Which of the following activities in the value chain generates a margin of value according to its direct contribution?

Prepare for the CIPS Defining Business Need (L4M2) Test with multiple choice questions and insightful explanations. Enhance your understanding and ensure success!

Inbound logistics is the correct choice because it plays a crucial role in the value chain by ensuring that materials and resources are efficiently brought into the organization for production. This activity directly contributes to the overall value creation process by managing the receipt, storage, and distribution of inputs, which affects production efficiency and ultimately impacts costs and product quality.

By optimizing inbound logistics, a business can reduce lead times, lower costs, and enhance the quality of the inputs used in production. This efficiency not only contributes to the overall margin of value but also influences other subsequent activities in the value chain, making it a foundational element in creating value for customers and generating profit.

In contrast, marketing and advertising, while important, act as support functions that promote and communicate the value of the products but do not directly enhance the production or delivery of the goods themselves. Sales promotions, like marketing, are also more about stimulating demand rather than contributing directly to the operational aspects of the value chain. Cost management is essential for maintaining profitability, but it does not directly create or enhance value in the way that effective inbound logistics does.

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