an introduction to value chains

malcolm beveridge and froukje kruijssen

WORKSHOP

WorldFish Center, Penang18-22 July 2011

overview

• purpose

• introduction to value chains

• methodologies

– value chain analysis

– value chain development

• using value chain analysis and development

– case studies

source: Oxfam America (2011)

Fish market, Dohaa

Source: http://www.flickr.com/photos/yahl/3246788986/#

purpose

• value chains are central to the CRPs

– WorldFish scientists should understand the basics

• by the end of the workshop, we intend that you have a better understanding of

– what a value chain is (jargon)

– why value chain research is central to the CRPs

– value chain analysis

– what value chain development entails

– how to engage with VC research in the Center

background

value chains – a definition

• ‘.. comprise all activities needed to bring farmed produce to consumers..’ *

– credit

– seed

– feed

– production

– processing

– storage

– marketing

– distribution

– consumption* source: Gomez et al. 2011. Science, 332, 1154-1155.

value chains

productioninputs

andservices

transportand

processingmarketing consumption

• increasingly used in development and associated research because they

– provide a good framework to ensure desired outcomes and impacts

– identify where problems – e.g. inefficiencies, gender inequities - are occurring and where interventions are needed

– highlight the importance of private sector development and identify where public sector and civil society can best play a role

• applied to an enterprise, a conglomerate, a sub-sector or a sector

• at each node a product is exchanged or transformed and value added

upstream downstream

value chain analysis

value chain analysis

inputsand

services

• the analysis of

– chain configuration (input-output structure)

– institutional framework

– governance

– upgrading (development)

• takes account of

– dynamics

– barriers, opportunitiessource: USAID (2010)

Shrimp farming value chain, Bangladesh

institutional framework• ‘.. the rules of the game in a society’*

– organizations

– formal (e.g. laws) and informal (e.g. norms of social behaviour) rules

*source: North (1990)

productioninputsand

services

transportand

processingmarketing consumption

industryorganizations

• value chain analysis

– factors that interact with the functioning of the value chain

– external to the governance of the chain

– influence terms of participation, gains.

producerorganizations

ministries

NGOsorganizations

andpressure groups

regulations

politicalparties

standards

governance

inputsand

services

• “.. inter-firm relationships and institutional mechanisms through which non-market, or ‘explicit’, coordination of activities in the chain is achieved..”*

• exercising governance

– deciding who does what, when, how, under what conditions along the chain

– results in allocations of resources, distributions of gains, and specific terms of participation and of exclusion

• ‘lead firms’

– occupy one or more functional positions along a value chain that govern or drive it

– decide who does what along the chain, how, with what specifications and for what rewards

*source: Humphrey & Schmitz (2004)

value chain development

value chain development - program design

source: www.actionforenterprise.org

step 1 – which value chain?

Typical supply flows for livestock products in a lower-income country

source: ILRI/CIAT/WorldFish/ICARDA (2011)

step 2 - value chain analysisStudies Participatory Adaptive

Methodology - Consultants spend several weeks interviewing key informants, reviewingstatistics, etc;- Information used as program design tool

- More streamlined approach, bringing together key informants/value chain reps for workshops, focus groups;- Information used as program design tool

- Target groups are selected and support initiatives beginimmediately

Advantages - Provides a strong analytical background to VC issues, constraints and opportunities

- Particularly appropriate for development of new products or markets

- Provides initial orientation to help select appropriatesupport initiatives- Fosters relationships with value chain representatives and sponsor organization- Less costly than in-depthanalysis

Avoids drawn out and expensive analysis - Builds support on in-depth understanding of target group needs and priorities- Adaptive to changing conditions

Disadvantages - Can be time consuming and expensive;- Analysis can be excessive- can be agency centered and/or rigid

- Analysis can be subjective and dependant on theinformation provided by workshop or focus group participants and therefore requires validation

- Risk of getting involved in a value chain for which nopromising support initiatives present themselves

modified from www.actionforenterprise.org

step 2 - e.g. study type methodology• inexpensive; rapid; useful for scoping - preliminary analysis - and where limited

outputs and outcomes (i.e. little change) are sought

• inaccuracies/biases

• methodologies

– key informants (phone and e-mails; field visits)

– published information (reports and papers; statistics)

Hatcheries

Feed Mills

Processors

Informal Traders

Inputs Farm Traders ProcessingProduction Zone Consumption Zone

Energy Commodities

Retailers

Retail outlets

On-farmseed

On-farmfeed

Manure

Large Traders

generalized aquaculture value chain, Zambia

steps 3–4 – identify and assess solutions

modified from www.actionforenterprise.org

Constraint Type ofconstraint

Market-based solutions

e.g. green bean exports, Kenya

discuss with solutionproviders and users

steps 5–6 – intervene and monitor

source: www.actionforenterprise.org

Step 5 – choose interventions

• focus on causes not symptoms

• prioritize

• strategic view

• enable (invest), incentivize and sustain change

Step 6 – measure performance

• more affordable fish

• increased consumption by target groups

• more gender equitable employment

developing value chains

(i) TNCs - maximizing poverty reduction

Objectives

• determine how the company’s procurement, manufacturing and distribution practices influence how easily poor people find quality employment, earn a living wage, sustain a business or participate in the market.

