when it is required and how much required. JIT is an efficient tool of minimizing overall process costs, but it requires good relations with all the collaborators and vendors. JIT benefits by minimizing in work in progress inventory, worker motivation, lower costs and less warehousing. HEIJUNKA (Leveled Production) TPS focuses on leveled production which means they decide one to two months prior what to make, and how much to make? This enables them to continue with the smooth flow of production with a leveled workforce, capacity and machines. In contrast chase strategy focuses on the quantity of units produce on the basis of demand forecast which surely increases cost of holding, cost of hiring/laying off workers etc. The key benefit of leveled production is efficient aggregate planning, worker motivation and employee empowerment. HEIJUNKA HEIJUNKA mean balanced and sequenced production, since they make around six variants so exact quantity and quality is of prime importance. HEIJUNKA aids in flexible and balanced production line which reduces the vulnerability of over burdened employees which eventually sets the tone for employee empowerment and improves morale and motivation. Kanban Kanban means Sign Board in Japanese. It is a card that shows standard quantity of production. It is derived from two-bin inventory system and maintains the discipline of pull production. It authorizes production and movement of goods. Quality (TQM) Quality is very important for any firm to be successful. At IMC it includes visual controls, like checkpoints. Every worker in an assembly assumes the next worker as

customer. This creates the culture of inspection at source. TPS is aided throughPoka Yokes which means fool proof system or part design, poka-yokes help in About the Visit Indus Motor Company is located in Port Qasim, which is in the outskirts of Karachi. The location is of prime importance for Toyota, because a plant near the port definitely improves the supply chain channel. IMC has a state of the art plant for manufacturing which is strictly secured and maintained. Being an ISO certified firm they mainly focus on the quality of environment, safety and precautionary measures for their employees and visitors. Proper instructions were given to us with respect to safety and confidentiality of the visit. We were then divided into two groups; each group was escorted by an experience management representative. The trip was basically focused on four key areas: 1. Precautionary Measures and the Process 2. Floor Management Development System 3. KANBAN and Material Management System 4. Toyota Production System (TPS) Just as we entered the production plant (assembly line), we were given instruction that we should walk on the green belted mark on the floor which was the designated corridor to walk on. This definitely signals that how much they care about MUDAs because delays in material movement certainly increases lead time and process costs. I also witnessed that there were numerous sign boards that showed their culture of continuous improvement and employee empowerment. There were boards (KANBAN) which emphasized on the concept of QUALITY COMES FIRST, they are key bullet points that the employee should always look upon so that he is always focused on his task and do things right the first time. The concept of PDCA, which was proposed by Edward Deming, was also shown all across the assembly line. Toyota basically sums up its values by focusing on the following key points: Challenge Kaizen Genchi Genbutsu Respect Team Work
We were also shown different parts of the plant which represented their quality

Policy, environmental policy and different safety and precautionary measures.

TPS emphasized on the concept of JOB SHOP in an assembly line. Now, I will elaborate the process flow which was being conducted at TPS to manufacture premium quality automobiles for their customers.

Trim Line
Trim line basically includes press shops and weld shops. Both focused on creating different body parts.

Press Shop
Here the metal sheets were being pressed and molded to form different shapes for different body parts of the car.

Weld Shop In weld shop parts were joined through welding, and they were molded together to form a car structure. It was basically divided into two parts:
1. Workers were taking parts like vehicle doors for welding 2. Weld different parts to form the car structure, which includes:
a. Floor b. Luggage Compartment c. Roof d. Engine Compartment

Chassis Line
In this area of the production line, different welded parts were perfectly joined with body pillars and the body base. As the whole manufacturing is done on the chassis of the car, so it makes this process of prime importance, because an unaddressed fault in chassis will definitely hinders other processes. So quality check is done here to make sure everything is in correct form.

Paint Shop
Afterwards the whole body was being painted. We werent allowed to visit the paint shop due to its sensitive nature. Proper protective clothes were required to enter the paint shop. A typical paint process followed the following steps: Base Primer Color Liquor Dryer

Plastic Assembly
This includes the assembly and plastic parts of a car like bumpers, mud guards, mud shields, steering, dash-boards, interiors, and tires.

