To get a good understanding of how to realize value from physical assets organizations need to understand what the value chain is in HPAM. But first let us see what "value chain" means.
A value chain is a high-level model developed by Michael Porter in his book "Competitive Advantage" to describe the activities within and around an organization and evaluates which value each particular activity adds to the products or services. Porter distinguishes between primary activities and support activities – those that are directly concerned with the creation or delivery of products or services and those that help to improve effectiveness or efficiency.
In HPAM the value chain is no different.
There are primary functions that are directly related to creating value from physical assets, such as operations, maintenance, project management, and secondary functions which support the primary functions in achieving their goals – procurement, finance, information technology, etc. The key element in the value chain is how these functions are linked to each other via their different activities, and how well these activities are coordinated.
To have good linkages and coordination, first of all the functions must be aligned with each other, with proper collaboration and flow of information. This will determine the extent of added (or non-added) value within the HPAM Value Chain.
For example, only if maintenance function does an effective job in maintaining and repairing physical assets will the operations function be able to maximize its production capacity.
In many organizations the HPAM Value Chain will consist of different functional areas structured and linked differently based on the type, size, and complexity of the business activities, as illustrated in my book (Chapter 4, Fig 4.2 & 4.3).
Do you know what the key components of your HPAM value chain are? Do you know how well-oiled is your HPAM Value Chain? Have you identified the areas where there are opportunities for improvement?
What is stopping you to realize maximum value from your HPAM Value Chain?
How do you find out what are the roadblocks, what are the existing constraints, and how do you deal with them?
Posted by Dharmen Dhaliah