e.g. Coca-Cola/SABMiller, Zambia

source: Oxfam America (2011)

maximizing poverty reduction among TNCs

• numbers of workers at each node

• incomes and benefits; taxes generated

• empowerment

• freedom of association

• grievance and dispute resolution

• diversity and women’s participation

• environmental impacts

source: Oxfam America (2011)

recommendations

independent audit

actions

(ii) improving small-scale producer value chains

• small producers linked only to buyers of their products

• reduces rewards and/or whole value chain performance

– sales of small volumes

– high uncertainty of price

– sales to many buyers

• cannot acquire reliable market information or access finance and other support from buyers

– poorly quality standards and quality

– lack of traceability

seaweed farming, Tanzania

upgrading• process upgrading: transform inputs into outputs

more efficiently by reorganizing production system or through better technologies. e.g. change from cage to pond culture by fish farmers

• product upgrading: change to more profitable product lines e.g. processors switch from frozen to breaded fillets

• functional upgrading: increase skill set e.g. from feed mill to vertically integrated company that includes farming and processing

• inter-chain upgrading: use skills acquired in a different sector/chain e.g. farmers switch from rice to Pangasius

• other forms of upgrading: increase volume, meet standards and certification, deliver on logistics and lead times, get paid better for the same product e.g. Fair Tradephotos: Chen Oai Li, Hong Meen Chee, Ingrid Kelling, Froukje

Kruijssen http://free-photos.biz

(iii) cost – benefit analysis of fishing

Objectives

• evaluate impact of interventions

– quotas, effort regulation or area closures

• on ecosystems, the economy, society and food availability

cost-benefit analysis fishing - methodology

source: Christensen et al. 2011

• determine flow (amounts, revenue, costs) of fish products from sea to consumer

• describe the social benefits (employment, incomes) from fish production and trade

• consider income distribution and social benefits of the fishing sector

• links trophic eco-system model to a value chains

Ecopath/Ecosim Value Chain Analysis

modeled benefits to fleet and value chain

source: Christensen et al. 2011

revenue revenueprofitprofit

(iv) gender

• value chains are embedded in a social context

• value chain development affects gender roles and relations

• gender equity and value chain competitiveness are mutually supportive goals

supporting gender equitable value chains

• understand men and women’s roles and relationships

• foster equitable participation

• address the distinctive needs of women

• support women’s economic advancement

• design and promote gender equitable, benefit sharing mechanisms

• include men in defining problems and solutions

source: http://www.fao.org/gender/gender-home/gender-programme/gender-livelihoods/en/

removing gender constraints

source: USAID (2010)

further reading• Christensen et al. 2011. A combined ecosystem and value chain modeling approach for evaluating societal costs and

benefits of fishing. Ecological Modeling, 222, 857-864.

• Gomez, M I et al. 2011. Research principles for developing country food value chains. Science, 332, 1154-1155.

• Mayoux, L and Mackie, G. 2008. A Practical Guide to Mainstreaming Gender Analysis in Value Chain Development . International Labour Office. - Addis Ababa.

• Oxfam America. 2011. Exploring the Links Between International Business and Poverty Reduction. The Coca-Cola/SABMiller value chain impacts in Zambia and El Salvador. Oxfam America,

• Riisgaard, L, Bolwig, S, Matose, F, Ponte, S, du Toit, A and Halberg, N. 2008. A Strategic Framework and Toolbox for Action Research with Small Producers in Value Chains. DIIS Working Paper no 2008/17. Copenhagen: Danish Institute for International Studies.

• Rubin, D, Manfre, C and Barrett., K N 2009. Promoting Gender Equitable Opportunities in Agricultural Value Chains: A Handbook. Publication prepared under the Greater Access To Trade Expansion (GATE) project, under the Women in Development IQC Contract No. GEW-I-00-02-00018-00, Task Order No. 02. Washington, DC: United States Agency for International Development.

• USAID. 2011. Gender and Pro-Poor Value Chain Analysis: Insights from the Gate Project Methodology and Case Studies. http://www.usaid.gov/our_work/cross-cutting_programs/wid/pubs/GATE_Gender_Pro-Poor_Value_Chain_Analysis_05-09.pdf

• Veliu, A, Gessesse, N, Ragassa, C.and Okali, C. 2009. Gender Analysis of Aquaculture Value Chains in Northern Vietnam and Nigeria. Agriculture and Rural Development Discussion Paper 44. Washington, World Bank.

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