Transcript Understanding Agricultural chains

UNDERSTANDING
AGRICULTURAL CHAINS
TOWARDS
ENHANCED MARKET ACCESS
Nerlita M. Manalili
VREDESEILANDEN
Outline
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A Simplistic View of Marketing & Agricultural Chains
Dynamic Markets and Accompanying Challenges
Towards a Deeper Understanding of Agricultural Chains
Market Access and Agricultural Chains
Towards Strengthened Positions in the Chains
A Simple Marketing System
Information/ communication
Producers
(sellers)
Goods / services
payment
Market
(Buyers)
Action/ decision
Porter
In reality marketing is not as simple as it seems
Information/ communication
Goods / services
value
Producers
(sellers)
traders
processors
Wholesalers/
retailers
Market
(Buyers)
payment
Action/ decision
•a product passes through number of intermediaries (trader, processors, wholesaler, etc)
before it reaches the end user(consumer/buyer)
• each level that a product passes through adds value to it (storage, cleaning, processing, etc)
and becomes a chain of value adding activities
and leads to a different product form
• information flow governs the value addition decisions in the chain
• if in simple marketing system - information distortion occurs, more so in a chain
- buyer seller behavior is complicated, more so in a chain
Simple Notion of Markets and Marketing
Lots of people
buying vegetables
in the market
Surely I have a
nearest me
ready market for
I am producing
vegetables
my vegetables
The Reality is
No assurance of ready Markets
Points Commonly Missed About
Markets & Marketing
What form, mode
& Price are they
sold/purchased?
Who are
Currently/buying
Supplying?
In what way
are my products
Similar/different?
What are
The potential entry points
or barriers to entry?
Shifting Trend
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Produce first
Then sell
Know market
Then Produce
to
Specifications
Requires farmers’ awareness of :
• who their end consumers are
• in what agricultural chain they are in
Dual Face of Agrifood Markets
Enhanced Presence of Modern retailers Popularity of Traditional retail markets
All Products passes through a value chain to get to a market then and now
The only difference is that currently there are proliferations of efficiency
driven chains
an offshoot of enhanced dynamics in the market place
changing mix of players
(old and new & more
equipped entrants)
changing mix of
commodities
(preferences, purchasing
power)
changing rules of the
games
(Quality, standards, etc)
These leads to dynamic markets
Small producers are
ill equipped to compete in these ever increasing dynamic markets
need to be brokered in to be able to cope and be integrated in dynamic markets
Information and Communication, among others plays a crucial role in the process of
integrating producers to dynamic markets
Factors driving
dynamic market change
Creates changes
in supply chains
Leading to small scale
producers & SMEs
•Consumer Pull
•Policy “push”
•Urbanization
•Commercial
opportunity
•Food standards
•Foreign
investment
•Technology
•Management
• Organization
•Industry Structure
concentration
•Procurement
•Standards
•Finance
INCLUSION
SMALL
PRODUCERS
& SMEs
EXCLUSION
Skills &
Assets
Of
Producers
&
SMEs
Entry Points
Policies
Institutions
Business Models
Collective Action Support Systems
Research
&
development
Regoverning Market
Market Dynamics’ Impact Pathways to Smallholder producers
Small holder producers
passers
nichers
failures
Traditional
Markets
Modern retailers
Entry
requirements
bonds
accounting
legal documents
business permits,
traceability
etc.
Procurement
Modes
Consignment
Deferred payment
Sustainability
price war
Discounts
Promotion
costs
Farming system
(nichers)
Continous supply
(specialty produce)
Production planning
Mono cropping
Staggard planting
(regularity of supply)
Spillover
Effects
Changing
• Quality
• Quantity
• Variety
• Price
• Marketing systems
(distribution,etc)
• consumer
behavior
Usually
lacking in
capacity to
absorb
produce
And the
incentives
to
Produce
more
Manalili 2007
Understanding Agricultural Chains
•Network of independent units/enterprises contributing to the planning,
design, production & distribution of a product from its inception
(production planning) to its consumption by end consumer/user
• where product flow at each enterprise unit which transforms product into
different forms (raw materials to final product) and that
transformation is refer to as value added
• value delivery system
• a chain participant captures only a certain percentage of the total value
generated by the system
•May come in different names depending on focus of analysis
supply chain - on managing the chain
value chain - on the value added
Trader /wholesaler (volume, place)
Producers
market
Retailer 3
One stop shopping
convenience
Retailer 2
(At your neighborhood , cleaned)
Retailer 1
(At your doorstep)
Supply Chain Management (SCM):
an approach to managing agricultural chains
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• the coordination & management of all activities within an
agricultural chain with the goal of maximizing value
for the consumer
• it aims to satisfy consumers through continual
improvement of the elements (managed system,
managing system and interfaces)
• competition is no longer between the business units
of the same level but between chains
operating in the same or substitute industries
• the key is coordination among and between
participants in the chain
• the challenge is to ensure each participant who
captures only a certain percentage of the
total value generated by the system gets
their fair share
Elements of a Value Chain
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Managed
systems
(chain participants
and value added)
Managing
systems
(coordination)
Process
Interface
(relationships)
• network of processes with precedence relationships that are linked
by flows of products and information
• processes that creates value
• participants roles and positions
• product
form, value added, flow
• information flow, control
• Coordination / decision ( Systems in place , Weak /strong
links)
• Process
• Structure
• Levels
•
•
•
•
•
Structural process behavior,
deployment of
resources,
operation (e.g. customer orders)
Decision support information:
Process performance/status
Knowing more about the agricultural chain
Will help determine your
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contribution to the chain
do you add value or are you just
duplicating other’s function?
