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Study highlights impact of value chain management


June 24, 2013
By Dave Harrison

June 24, 2013, Guelph, Ont. — New research completed on behalf of the
Agricultural Management Institute (AMI) shows that few Ontario
stakeholders in agriculture have a solid grasp of the term value chain
or the potential impact that value chain management can have on their
competitiveness and profitability.

June 24, 2013, Guelph, Ont. — New research completed on behalf of the Agricultural Management Institute (AMI) shows that few Ontario stakeholders in agriculture have a solid grasp of the term value chain or the potential impact that value chain management can have on their competitiveness and profitability.

Value chain management (VCM) is a strategic business approach where organizations work collaboratively with suppliers, processors, distributors and the like, to improve operational efficiency and create value for the end consumer.

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The study showed that producers with these types of close relationships are most likely to enhance their business skills to the point where they are able to secure new and ongoing market opportunities. The result is businesses that are more competitive and more profitable than if they were operating independently.

While it is clear that closer business relationships are key drivers of farm business success, the research also shows that producers who lack these associations are often ill-equipped to develop them because of attitude, behaviour, lack of business and marketing ability, and/or poor communication skills.

LESS MOTIVATED TO ACCESS RESOURCES

Farmers who lack a clear understanding of VCM and its associated benefits are less motivated to access resources – even those who are aware of what is being used by their peers.

However, customers (i.e. processors, retailers, foodservice distributors, etc.) are reluctant to invest in relationship-building with producers who are unwilling to learn or change their behaviours.

Led by the George Morris Centre in partnership with the Value Chain Management Centre, Ipsos, and fsSTRATEGY, the study provided an understanding of:

•    Existing business relationships between producers, their customers, and the value chain(s) in which they operate.

•    Factors that have shaped these relationships and what they have allowed farm business operators to achieve.

•    Activities and programs that can be undertaken to encourage and enable farmers to adopt chain management practices.

The study included interviews with 552 Ontario producers and agri-food business operators encompassing agriculture, food, bio-products and bio-fuel.

Interviews were also conducted with senior representatives from successful Canadian and international programs that encourage and assist producers in developing strategic relationships with value chain members.

Only 34 per cent (169) of those surveyed currently participate in a value chain. This group, which benefits from close business relationships, realize annual revenues of $250,000 or more and are considerably more likely to have marketing knowledge or experience. They are also more likely to manage their farms from a strategic perspective and have developed a formal business plan.

CLOSER BUSINESS RELATIONSHIPS

Agri-food businesses were found to have a distinct influence on the extent to which producers and their ultimate customers (retailers and foodservice operators) are able to benefit from closer business relationships. Government programs and policy also shape attitudes and behaviour.

“The findings of this survey will allow AMI to develop the necessary tools and resources to both inform and motivate producers and associated organizations to develop stronger business ties and reap the benefits that knowledge and collaboration can bring,” says Ryan Koeslag, AMI’s executive director.

The full report will be made available at www.takeanewapproach.ca in the coming weeks.

AMI promotes new ways of thinking about farm business management and aims to increase awareness, understanding and adoption of beneficial business management practices by Ontario farmers.

The AMI is funded by the Canada-Ontario bilateral agreement to implement Growing Forward 2, a Federal-Provincial-Territorial initiative.


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