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External value chain 

or value network

The links between an 

organisation and its 

strategic and  non‑ 

 strategic partners that 

form its external value 

chain.

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Chapter 6  Supply chain management

The similarity between elements of the value network of Figure 6.9 and the supply chain 

of a typical B2B company of Figure 6.5 will be apparent. But the value network offers a differ‑

ent perspective that is intended to emphasise:

● 

The electronic interconnections between partners and the organisation and directly between 

partners that potentially enables  real‑  time information exchange between partners.

● 

The dynamic nature of the network. The network can be readily modified according to 

market conditions or in response to customer demands. New partners can readily be 

introduced into the network and others removed.

● 

Different types of links can be formed between different types of partners.

Wholesale outsourcing to third parties is not the only option. The different types of partner‑

ship that can be formed are described in more detail in the later section on ‘Managing partner‑

ships’. Remember also that outsourcing does imply cost reduction. Michael Dell relates that 

Dell do not see outsourcing as getting rid of a process that does not add value; rather they 

see it as a way of ‘coordinating their activity to create the most value for customers’ (Magretta, 

1998). Dell has improved customer service by changing the way it works with both its suppli‑

ers and distributors to build a computer to the customer’s specific order within just six days.