Dr DAM De Silva Supply chain is not synonymous with value chain because Value chains are concerned with what the market will pay for a good offered for sale The main objectives of value chain management are to ID: 183636
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Slide1
A survey of value chain studies in Asia
Dr. D.A.M. De SilvaSlide2
“Supply chain” is not synonymous with “value chain”, because…
Value chains are concerned with what the market will pay for a good offered for sale
The main objectives of value chain management are to
maximize gross revenue
and
sustain
it over time
Supply chains are concerned with what it costs and how long it takes to present the good for sale
The main objectives of supply chain management are to reduce the number of links and to reduce friction (bottlenecks, costs incurred, time to market), but
Need a
good supply chain
to build a
value chainSlide3
Source: Michael Porter (1985)Slide4
Production
(From: Farm or water bodies)
Distribution
(Transport and logistics)
Marketing
(
To: Final consumer
)
VALUE CHAIN: Creating value chain for fish and fishery productsSlide5
Production
Year round production; multi regional and international
Fresh, cut
Service oriented customers
Fisher or shipper controlled;
cost driven
Differentiated produce
Branding and private labels
Streamlined Distribution,Acct-oriented
marketing,
Category
Management
Retailer controlled; revenue drivenSlide6
Food fish value chains in Asia
fishermen
Importers
Retailers
fishermen
Processors
Retail Chain
Export
123fishermen
Export
Processors
Export
Wholesaler
Retailers
ImportersSlide7
4
Processor
Wholesaler
Retailer
5
Processor
Export
Re-Export
WholesalerRetailerSlide8
Fishers (100%)
60% Dealer
Dry dish value chain - Bangladesh
Middlemen (25%)
Middlemen (15%)
Dealer (80%)
Dry fish producers (20%)
5%
10%5%Slide9
Dry fish producers (20%)
Low income (16%)
Wholesaler (16%)
City wholesaler (14.%)
Retailer (14.5%)
Feed
IndustryImports
Middle income (3.5%)Middlemen (3%)Retailer (3%)Entrepreneurs (0.5%)Supermarket (0.4%)Export
(0.6%)Consumers
Source:(
Shamsuddoha
, 2007)Slide10
Value chain analysis –
Hilsa
marketing, Bangladesh
Hilsa
(
Tenualosa
ilisha) – national fishMost important single species, economically and emotionally30% of national fisheries prodcution88% marketed internally for domestic consumption12% exported to ethnic marketsFish marketing system are complex, traditional, and less competitiveSlide11Slide12
Value chain analysis -
Hilsa
Primary market
Purchase price (PP) 0.88
Marketing costs (MC) 0.05
Sales price (SP) 1.02
Market margin (MM=SP-PP) 0.14 (8%)Marketing profit (MP=MM-MC)0.09
Secondary marketPurchase price (PP) 1.02Marketing costs (MC) 0.07Sales price (SP) 1.39Market margin (MM=SP-PP) 0.37 (23%)Market profit (Mp=MM-MC) 0.30 Retail marketPurchase price (PP) 1.39Marketing costs (MC) 0.04Sales price (SP) 1.61Market margin (MM=SP-PP) 0.22 (14%)
Market profit (Mp=MM-MC) 0.18 Slide13
Market margin and Marketing Profit –
Hilsa
marketing
Source: (Ahmed, 2005)Slide14
Vietnam’s seafood industry: A socially embedded division of state owned and local Chinese owned enterprises in regional value chains?
Seafood industry is the country's third largest exporter
Dominating position on the Japanese market and market of Mainland China has increased in importance
To illustrate how the structures of value chains are embedded in lead firms as well in the supplying firms in the value chain
State owned enterprises (SOEs) and the local Chinese dominated private seafood sector
Nature of the value chain as shaped by the institutional environments and the social actors, who give specific attributes to the different nodes of the chain in local, national, regional and global spaces
Shrimp Value chains are three types:1. Local Chinese Owned Pvt. Companies: i. Marginalized in HACCP standard procedure ii. Minor group of enterprises succeed to upgrade to HACCP2. State Owned Enterprises /SOE
***Overseas Chinese dominated shrimp value chains***Slide15
Shrimp value chain: SOE or Local Chinese owned
pvt
. Co.
Aquaculture
Traders
Processors
Retailers
Source:
Lindhal, 2005Slide16
Local Chinese Owned Pvt. Companies
vs
SOEs
Forward linkages with farmers
Provide feed, capital, antibiotics and other inputs to farmers
Price is higher (15%)
Use new technology; IT, market information, certificationNew processing plantsLong term supplier contractsUse ethnic networks to market productsStrong ties with diasporaSlide17
Shrimp value chains to Japanese market
Farmers
Traders
Trading houses in Hong Kong & Singapore
Processors in Japan
Processors
Retail chains in Japan or
Trading HousesRetailers
Source: Lindhal, 2005Slide18
Overseas Chinese dominated shrimp value chains
1.
