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Value Chain

Some Facts
The overall value addition of agriculture produce in India is less than
2% compared to more than 40% in other developing countries like
Brazil, Malaysia.
The long and fragmented supply chain coupled with lack of modern
storage, transportation, processing and marketing facilities /
infrastructure lead to deterioration of the quality and value-loss of
agricultural commodities.
Too much intermediation by Commission Agents / Arthias at various
levels, un-scientific handling of agriculture produce, multi layer
marketing etc add further to the sufferings of the producer-farmer.
Significant investment opportunities are likely to arise in the market,
for both basic and high value foods, where demand can be driven by
rising incomes and price reductions achieved through increased
integration and efficiency in the supply chain.
Minimizing the market risk the farmers are exposed to, should be the
primary objective, specially for both perishable and comparatively
durable agriculture commodities. This is possible only through an
integrated value chain.

Value chain
A "value chain" is the full range of
inter-related productive activities
performed by firms in different
geographical locations to bring out a
product or a service from conception
to complete production and delivery
to final consumers" Definition by
UNCTAD

An Overview of the Value


Chain System
from suppliers to consumers

Rewards and Risks of a Value


Chain
Rewards:
Competitive edge
Unique way to
manage Risk
Access to markets
Reduced response
time
Rewarding
relationships.

Risks:
Less control
Less flexibility
More money spent
More time spent
to make decisions
Sharing of
proprietary
information or
expertise.

Seed processing chain

The three main features of a value


chain are..
coordination of all links in the
chain,
added value at each stage, and
market-led approach, responding to
local, national and international
consumer demand.

Links in the Food value


chain

Developing the Fresh Produce


Value Chain

Effective value chains generate


profits

Mainstream food supply chains have


these characteristics:
Each company in the chain seeks to buy
as cheaply and sell as expensively as
possible.
This leads to:
business relationships that are competitive
and adversarial (win-lose)
a lack of trust among marketing channel
members

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Mainstream food supply chains have


these characteristics:
Farmers:
are often operating in restricted markets
or under short-term contracts
bear much of the risk
may be treated as interchangeable (and
exploitable) input suppliers

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Mainstream food supply chains have


these characteristics:
Benefits and profits from the sale of food
products to the final consumer are not
evenly distributed across the supply
chain.
Food processors and marketers usually
receive a disproportionately higher share.

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Values-based food supply chains are different


from mainstream food supply chains in two ways:

1. Business relationships among


strategic partners interacting in the
supply chain are based on a written
set of values (values-based supply
chains).
Business relationships are framed in winwin terms where all supply chain partners
have a strategic interest in the
performance and well-being of other
partners, resulting in high level of
interdependence and trust.
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Values-based food supply chains are different


from mainstream food supply chains in two ways:

Farmers are strategic partners with rights


and responsibilities related to supply
chain information, risk-taking, governance
and decision making.
The welfare of all strategic partners is
taken into consideration including
appropriate profit margins, living wages
and long-term business agreements.

21

Values-based food supply chains are different


from mainstream food supply chains in two ways:

2. Products are differentiated from similar


food products based on product attributes
such as food quality, safety, and/or
functionality along with environmental and
social attributes such as sustainable or
organic production and treatment of farm
workers or animals.

Healthy Animals

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Supply Chain and Value


Chain

We will refer to values-based


food supply chains as value
chains.

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General characteristics of
value chains

Value chains combine scale with


product differentiation, and
cooperation with competition, to
achieve advantages in the
marketplace.

Cooperation within the supply chain,


competition with other supply chains

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General characteristics of
value chains
Value chains emphasize high levels of interorganizational trust.
Inter-organizational trust is pivotal to successful
value chains.
Inter-organizational trust will still be in place even
if key people leave because it is based on
organizational proceduresit is process-based
trust.
Inter-organizational trust is built on fairness,
stability, predictability of agreements among
strategic partners and confidence that partners will
not exploit the others vulnerabilities.
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General characteristics of
value chains
Value chains emphasize shared values
and vision, shared information
(transparency) and shared decision
making among the strategic partners.
Shared information improves productivity and
enables rapid responses to market changes.
Shared decision making can be framed in
familiar shared governance terms:
Legislativesets standards for the chain
Judicialmonitors performance in the chain
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Executivecoordinates procedures and flows

General characteristics of
value chains
Shared decision making means all
partners experience a sense of fairness
and justice.
Distributive justicerewards/profits are
distributed fairly among all strategic
partners
Procedural justiceall partners
experience rules of business as fair

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General characteristics of
value chains
Value chains emphasize high levels of
performance.
High levels of performance are essential to
deliver high- quality products and services.
Appropriate standards need to be developed
and performance evaluations conducted
across the entire chain.
Quality assurance and continuous
improvement systems need to be employed.

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Value Chain Management:The process of managing the entire


sequence of integrated activities and
information about product flows along
the entire value chain.

Goal of Value Chain Management:To create a value chain strategy that


fully integrates all members into a
seamless chain that meets and exceeds
customers needs and creates the
highest value for the customer.

Six Requirements for Successful Value Chain Management

Value Chain and the QCT Triangle

VC allows alignment of processes


with customers. This generates a
quality advantage.
VC focuses cost management
efforts.
VC provides for efficient processes
which improves the timeliness of
operations.

Benefits of Value Chain Management

Improved
Improved
Procurement
Procurement

Improved
Improved
Logistics
Logistics
Benefits
Benefitsof
of
Value
ValueChange
Change
Management
Management

Enhanced
Enhanced
Customer
CustomerOrder
Order
Management
Management

Improved
Improved
Product
Product
Development
Development

Developing the Fresh Produce


Value Chain

has a value only if its value is v

Stages in Building a
Value Chain
Stage 1: Identifying the
Opportunity
Stage 2: Developing a Pilot
Project Plan
Stage 3: Monitoring and
Evaluating the Pilot Project

Case Study of Fruit Beverage


Value Chain

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