Is there a danger my contribution
can be taken over by others?
identify opportunities within
are their gaps not served
Tells you about
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Strength and weaknesses
( to improve on)
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Threat (to anticipate & prepare for)
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Assess future, to evaluate and
decide
Market Access & Agricultural Chains
Market access means
 Be
able to bring products to markets
 On a sustainable basis, getting an acceptable price for
their products
 Within the context of sustainable agricultural chain (SAC)
Being part or integrated in an SAC
finding
what you can do best
 having a strong position in it
Market Strategies in an SAC context
Challenges
Market Driving Forces
Market segmentation
Chain differentiation
Product and service differentiation
Value-added demand
Satisfy the need for
Integral chain care
Quality
Safety
Sustainability
Low cost strategy
Reducing interventions
Eliminating non value activities
Improving efficiency
Chain optimization
World Bank 2002
•Information on markets
product & product standards
volume and prices
• technology, resources (+credit)
Source and accessibility
process and raw materials
•Consumer preferences
•Varying quality perceptions
•Access to alternative markets
• competition & competitors’
strategies
• trade requirements
(export, certification, food
safety, etc)
• a lot more
Enhancing position and integration in the chain
Vertical integration
Horizontal Integration
Assuming other roles and
position in the chain
Participation in
coordination and
management of the
chain
Integration of post farm activities
Specialization in farm production
Observer
active participant
How do we help farmers be integrated in the chain
In terms of activities
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In terms of coordination &
management
 To participate in
To improve on his
decision process
current segment as
chain participant
 In setting norms and
standards
To add more activities
and move to other
 Through innovation
chain segments
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Four forms of inclusive chain
development
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Integration
of post-farm activities
no
participation in
chain
Management
CHAIN
Activity integrator
CHAIN
Participant
CHAIN
(CO-) OWNER
participation
in chain
mnagement
CHAIN
Partner
Specialization
in farm production
Source: Regoverning Market (with enhancements by Manalili)
Pathways of enhancing farmers’ position in the chain
within the Four forms of inclusive chain development
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Integration
of post-farm activities
2
4
CHAIN
Activity integrator
no
participation in
chain
Management
CHAIN
Participant
CHAIN
(CO-) OWNER
participation
in chain
mnagement
CHAIN
Partner
1
3
Specialization
in farm production
Source: Regoverning Market (with modification by NMM)
Four forms of inclusive chain development
23
Integration
of post-farm activities
no
participation in
chain
Management
CHAIN
Activity integrator
CHAIN
Participant
CHAIN
(CO-) OWNER
participation
in chain
mnagement
CHAIN
Partner
Know more about improving
Farming systems and quality
Of product (to have better
Chance at the market and
Specialization
Get better prices)
in farm production
Source: Regoverning Market (with enhancements by Manalili)
Four forms of inclusive chain development
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Enhance quality
Add value and Process
products
no
particpaipation
in chain
Management
Integration
of post-farm activities
CHAIN
Activity integrator
CHAIN
Participant
CHAIN
(CO-) OWNER
participation
in chain
mnagement
CHAIN
Partner
Specialization
in farm production
Source: Regoverning Market (with enhancements by Manalili)
Four forms of inclusive chain development
25
Integration
of post-farm activities
no
participation in
chain
Management
CHAIN
Activity integrator
CHAIN
Participant
CHAIN
(CO-) OWNER
participation
in chain
mnagement
CHAIN
Partner
Specialization
in farm production
Farmer study groups
Specialized activity/
Knowledge & Negotiation skills
that they get to influence chain
decisions
Source: Regoverning Market (with enhancements by Manalili)
Four forms of inclusive chain development
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Integration
of post-farm activities
no
participation in
chain
Management
CHAIN
Activity integrator
CHAIN
Participant
Cooperatrive business
Product development
Branding, marketing
CHAIN
(CO-) OWNER
CHAIN
Partner
participation
in chain
mnagement
Specialization
in farm production
Source: Regoverning Market (with enhancements by Manalili)