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A Valuable Proposition

Are you adding value or just passing things down the line?

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This story appears in the June 2001 issue of Entrepreneur. Subscribe »

Value chain and supply chain, two classic business concepts,have traditionally been considered very similar. The assumption hasbeen that everyone who touches a product or service adds some valueto it. So farmers add value by growing and harvesting grain;truckers or railroads add value by hauling the grain to grainelevators, which add value by storing the grain and distributing itto the manufacturers, who add value by turning it into finishedproducts. Along the way, a lot of other people join the valuechain, from ad agencies to supermarkets.

Today, of course, we realize there's a difference betweenadding a "fingerprint"-just touching a product along itspath-and adding tangible value. Imagine how many supersized ordersof McDonald's french fries compare to a 100-pound bag of Idahopotatoes. Now compare the price. We've also had to modify thevery definition of value to pertain to an economy based ongenerating and manipulating information.

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