09/03/2021 Supply chain analysis

Supply chain analysis

Supply chain analysis consists in a quantitative analysis of inputs and outputs

between firms, prices and value added along a supply chain through agent
accounts. These inputs and outputs can be expressed in physical flows of material
and services needed to manufacture a final product as well as in their monetary
equivalents.

Introduction

Figure 1. Example of a flowchart showing flows of material in physical and

monetary terms through a paddy and rice production chain [1]

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The term Supply Chain analysis is used to refer to the overall group of economic
agents (a physical person such as a farmer, a trader or a consumer, as well as legal
entities such as a business, an authority or a development organisation) that
contribute directly to the determination of a final product. Thus the chain
encompasses the complete sequence of operations which, starting from the raw
material, or an intermediate product, finishes downstream, after several stages of
transformation or increases in value, at one or several final products at the level of
the consumer (FAO, 2005a [1]).

Building a supply chain analysis requires to spend time in the followings tasks
(see example figure 1):

1. Mapping the chain (through a flowchart) to obtain an overview of the

chain, the product flows, the position of the chain actors and type of
interaction between the actors.

1. Developing the economic accounts corresponding to the activities of

the agents involved in the chain. This consists in quantifying the
activities observed and their flow of material both in physical and in
monetary terms. This allows the analyst to assess the relative
importance of the different segments or sub-chains of the chain, which
in turn will allow an appropriate use of time and resources. For more
details on how building economic accounts, read FAO (2013) [2].

Practical use of supply chain analysis

Supply chain analysis is a tool that allows us to assess the impact of an
environmental policy through a simple Excel table with data on complete
financial accounts of the various agents along the length of the chain. Then the
impact of an environmental policy option on financial accounts and material flow
of economic agents targeted by this policy is entered in the Excel table. This will
automatically induce a change in the financial account of all other agents
connected to him and directly or indirectly depending on his production to ensure
their own production. Supply chain analysis offers an economic simulation model,
not a model of optimization. This method can be used for assessment of policies
targeting a whole sector, a sub-sector or a branch of economic activities (e.g. dairy
quota limiting milk production, taxes on chemical nitrogen fertilizers) or for
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macroeconomic policies (e.g. aiming at unemployment decrease, inflation

stabilization, keeping the balance of payment in equilibrium, achieving a higher
economic growth…).

In that sense, supply chain analysis is relevant for the same cases as computable
general equilibrium, input-output matrix and accounts environmentally adjusted,
since this methodology is able to capture the impact of a policy scenario that
cover a great number of economic activities (at least one sector, a sub-sector or a
branch but not few economic agents).

It could also be used at lower economic level (a small number of economic

agents) but in that case, national and regional data would be too aggregated and
more detailed and disaggregated data should be found by surveys on field.

Limits of the method

Capture fewer indirect impacts on other sectors than I-O. Indeed,
supply Chain analysis is in a sense, quite similar to I-O analysis but
deals with fewer sectors (only those linked to the analyzed product for
which a supply chain is mapped) while I-O table deals with most of
economic sectors (available in national or regional statistical offices).

Supply chain analysis cover fewer sectors but goes more into details
concerning data (on material flows between agents). However, this
high level of details achievement is time consuming since most data
are not published and require visiting national statistic offices, official
institutions, and enterprises for collecting data.

Several limits are the same as for I-O analysis :

The static aspects making difficult any projection possibilities

Dependence on availability of regional data or data at watershed level
(or any other environmental unit of the territory). When not available,
need to go to industrial federations etc. for data collecting.

Other regional economic accounting

methods
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See also

References

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