Engine Assembly

In the engine assembly shop we were shown that how the engines were checked for optimal performance. We were told the engine parts are usually imported and then assembled here at IMC. There were different variants of engine which were classified like Coure Engine, Toyota 1300cc and 1800cc petrol engines, and 2000cc diesel engines for 2.OD. Engine Assembly line was further divided into two rooms:

Room 1 Engine assemebly for different variants Room 2 Quality Check for engines, for e.g. leakages, bubbling, abrasiveness Dynamo Room This includes: Thorough checking of engines Fuel consumption Oil consumption Engine timing and power checks.

Engine Transmission Fitting

Then the final painted body was equipped with the engine and transmission, the workers here were very efficient and were able to identify defects at the source, this is the main concept behind JIDOKA.

Final Assembly Shop

This includes the final assembly of all the parts to complete a car; it comprises of the assembling of main parts of the body from the section of engine transmission fitting area with various accessories like wiring, air-conditioner etc.
a. Wiring b. Car Air Conditioner c. Piping d. Panels e. Glasses f. Shocks g. Electronics h. Roof Pads, i. Bumber Pads

SQA (Shipping Quality Audit) Final Supreme Audit

This is done by Toyota certified quality inspector; checker is highly qualified and trained and has its excellence in checking the car performance. Suppose if 50 cars are produced in a shift then the inspector has the authority to select any 4 cars on a random basis and audit them according to the specified international standards. Any defect diagnosed at this stage seriously causes a dilemma because it is the final stage of checking.

This is where goods are manufactured or assembled. Individual

operations could include organizing the parts to make new cars & the final tune for a new car's engine. Toyota motors are known for their reliability which comes from efficient operations

3. Inbound Distribution or Logistics of P&G :

Procter & Gamble Overview: Mission Statement: The People With Disabilities (PWD) Task Force's mission is to enable hiring, onboarding, retention, advancement and contributions to people with disabilities. We seek to achieve this by providing guidance and recommendations in five main areas:

Accessibility/Work Accommodations Education and Training Policy Recruiting, Hiring and Retention Practices Business Partners

As a team we are focused on:

Benchmarking top companies in disabilities results Enhance recruiting efforts Implement an On-Boarding Program Improve site facilities Communication to P&G Organization Partnership with external groups

Our mission is to transform the way business is done.

Our Business Model The GBS organization is one of the companys four pillars and is composed of 7000 people. We support P&Gs 127,000 employees and 300 brands sold in 180 countries. We provide more than 170 employee and business services including IT, finance, facilities, purchasing and employee services as well as business building solutions. The GBS model is all about the AND. We want lower costs AND improve quality AND innovation AND productivity. GBS is one of the largest, most progressive Shared Service Organizations in the world.

The Value of GBS We deliver cost savings o Nearly $800MM cost savings o costs as % of sales reduced by 1/3 since 2003 We drive scale o From 27% systems standardization post-Gillette to 60% today o Ability to manage 3x project workload We innovate o Virtualization of brand design and development o Productivity building capabilities and tools to steer the business real-time We enable agility o P&G Integrations and Divestitures o Staffing to meet company priorities in 4< days We are delivering the Companys digital strategy Creat new business-building capabilities Our Unique Capabilities Ensure operational excellence of services Scale services, systems and processes Overview: Market share/importance: Procter & Gamble (P&G) is Americas biggest maker of household products, with at least 250 brands in six main categories: laundry and cleaning (detergents), paper goods (toilet paper), beauty care (cosmetics, shampoos), food and beverages (coffee, snacks), feminine care (sanitary towels) and health care (toothpaste, medicine). P&Gs famous brands include Ariel, Pantene, Head & Shoulders, Fabreze, Sunny Delight, and Oil of Olaz. About half of P&G's sales come from its top ten brands. P&G also makes pet food and PUR water filters and produces the soap operas Guiding Light and As the World Turns [1]. Finally, P&G produces chemicals. Today, P&G markets its products to more than five billion consumers in 130 countries. The company has on-the-ground operations in over 70 countries around the world, and employs more than 106,000 people. Last years (2000) turnover equaled $37 billion [25,6 billion]. P&G is one of the worlds biggest advertisers [2]. Advertising Age estimate a 1999 media spend of $4.7bn [3,3bn], of which around $3bn [3,253bn] was outside the US, making it the world's #2 advertiser [3]. Fortune 500 lists Americas Top Performing Companies. P&G ranks #39 on the list, before its main competitor Johnson & Johnson (#57) and Kimberly-Clark (#142). P&G also outperforms Unilever and Nestle, the companys main competitors overseas [4].

