Value Creation Process

What is a Value Creation Process?

A value creation process encompasses all activities through which a company transforms raw materials, knowledge, or services into a product or service with a higher value. Efficiency in value creation processes should continuously improve through lean processes, digitalization, and innovation.

It is important to distinguish between value creation process and value chain. The value chain refers to all value creation processes of a company in a logical sequence, whereas a value creation process represents a single step within the value chain.

The outcome of a value creation process is the difference between the initial input (raw materials or pre-delivered goods) and the newly created product. From a business perspective, value creation is defined as sales revenue minus the cost of external goods. In economics, however, value creation represents the total contribution across different sectors, evaluated not only by financial impact but also by overall benefit.

For example, in automobile manufacturing, raw materials like metal and plastic are transformed into car bodies through assembling, welding, and painting, followed by engine production, final assembly, and distribution. In logistics, value creation consists of transport orders, executed through route planning, loading, transportation, and delivery.

Key Characteristics of a Value Creation Process:

• Transformation – Converts raw materials, energy, and labor (input) into a finished product or service (output).
• Added Value – Processing, refining, or enhancing raw materials results in a higher-value product or service.