Value chains: when 1 + 1 equals 3


Today, co-creation and shared work are essential for boosting innovation between businesses, because we don't produce on a big enough scale here to compete with international giants.

√Čtienne Gosselin | Agronomist | Journalist

Value chains have been gaining in popularity since the early 2000s. Supported by public powers, the concept has become more than a trend--it's established itself as a sustainable practice of industrial organization. 

We talked to analyst Daniel Yeon of the Canadian Agri-Food Policy Institute, a think tank that has looked at the success factors of numerous value chains.

Q. What is a value chain?
The concept is easier to understood if talk about supply chains. Today, co-creation and shared work are essential for boosting innovation between businesses, because we don't produce on a big enough scale here to compete with international giants. To do that, businesses need to join together.

Q. What's the weak link in a value chain?
Value, even though that might seem contradictory. Creating value at every stage is essential for the chain to work. The risk that each participant in the chain takes must also be properly assessed and should be reflected in the price or the premiums. If every link adds value, it should be paid in accordance with the risks incurred. Fortunately, there are government programs to reduce the risks for agricultural producers, for example.

Q. Do you have any examples of profitable value chains?
There's a lot of talk right now about Ontario Corn-Fed Beef, from cattle fed a high percentage of corn according to precise specifications. In partnership with Loblaws, this value chain set up in 2001 can hardly keep up with demand. In Quebec, we've seen subsidiaries position themselves in identity-preserved (IP) soy to ensure that their products are GMO-free and target more profitable market segments. Wheat commissioned in Canada since 1993 and purchased by the Warburtons bakery chain in the U.K., is another profitable value chain. These specially selected red spring wheat varieties whose identities are preserved through a traceability system have a particular taste that command higher prices.

Q. What qualities or attitudes do entrepreneurs who are willing to participate in a value chain need?
They need to be interested in negotiating and making deals. Fortunately, more and more agricultural producers are. The shorter the chain, the fewer the players, which makes it easier to manage. For example, it's easier to establish produce value chains than livestock chains. For business owners, devoting part of their production to a value chain enables them to secure their short-term future.

A structure that's fundamentally different
The Canadian Agri-Food Policy Institute and Value Chain Management International have defined 4 value chain structures, from least to most complex: 
1. Fragmented
2. Cooperative
3. Coordinated
4. Collaborative

Many sources compare the most sophisticated value chains (collaborative model) with the traditional linear business model: 

 

Traditional model

Value chain

Relationship between players

Independent

Interdependent

Sharing of information

Limited

Abundant

Orientation

Raw material

Differentiated product

Analysis

Cost/benefit

Value/quality

Competitiveness

Adversaries

Cooperators

Main priority

Supply (push)

Demand (pull)

Scale

Enterprise system

Système


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