Summary Week 1
So, if I asked you to summarise, you would hopefully say….
A supply chain is a chain linking the supplier to the consumer but pushed by the supplier – decisions of stakeholders are made independently of others in the chain.
A value chain, however, is a collaborative chain that functions on consumer demand pull – collaboration is the key, where decisions are made in consultation with others in the chain.
And why are we studying Value Chain Management as part of Agribusiness?
Firstly, we need to learn how to create value along an Agribusiness chain.
Secondly, we need to learn how to grow the pie (more money for all).
Thirdly, we need to be able to create consumer value (know what they want and value).
If we recall the quandary from last week about who gets the extra money in the chain. The question is not about how much of the consumers’ money each chain participant gets. The question is actually....
Does each members share reflect the amount of value each member created and how much effort it took to create that value?
Value Chain Structure
So, let’s turn our attention to structure. For this, I would like you to think about a product. Just for this exercise – let’s use beef cattle, and let’s think about Powranna feedlot. Powranna feedlot don’t breed cattle – but they do grow cattle for both the domestic and export market. In this beef cattle value chain, there is a range of people and services involved.
In value chain circles, looking up and down the chain is often referred to as upstream and downstream. Starting with the steers that are purchased, we have the breeders, the feed suppliers, and transport and vet services upstream. At the site, there is also the feed suppliers and vet services. Downstream, we have the buyers, transport, abattoir, transport, wholesalers (butchers), retailers (butchers/supermarkets) and then possibly restaurants and domestic customers. In between all of these is finance. The money flows, but it is also supplemented from outside the chain (i.e. banks)
A good way to think about how this all works is to grab a pile of sticky notes, and write each member of the chain on a separate sticky note. The next thing is to put them on a large piece of paper in some sort of formation. The next step is to start drawing lines between all the dyads (direct connections) to show how all the members are connected.
Before we do this – what’s a Dyad. Well a Dyad is a group of two. So, simple connections are between 2 groups or 2 members of the chain. In a supply chain, the following shows a number of Dyads.
Inbound logistics includes all the ways in which agribusinesses receive and store raw materials that are needed to make their product or service, including distribution for use.
The next function of a value chain is operations. Operations takes the raw product supplied, stored and/or distributed from inbound logistics and creates the product. For example, in the beef feedlot, operations includes feed supply and veterinary services. Both of these can influence the successful growth of the cattle. Efficiency in operations equates to savings and overall value to the chain.