The AERU Value Chain Compass

Demand and Supply

The vertical axis of the Compass focuses on the interaction between Demand and Supply.

• Demand: The willingness of the value chain’s consumers to pay for the goods and services it provides.

• Supply: The quantity and quality of the goods and services delivered by the value chain’s producers.

This interaction influences the economic value created by the value chain. To be viable, a value chain must identify consumers who are willing to pay a price no less than the cost of supply.

Social and cultural values are important for interactions between demand and supply. Producers and processors, for example, express their values in choices they make about their business operations, while retailers and consumers express values in choices they make about their purchases of food and fibre products. These values influence the price consumers are willing to pay and the cost of supply.

An effective value chain ensures that the values of consumers and producers are aligned in order to maximise the economic value sustained by the value chain.