The phrase, "value chain," perceives business as a series of actions that add value to an input. While it is simple to apply this concept to manufacturing, it is a concept that applies to the service sector as well.
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Value chain analysis starts with listing the activities a business is engaged in and how much time each activity takes. Some of these activities connect to each other in logical, chronological sequences, as in taking orders in a restaurant followed by preparing the meal. Others activities, bookkeeping and payroll for example, have their own value propositions.
List the value each activity adds to the service being provided. Activities can add positive or negative value, depending on the context. Making waiters responsible for busing tables might keep them busy during slow periods but be impractical during the lunch rush.
Cross-reference activities by time spent and value added. This reveals what links in the value chain need to be strengthened, added or eliminated.
The most common error in service sector value chain analysis occurs early in the process, in the activities list stage. Employees must be observed and timed, so the activity list reflects realistic time frames and expectations. An activity list cannot be properly compiled while seated.
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