Mgt 491 - Blue Nile Value Chain Analysis

Kaitlyn Crowder

MGT 491

October 6, 2015

Blue Nile Value Chain Analysis

Blue Nile is a company that has risen itself up in the jewelry industry by separating themselves from other companies.  They didn’t want to be similar to anyone else, so they distinguished themselves as such.  They have a just-in-time ordering system that means they supply goods as close as possible to when they are actually needed for the customers.  They have made it so they have successfully cut out the middleman in order to cut costs and increase profits.  Another major contributor to Blue Nile’s success has been the vision to educate customers enough so they can create an online process that is “easy and hassle-free.”  

Inbound and Outbound Logistics:

1. Blue Nile has cut costs by using one company to ship their product back and forth; FedEx.  They worked with UPS before, but their company thought there was too much liability involved with shipping products of such high volume.  
2. Blue Nile employees 170 employees.  When thinking about a company as big as themselves, this isn’t very many people.  They did this intentionally to save costs and provide for their company.  
3. For outbound logistics, Blue Nile uses the just-in-time ordering system.  They don’t have warehouse, storage, or as many shipping costs.  This is valuable because it cuts costs on the final good the customer gets in hand.  

Operations:

1. Operating through multiple different websites in order to reach a global clientele.  This makes operating costs very small because there is no storefront.  If we think about Kay Jewelers, they have multitudes of store fronts to pay millions for, both to initially build, and then to keep up with.  They also do online, paper, and commercial advertisements that they need to pay for.  Blue Nile doesn’t have any of that.  They have no storefronts, only the cost of keeping their website alive.
2. The customization process for each item of jewelry is called the “Build Your Own Ring” part of Blue Nile.  This allows them to personalize each item.  This creates differentiation, which as we talked about in class.  This is valuable because it can decrease rivalry in the industry.
3. As mentioned above, the just-in time ordering system that Blue Nile has created from building supplier relationships is another part of the operations success.  They don’t have to pay to store inventory, or make the customer inadvertently pay for it either.  This is valuable because customers have the opportunity to pay less because they do not have to pay for the middleman.  

Marketing and Sales:

1. Blue Nile has established a well-respected consumer brand.  They were one of the first of their kind to perfect the online technology.  Since they weigh customer service so high, they have to make their online experience the easiest to use in the industry.  This will increase ease of use and overall customer satisfaction.  This is a key driver for the company because again, they don’t have to have a storefront.  
2. Blue Nile has created a unique mobile site to add to the ease of use for customers in America and also overseas.  With the use of smart phones on the rise, this launches new opportunity.  
3. The “Build Your Own Ring” service is a solely online feature that they have creates in order to bring in more customers and raise customer satisfaction again.  This is valuable because it makes things customized and unique for customer.  
4. They can advertise online.  Even though this is a different way than their competitors (for example Kay Jewelers who advertise on the television greatly) they have made it work.  This is valuable because they save money because advertising online costs much less than it does for television.  

Service:  

1. A service benefit of Blue Nile is fast turnaround.  They receive the payment for the order from the online consumer within five days of pressing the ‘buy’ button.  In these five days, Blue Nile can notify its suppliers to get started on the process.  From there the customer can have the product in hand faster than expected.
2. The “Build Your Own Ring” tool makes customization easy and the first priority of Blue Nile.  This is valuable because it opens a whole new level of customer satisfaction because they, themselves made it.  
3. Blue Nile has a return policy of 30 days, and with that comes free shipping.  This is valuable because this shows that customer satisfaction is important.  

Part 2 of Value Chain Analysis

General Administration:

1. Going back to the ‘just-in-time’ ordering system as mentioned many times above, creates the opportunity to save money.  They don’t have to pay for storage units, face-to-face sales people, and as much advertising.  

Tech Development:

1. The online website is a huge development in convenience and customer satisfaction.  They have made it easy enough for the most technology inept clients to even use.
2. Blue Nile has a “Diamond Search” tool on their website.  This lets customers to search for specific criteria they are looking for in a ring or other fine jewelry.  
3. Blue Nile’s mobile site allows customers to not only search online, but on the go as well.  This is valuable because it continues to add to the convenience issue of the company.  

Procurement: buying/supplying

1. Because Blue Nile has such strong supplier relationships, they do not have to have a middleman/ storefront.  They are working to not let any other company that is coming into the market use their supplier relationships.  This is a huge step in the right direction because they are making their suppliers not available to anyone else.  This creates differentiation.  
2. They use only one kind of shipping company to get to the customer.  This allows them to strike deals between each other that no other company could compete with.