PARTONE-assignment1.docx

The definition of value-chain in business management is a series of activities and process which in order to add value to a product at every step during the production process. The analysis of value-chain has a great significance to a company to enhance its value by identifying where area cost should be minimized and where customer value can be enhanced.
William instruments is a famous surgical equipment manufacturing company around the word. The manufacturing process consists primarily of assembly of component purchase from various parts from outside supplier. Thus, the cost of manufacturing is the cost of manufacturing plus cost of purchase. And now, William has another choice, the part of material which bought from outsides can be produced inside. Therefore, we will use the Porter’s value-chain framework to help William decide whether to manufacture the parts inside or purchase the parts from outside. There are two main parts of activities in value-chain framework: primary activities and support activities.

Primary Activities

· Inbound Logistics
The inbound logistics for William Instrument refer to purchase components from various electronic firms. During the purchase process William need to consider the quality and price of the components. In this case, the purchased parts cost $800. However, there is $300 for this part that William could manufacture in its existing facility for $100 in material for each unit. Therefore, the cost will be 500 (800-300)+ $100*4=40,500. And then these components will be sent to assemble in the manufacturing house.

· Operations
After the components sending to the manufacturing house, workers will assemble them, the manufacturing cost $600 per unit. As well as the average production and sales are 400 units per month. Therefore, the total manufacturing cost will be $240,000 one month for 400 units.

· Outbound logistics
After the products are finished, they will be sent to all over the word directly. And this surgical equipment will be used in hospital and clinics.

· Marketing and sales
The blood pressure measuring device is the most popular product which contribute 40% of its revenue and 35% of its profit in William’s company. Therefore, William pays more attention on this product so that he can improve the quality and find efficient way to manufacturing this to reduce cost. Meanwhile, he should produce more products to satisfy with the various needs of customers.

· Service
William has achieved its success in the competitive market through excellent customer service and product reliability. Therefore, we can see that the service plays an important role in contemporary’s competition. And it can also bring economic effectiveness.

From the analysis above, the total cost of component which purchase from outside is $800+$240,000=$240800 and the total cost for produce inside is $40,500+$240,000=$280500. Through comparing these two we can find that buy from outside is cheaper than produce inside. It will save $39700.

Support Activities

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