Where on the value chain can you innovate in order to create superior customer value? That question should haunt marketers. The value chain is the series of events between conception of the product/ service and when it finally lands in the customer hands (or the customer disposes of it). WalMart and its largest supplier, Proctor and Gamble, saved money by moving from legal contracts to handshakes. WalMart created a cross docking procedure that eliminated costs in their distribution system, thereby adding value. Most United States retailers have added value in their supply chains by sourcing from China and the Far East. As one company president said, “I can make it in China and ship it here for a third of the cost that I can make it here.”
Many ways exist to innovate in the value chain. A company might source raw materials that are cheaper, better, or easier to procure. A company might innovate in internal processes, cutting costs and limiting the time it takes to get the product to the end user. A company can add attributes to the product or service that will delight the customer, such as a maintenance package that puts the customer at ease. The innovative company constantly looks for places along the value chain to innovate.