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The value chain

A value chain is a collection of businesses including primary producers, processors, distributors and retailers that work together to understand what consumers want and create and deliver a product that meets their demands.

Value chains place the consumer and their needs first, with everything else secondary to those demands. 

The core reasoning behind value chain thinking is to create sustainable competitive advantage. 

In a sustainable value chain, businesses along the chain work together and communicate effectively with each other to make better decisions about using resources to provide a product that meets consumer demands.  They share information, have strong, trusting relationships and are all working towards achieving a common goal. This means the businesses can make better decisions about how to allocate resources by focusing on the areas that create consumer value.

Understanding the challenges and opportunities presented by being a part of global value chains is an important edge for South Australia’s food and wine sectors. Identifying specific opportunities and strengthening chains is critical in helping South Australia reach its goals for the food sector.

Glossary of Value Chain terms

Want more information?

There are many opportunities to learn more about value chain thinking, the value chain process from the paddock to the plate, and how it can be applied to your business.

Professor Andrew Fearne: 'Sustainable Food and Wine Value Chains' 

Professor Andrew Fearne, a world-recognised leader in value chain management and consumer behaviour, was a recent Adelaide Thinker in Residence. His focus was ‘Food & Wine Value Chains: Prosperity through Collaboration’. He actively promoted community participation in value chain thinking, healthy eating, and sustainable consumption across the South Australian population, through the development of stronger linkages between health, environment, agriculture, education, retail and consumers.

His final report 'Sustainable Food and Wine Value Chains' (pdf, 2.13mb) details that South Australian food and wine faces steep challenges to enhance their strategic thinking and management practices. In the report he has set a challenge for South Australia’s food and wine industries to "focus on consumer demands or risk losing your international competitiveness."

The report includes five key recommendations:

  1. Thought leadership – increase understanding of value chain principles amongst government and industry senior managers.
  2. Integrated market intelligence and consumer insight - an integrated market intelligence and consumer insight service that is accessible to all stakeholders in the respective, sector specific value chains.
  3. Holistic food policy - development of a holistic food policy, which supports the implementation of the SA Food Strategy and interacts with other plans (trade and development, health, education, workforce development, sustainability and climate change).
  4. Education and training - review the current education and training provisions for the South Australian food and wine industries.
  5. Regional co-innovation clusters - create virtual networks that are rooted in the regions but extend globally and target young people.

PIRSA Value Chain Development Unit

As a result of Professor Andrew Fearne's residency, PIRSA established the Value Chain Development Unit to drive the uptake of value chain thinking and management through the agrifood and wine sectors in South Australia.

The key strategies of the Value Chain Development Unit are:

  • act as a change agent to galvanise the paradigm shift from a production focus to a consumer focus within industry and across supporting government agencies.
  • develop an information hub with up to date global information sources
  • develop and deliver educational and capability development programs.

How is the SA Food Centre helping?

The South Australian Food Centre website has developed a value chain model which includes links to issues, such as business fundamentals and innovation. In encouraging value chain thinking the model works from the consumer back to the primary producer.

Consumers

Why will consumers buy your products?
To gain a competitive advantage you must have consumer knowledge and understand current and future trends. Understanding consumers’ behaviour will help you in create and deliver products they will purchase.

Customers

Who will present your products to consumers?
What is the best way to make your product available to consumers?  Customers’ needs will be different from consumers needs and you will need to meet the needs of customers for your product to reach consumers.  You want your customers to know your products and be able to tell consumers about them.

Distribution

How will I you get my products to market?
You need to have an efficient and effective distribution method that ensures the timely, safe and smooth delivery of your products to your customers and onto consumers.

Processing and manufacturing

How will you manufacture efficiently, safely and with consistent quality?
Customer and consumer expectations need to be met with consistent quality and supply.  The food industry, food service sector and government have a primary responsibility to ensure food is safe for consumers.

Growing and producing

How can you improve your products?
The nature of business, the environment and access to natural resources is ever changing.  Growers and producers must constantly evolve to keep themselves at the forefront.

And along the food value chain:

Innovation
How will your products, packaging and manufacturing processes differ from your competitors in ways that add value for the consumer?
Innovation along the whole chain is vital for business and product development in forging a competitive advantage.

Business Fundamentals
How will you structure and resource your business to operate profitably, sustainably and legally?
The basic economic, financial and operating factors that influence the success of your business and the things you need to know to start your business and help it succeed.

Who can I contact?

Talk to the Value Chain Development Unit or the SA Food Centre