What Is the Value Grid?

A value grid is a modification and combination of supply chain management and market focus. This concept basically illustrates methods that companies use to increase their available markets while shifting from linear suppliers to more of a supply web. The value grid concept began to gain ground in the latter part of the 20th century when increased telecommunication options and faster shipping made worldwide commerce and marketing much easier. Since then, it has become increasingly rare to find firms that use liner supply methods.

The supply chain is one of the oldest concepts in modern manufacturing and business. In a very basic example, a company extracts raw materials and sells them to another company. That company turns the raw materials into a specific product, which it then sells to consumers. When a person purchases something, that customer could literally trace each part back to its original raw form. While these methods worked very well for centuries, modern businesses are significantly more complex than many of their predecessors.

Now a single firm may get raw materials from several different locations all around the world. Slight differences in the harvesting methods or surrounding environment may make one substance well-suited for one product but not for others. In addition, companies make a wide array of products. As the company expands, it slowly moves into adjacent fields to increase its profitability. For example, a company that makes saws may begin to make other similar tools until it has an entire line that runs from hand tools to industrial tools.

This increase in complexity is called the value grid. The old system was described as a chain, items moving from place to place in an ever more complex form. The new system describes how a single firm may have many different suppliers, may supply itself or even operate in conjunction with several different industries.

In addition to replacing the supply chain, the value grid also placed increased emphasis on sales and marketing. Traditionally, the supply chain ended at the final retailer and customers were outside its influence. Now the value grid not only includes the final customers, but how those customers interact with the product. In addition, the value grid also emphasizes brand expansion into other industries.

This all comes together to make companies stronger. By taking in materials from many locations and selling a finished product to a wide range of people, the company is protected from shifts in the marketplace. If a specific supplier closes down, the company can lean more heavily on others until the situation resolves itself.