The chain of production and value added
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Chain Of Production And Adding Value - Chain Of Production
Chains of Production often include several stages from the extraction of raw materials for a product to the actual assembly.There are several representations of a chain of production (COP), but this is what one might look like for furniture (used from http://www.thetimes100.co.uk/theory/theory.php?tID=127);
Growing of trees and lumbering of timber
Sawing up of timber in sawmill
Seasoning of timber
Construction of furniture by carpenters
End product
Supply Chains
A supply chain is a sequence of events required to change raw materials into finished products.
• Primary producers are the people that grow, mine, collect etc, the raw materials needed for the product.
• Secondary stage is the stage in which the goods are manufactured and put together.
• The tertiary stage is the stage where the goods get delivered and sold to the consumers.
Supply chains are often used in chains of production to sort out where and when each part of the production takes place and gets sent to.
Types Of Company That Use Chains Of Production
There are several types of company that would use chains of production. These are usually companies that buy and use there products from start to finish. For example, a chocolate company may use a chain of production to produce a chocolate bar. They may start off by hiring farmers to plant and grow the beans in countries with the correct climate, or in greenhouses adjusted to the correct climate. That would be the first part of the production chain. The next part would be to harvest the beans and send them to a factory that can process and mix the beans with other things needed to make the chocolate. Finally, the third stage could be the shaping and packaging of the product to form the end product. This entire process is a chain of production.
Another example of a chain of production, is perhaps the making of items of clothing. The item could go from having the cotton grown and sheep for wool and then having it harvested, having this sent to a factory or sweatshop (levis in particular used massive amounts of sweatshops) to have the product woven ad assembled, and then into stores to be sold for lots of money. Depending on the materials used or the brand-name of the product will determine the price of the final product.
Adding Value
Adding value is the way in which value is added to a product, from raw materials to the end product. If the raw materials were worth say £1000 and the final product was worth £1700 then the added value would be £700.
There are several ways that you can add value to a product using chains of production and that can include things such as using finer quality raw materials. ie Yew instead of oak, stainless steel instead of iron, as these higher quality materials can increase the final products price dramatically. Another thing that we can do is use better workers when making the product. Better carpenters, stone masons etc. will also improve the product price.
Brand Names
One main way we are of adding value is to add a brand name. Buying a product from the source instead of from a branded company can save you hundreds of pounds, or even thousands if it is a very large product. A brand name can make all of the difference when it comes to the price of a product. A pair of shoes from Nike can cost £100, yet the same pair from a no-name brand could cost you maybe £20. Although this sounds stupid customers are willing to pay the extra money as the brand name can be associated with better products, and that more expensive brand products will create the appearance of more money. This brand status is very important to some people, for example a chav (Tom Colley, please edit this)would pay much extra for a Nike Total 90 tracksuit rather than getting a much cheaper unbranded one, so he could impress his chav friends and think he looks good. Companies can use this brand power to increase the price of their product and avoid losing sales.
Links
A page explaining Chain of Production and Value Added http://www.thetimes100.co.uk/theory/theory.php?tID=127
Contributors
Liam Botham and Tom Colley, 10B