Local Chinese Owned Pvt. Companies
Use regional relationships to enhance ;
market power, coordinating skills, market penetration, brand establishment, & entering into high value markets
2. Minor group of enterprises succeed to upgrade to HACCPUse relationship in Diaspora communities to clear branding strategies, contact variety of regional and global retailers, developed market linkages through ICTProducts to ethnic markets: low level of value addition and traditional tastes, flavours, methods...Slide19
Similarities of fish marketing systems in developing
vs
developed countries
Both have to face the same basic challenge of providing safe food of right type and quality, to right place to right people those who are willing and able to pay
Market composed of mixture of local and imported fish and fishery products
Complex panorama of actors, enterprises and institutions
Important role of supermarkets in fish and fishery product retailingPresence of hotel restaurant and institutional channels, and therefore some food service suppliersIncreasing role of regulations and standardsSlide20
Differences of fish marketing systems in developing
vs
developed countries
Vastly different scale at system and enterprise level
Percentage of product handled formally lower in less developed countries
Share of fresh versus processed or manufactured much higher in less developed countries than emerging or developed countries
Supermarket share is rising still and fast in less developed countries to detriment of smaller retailers and wholesale marketsSlide21
Challenges for developing country suppliers in general
Choosing between commodity and specialty markets
Retaining and expanding market access
Gaining and holding a position in lucrative value/supply chains
Penetrating, holding, expanding better markets
Raising productivity and competitiveness
Increasing value addedDealing effectively with emerging standardsSlide22
PESTLE analysis
Is a useful tool for understanding the “big picture” of the environment in which industry is operating and environmental understanding will bring the advantage of the opportunities and guide to minimize the threats
PESTLE components are;
P-Political
E – Economic
S – Social
T – TechnologicalL - LegalE - EnvironmentSlide23
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Political Factors
Low political interest among the general public and therefore little or no pressure on government
Low political pressure from fishermen and boat owners Low interest among politicians High interest among government to improve the situation on post harvest losses Frequent changes in policy due to rapid changes in politically elected authorities within the government affecting stability of practical resolutions Possibilities for fishermen- and vessel owner associations to influence future policy making and contributing to political decisions
International agreements e.g. IOTC= > => >
> >Slide24
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Economical Factors
Low average catches affect fishermen’s incomes and availability of capital to invest in improvements
Low purchasing power among a large group of customers in the domestic marketUn equal income distribution and growing upper middle class Limited knowledge in financial accounting affects operation of small and medium sized fishermen’s businessesThe ongoing civil conflicts in Asia affects governmental expenditures and decreases the possible funding of development in the fisheries sector
The tsunami disaster had severe effect on the Indonesian, Sri Lankan, and Thailand fisheries sectors e.g. on development and capacity = > > <
> <Slide25
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Sociological Factors
Acceptance of low quality fish
Lack of awarenessFood safety and health problems due to low fish qualityThe attitude of fishermenLack of specialized education among fishermen
Religious sentiments affecting industrial practices < < > > > =Slide26
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Technological Factors
Lack of infrastructure (e.g. facility, machinery, tools, practices)
Inferior boat designInferior harbor designInsufficient availability of freezing facilitiesInadequate processing facilitiesSelectivity of fishing gear (i.e. gillnets)
Lack of technological improvements (e.g. freezers, insulating boxes etc.)Lack of proper hygienic practicesInadequate transport facilities< > > > > =
> > =Slide27
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Legal Factors
Lack of regulations, monitoring and enforcement on:
Quality standards Food safety Hygiene standards
Fish handling Illegal inland fishing Regulations in foreign export markets (e.g. EU, USA and Japan)General trade agreements and tariff> > > >
> > > =Slide28
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Environmental Factors
Insufficient availability of clean water
Tropical weather conditions and climate changePollution in harbor basin waterLack of adequate sewage managementOil spills in harborsHygienic conditions onboard boats and in harbors
Sustainability of fish stocksStock size (When stocks are large and catches good, post harvest losses tends to increase) > > > > =>
< = Slide29
Drivers and governors of change on the demand side…
Demographics
: growth rate; age distribution; ethnicity; race; geographic distribution; extent of travel; exposure to food-related information and retailer promotion
Consumer preferences
: price vs. quality/condition; convenience; year-round availability; variety; nutritional content; safety; greenness; fair trade; luxury goods
Buyer specifications
: volumes; presentation; labeling; private standards; certification; price point; service Technology: marketing information systems; category management methods; progress in supply chain management; transport and handling advances Slide30
Regulatory change
: official standards and associated certification; labeling (nutrition, COOL, allergens); market access; environmental protection; OSHA; labor rights; animal rights
Market access
: tariffs; quarantine restrictions; other non-tariff trade barriers (NTBs)
Factor costs in distribution and retailing
: energy; transport; labor
Economic growth trends: GDP; disposable income; levels and use of consumer credit; inequality of wealthSlide31
Drivers and governors of change on the supply side…
Product/market conditions
: effective demand; prices; competition
Procurement practices
: value chain integration; compliance with private standards; preferred supplier arrangements; new terms of sale
Factor prices and availability for production and shipping
: land; capital; labor; energy; transport Producer preferences: overall investment per crop area; price levels and their variability; production riskSlide32
Technology
: marketing information systems; supply chain management; quality assurance regimes; transport and handling technologies; post-harvest and production technologies
Regulatory change
: capacity to deal with market access requirements and standards; dealing with local and national restrictions on land use, inputs, labor contracting and treatment
Demographics
:
availability of seasonal labor; existence of a local market for seconds and an urban market for export-quality productSlide33
Conclusions and Implications
Different institutional contexts of end-markets are linked to different forms of coordination and control of value chains
Economically and socially important species and value chains are differ widely across Asia
Networks both local and regional enhance the value additionSlide34
Need to develop vision on: learning, investment, market access, sales, and exports
Make sure the policy environment as favorable as possible, but don’t assume that will be enough
Identify and support promising value chains with assistance at key point in the supply chain based on collaborative analysis of challenges, joint definition of priorities, and expert assistance from industry-experienced people
Take a cluster approach only as the starting point for value chains, not as an end in itself. Slide35
5. Concentrate on competitiveness and productivity
6. Look for and exploit multiple ways to add value once initial success has been attained with a single deal
7. Seek sustainability within value chains, not in the development programs or projects
8. Recognize that some keys to success require mainly public sector intervention, others only private, and some a mixture of the two
9. Seek private sector alliances at all stages of supply and value chainsSlide36
Thanks!