Value chains versus supply chains

Farm & Countryside Commentary by Elbert van Donkersgoed

Editor's NOTE

This column was adapted from one of Elbert van Donkersgoed's weekly radio chats, called Corner Post, which are aired weekly on CFCO Radio in Chatham and CKNX Radio in Wingham, Ontario. Elbert is the Strategic Policy Advisor of the Christian Farmers Federation of Ontario, which is working hard to create a more satisfying and sustainable model for farming in the province. If you'd like to receive a transcript of Elbert's Corner Post address each week, send an email to evd@christianfarmers.org with SUBSCRIBE as the message.

Do any of the issues listed in this column resonate with you, or are there other wishes you'd like to share? Send them to us now, and we'll post them on the web site later.



Posted July 7, 2003: Last week's National Value Chain conference in Toronto changed my thinking about the merits of family farmers participating in value chains. I arrived a skeptic. I left persuaded that many family farms could become stronger businesses by developing value chains with others in the food system.

I needed to appreciate that a value chain is not a supply chain. Not all the conference speakers had the distinction clear, but the event as a whole clarified my understanding. On the surface a value chain may look like a supply chain, but its structural framework -- and who benefits -- differs profoundly.

In recent weeks, there have been two interesting supply chain developments. McDonald's corporation announced restrictions on its suppliers' use of antibiotics in livestock. MacDonald's new policy requires the phasing out of some antibiotics that promote growth in animals. The media reported the initiative as the result of yearlong consultations with environmental, science and consumer groups. No mention of farmers!

Closer to home, pork producers under contract to deliver to Maple Leaf Pork, Ontario's largest processor of pork, have received a letter requiring them to remove all meat and bone meal from all approved Signature Hog rations immediately. Although Maple Leaf Pork likes to address those under contract to deliver to them as "producer partners," there is no indication that farmers had any input on this latest development.

My purpose in mentioning these supply chain developments is not to criticize their content. I expect that both can be accommodated in our food system without long-term disruption. Both are bold examples of supply chain management, in this case designed, not to drive out costs, but to protect market share. In each case, there is only one winner, the firm with enough market clout to manage the supply chain.

Value chains work differently.

First, a value chain is a real partnership between all players in the chain, from farmers and their input providers to wholesalers and the firm dealing directly with consumers. The ideal value chain will even have consumers as partners. Real partnership means all participants benefit and all have a say in developments.

Second, a value chain is built on trust. Value chains are as strong as the confidence that the contributors have in each other. They too need to be bold, but their emphasis is on collaboration, building relationships and creating social supports.

Third, value chains -- add value. They are not caught in the cheap food syndrome, the race to the bottom, the chase for the lowest cost of production globally. They apply market knowledge to develop storied food that brings consumers back, again and again.



Corner Post can be heard weekly on CFCO Radio, Chatham and CKNX Radio, Wingham, Ontario. Corner Post is archived on the website of the Christian Farmers Federation of Ontario: www.christianfarmers.org. To be added to the electronic distribution list of Corner Post, send email to evd@christianfarmers.org with SUBSCRIBE as the message. To remove your name, send email with UNSUBSCRIBE as the message.