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Value chain analysis and why is it important
Research The role and importance of Global Supply Chain Management
Research The role and importance of Global Supply Chain Management
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LITERATURE REVIEW In this part of the study the basic concepts of value chain, concepts guiding agricultural value chain, benefit of value chain in agricultural sector, markets and marketing, market channel, market performance, measuring value chain, developing value chain towards the benefit of the poor, market deriving development in vegetable value chain, status of fruits processing at EcoAgribusiness and empirical reviews would be discussed. Definitions and Concepts in of Value Chain Analysis Industry chains are classified as either ‘supply’ or ‘value’ chains. The following definitions within the general term ‘industry chain’ are used: Supply chain: It is taken to mean the flow of goods that are required for raw materials to be transformed into finished products. Supply chain management entails making the chain as efficient as possible through better flow scheduling and resource use, improving quality control throughout the chain, reducing the risk associated with food safety and contamination, and decreasing the agricultural industry’s response to changes in consumer demand for food attributes (Dunne, 2001). Value chain: It is taken to mean a group of companies/industries working together to satisfy market demands. It comprises of a chain of activities that are associated with adding value to a product through the production and distribution processes of each activity (Schmitz, 2005). An organization’s competitive advantage is rated on their product’s value chain. The goal of the company is to offer maximum value to the end user for the least possible total cost to the company, thereby maximizing profit (Porter, 1985). A value chain is the sequence of activities required to bring a product from conception, through ... ... middle of paper ... ...ure of success being the return on investment (Dunne, 2001; Bryceson and Kandampully, 2004). Major concepts guiding agricultural value chain analysis There are four major key concepts guiding value chain analysis (Anandajayasekeram and Berhanu, 2009; Kaplinsky and Morris, 2000). These are effective demand, production, value chain governance, and upgrading. Effective demand Value chain analysis views effective demand as the force that pulls goods and services through the vertical system. Hence, value chain analysis need to understand the dynamics of how demand is changing at the markets, and the implications for value chain organization and performance. Value chain analysis also needs to check the barriers to the transmission of information in the changing nature of demand and incentives back to producers at various levels of the value chain (MSPA, 2010).