The AERU Value Chain Compass

Value Chains

Traditional supply chains (in contrast to value chains) in the food and fibre sector begin with producers delivering harvested outputs to processors. There may be further manufacturing before exporters sell the product to overseas importers. The importers sell to retailers, who sell to consumers.

The producers, and even the exporters, may have little knowledge about final consumers. They deliver commodities efficiently to specifications set by agents with the most market power (typically the retailers, since they know their customers).

In a value chain, participating enterprises learn what is valued by consumers, and that knowledge is passed back along the chain to processors and producers. The value chain also understands all the attributes in its production and distribution systems that are valued by final consumers, and that knowledge is passed forward along the chain to retailers and consumers.

This is represented in the diagram below. The arrows represent dual movements of knowledge about value, from the consumer through to the producer, and from the producer through to the consumer.