A value chain is a string of companies or collaborating players who work together to satisfy market demands for specific products or services. Longer definition
What does a midsize truck have to do with a value chain?
A midsize truck represents one of the advantages that local and regional food value chains have over the traditional food value chain in which products may be shipped hundreds or thousands of miles. Efficient transportation and distribution systems are key to how well any food or fiber value chain operates. Local and regional food value chains have shorter travel distances between where the food or fiber is produced (the farm) to where it is processed, distributed and sold. This gives local and regional food value chains distinct economic and environmental advantages.
What is an example of a value chain?
A value chain in the pork industry might include:
- an input supplier (of food, housing, veterinary care, etc.)
- the farmer or producer (to raise and market the animals)
- the packing plant (for primal cuts)
- the fabrication plant (for portion cuts)
- the food service distributor who gets the product to wholesalers and other markets
- the consumer who buys the pork chop or pork roast
What do value chains have to do with sustainable agriculture?
A lot! Most U.S. food commodities are produced by a few contract growers linked to large processors and consolidated wholesale-retail buying corporations. Increasingly, as these firms dictate farm management practices to meet their business interests and community goals are frequently ignored.
Market conditions make America's 575,000 midsize farms especially vulnerable. Midsize farmers find it difficult to gain market access to the industrial value chain because large processors buy from large farms to reduce transaction costs. In addition, they have difficulty taking advantage of direct marketing opportunities, and often lack the market power and capital to compete.
A viable alternative for midsize farms is the development of differentiated value chains that create new marketing relationships among farmers, processors, distributors and retailers. Networks can be built on the competitive advantages of differentiation (in product quality, farming practices, community values and environmental benefits).
VCP's central goal is to use collaborative approaches to support new and existing value chains that promote local ownership and influence environmental stewardship and economic sustainability for all members of the value chain.
What do others say about re-thinking the traditional value chain?
- The authors of Supply Chain Redesign offer a good argument for developing new ways for value chains to operate:
In creating integrated supply chains, companies must re-think how they view their customers and suppliers. They must concentrate not just on maximizing their own profits, but also on how to maximize the success of all organizations in the supply chain. Strategic priorities must consider other key alliance partners that contribute value for the end customer. Tactical and operational plans should be continuously shared and coordinated. Instead of encouraging companies to hold their information close, trust-building processes promote the sharing of all forms of information possible that will allow supply chain members to make better decisions. Whereas traditional accounting, measurement, and reward systems tend to focus on individual organizations, a unified set of supply chain performance metrics should be utilized as well. Finally, instead of "pushing products" into the supply channel, thereby creating excess inventories and inefficient use of resources, consultative sales processes and "pull" systems should be utilized. [pg. 152]