History: Soap Candles Candle maker William Procter (an immigrant from England) and soap maker James Gamble (arrived from Ireland) launched their new enterprise in Cincinnati in 1837. The company gradually grew into a multi-million dollar corporation. During the Civil War, Procter & Gamble was awarded several contracts to supply soap and candles to the Union armies. These orders kept the factory busy day and night, building the Company's reputation as soldiers returned home with their P&G products.[5] Once a staple of the company's product line, candles declined in popularity with the invention of the electric light bulb. P&G discontinued candle manufacturing in the 1920s [6]. Soap is still one of P&Gs core products. P&G was the first company to advertise nationally direct to consumers (Ivory soap in the 1880s) and it literally created the concept of "soap opera" by sponsoring radio and television dramas targeting women [7]. P&G defined many marketing strategies we now take for granted. Marketing (still gaining importance) is definitely an important key to P&Gs success. As one critic put it: "Within a paternalistic corporate culture, P&G pioneered in brand management, in consumer surveys for marketing research, and in new product research and development. One reason for P&G's domestic success has been their reliance on a combination of consumer research, advertising, and distribution techniques." [8] Bad Results However, P&G has not been very successful recently. Annual sales growth has been slowing over the last few years, from 5 percent in 1996 to 2.6 percent in 1999. The company stumbled badly in 2000 missing analysts profit expectations and causing its famously reliable stock to plummet from $103 (71,3) in January 2000 to $64 (44,3) in June 2001 [9]. In 1999, CEO Durk Jager kicked off Organization 2005 in order to forge better performance. Organization 2005 includes cutting 17,000 workers over the next three years and reorganizing the company's corporate structure from four geographic business units to seven global business units based on product categories. Outbound logistics of Procter & Gamble in detail view: Organization 2005 also aims at changing P&G's culture from a conservative, slowmoving, bureaucratic behemoth to that of a modern, fast-moving, Internet-savvy organization. P&G wants to make faster and better decisions, cut red tape, wring costs out of systems and procedures, fuel innovation, set more aggressive sales goals and nearly double its revenue. The catalyst for all this change is IT.[10] In addition, P&G wants to abandon its legacy of secrecy. Its new spirit of openness is most evident on the Internet. A year ago, it was a stodgy, nondescript site where no one

other than investors or job seekers had any reason to go to. Today, you see a consumerfriendly portal with loads of information about P&G products.[11] So far, Organization 2005 has had little to show. However, P&G stresses the company will pick the fruits of the ambitious restructuring plan in the near future. "This restructuring," former CEO Millen explained, "will ensure that P&G is well placed to address the issues facing manufacturers, retailers and wholesalers at the outset of the 21st century. Examples of these issues are the internationalization and consolidation of retailing, consumer loyalty and retention, category management, the potential effects of the Euro currency and dramatic advances in information technology."[12] Creating a Real Time environment:

Digital Value Chain

Create Business Intelligence harness the power of real time business intelligence Create a faster, simpler and more agile P&G Create Digital Business Capabilities: digital experiences that transform consumer relationships Create Digital Organization: work from anywhere, with peak performance One of P&G's new strategies is linking up with other companies to extract as much value from its brands as possible. Last February (2001) Coke and P&G announced a $4bn [2,77bn] alliance. The alliance would involve the union of some 40 consumer products (including Sunny Delight, Pringles and Minute Maid) under the umbrella of a CokeP&G joint venture. P&G was hoping Cokes far-reaching distribution network could give the company a boost. P&Gs renowned R&D capacities were attractive to Coke. Eight months later the consumer goods behemoths called the wedding off. A spokesman for Coke said: "After many months of due diligence with Procter & Gamble, we felt that we could unlock the value of our brands more effectively and profitably by retaining full control of them. However, P&G successfully tied up with chewing gum giant the Wrigley Company. The deal will allow P&G to cash in on the global gum, mint, and breath-freshener market. This is bigger than the toothpaste market and equal in size to the shampoo or skincare sectors. We will soon be able to sweeten our mouths with Crest gum, Crest mints and Crest breath freshener, the Guardian reports [14]. P&G has recently announced it will sell the Jif and Crisco brands in a bid to get rid of under-performing brands. P&G and J.M. Smucker Co., which makes a wide variety of jams, jellies and other foods, is acquiring the Jif peanut butter and Crisco cooking oil brands from P&G for $1 billion in.

These are all the activities concerned with distributing the final product and/or service to the customers. For example, in case of a hotel this activity would entail the ways of bringing customers to the hotel

4. Marketing and selling of ? :

?t Overview Mission Statement: