1. Pieter Taljaard Navorsingsgenoot en bestuurder: Eenheid vir Lewendehawe- en Wildlewe-ekonomie Departement Landbou-ekonomie Universteit van die Vrystaat 13 Oktober 2010 LPO kongres Windhoek 1 Medewerker: David Spies “Skakel” verantwoordelikhede in rooivleiswaardekettings

2. Content Introduction Supply vs Value chains Typical Value chains Value chains and globalization Value chain management Requirements Principals AgriBenchmark project Summary 2

3. VALUE CHAIN CONCEPT 3

4. 4 What is it? “The value chain is the end result of the interaction between the supply chain and the demand chain” The goal of the value chain is to create a system that can accurately forecast and quickly satisfy consumer demand with the least amount of inventory and the most efficient transportation modes possible

5. What is it?..... “Value chain” refers to all the activities and services that bring a product (or a service) from conception to end use in a particular industry—from input supply to production, processing, wholesale and finally, retail. A “value chain approach” to economic development means addressing the major constraints and opportunities faced by businesses at multiple levels of the value chain 5

6. Supply vs Value chains Supply chain management focuses mostly on increasing the efficiency of current operations, such as minimizing transportation or production costs in isolation of other factors. Its core focus is on reducing costs while retaining the systems and processes already in place. 6

7. Supply vs Value chains VCM is basing management decisions on what is required to create value from consumers’ perspective.  Its core focus is on developing the systems (resources, infrastructure, processes and relationships) necessary to satisfy or exceed consumers’ expectations.  Cost reduction is an outcome of this approach, as is superior quality and competitiveness 7

8. Tipical value chains 8 Consumers ProducersRetailers Processors Abattoirs Traders Input suppliers Feedlots Product flowInformation flowFinancial flow Marketing Segments Production Segments Source: VAIMS – SADC, 2009

9. Value chain players, supporters and influences 9

10. Gobalization and value chains VC old concept More important in globalized world “Globalization is changing the environment in which poverty reduction strategies are being implemented” (ACDI, 2009) Poverty alleviation cannot be sustained without economic growth Economic growth cannot be sustained in non- competitive industries 10

11. VCM not only…. (Min et al, 2005) reduces costs, but also increase revenues by: 1. Mutuality – this includes mutual benefits and synergies; 2. Efficiency – doing things right such as cost and inventory reductions, shortened lead-times, streamlined value chain processes; 3. Effectiveness – doing the right things such as improved customer service, increased market share, better pricing and new product development; 4. Profitability – in the form of return on investment and sales per target segment; and 5. Reinforcement and expansion of relationships – including trust, commitment, interdependence and mutual involvements. 11

12. VCM generate revenue by being able to: 1. Innovate more quickly and profitably by identifying new consumer needs and new uses; 2. Target new markets where the organization can be “number 1”; and 3. Develop the long-term shared strategies necessary for businesses to be financially sustainable 12

13. VC fails because… 1. One of the key requirements of success is missing, such as an effective governance system, 2. It does not have capabilities necessary to create a sustainable competitive advantage, 3. The participants are unable to learn and, in so doing, possess the capabilities necessary to adapt to the changing business environment, 4. Other common reasons include:  incorrect or unsuitable cultures;  impractical or non-aligned strategies;  physical mismatches in structure versus products and markets;  possessing operations that do not suit customer requirements;  the inability or unwillingness to share information;  incorrect, or the lack of or too much technology;  incorrect or insufficient training;  incentives that are misaligned to participants’ goals. 13

14. Principals of successful VCM (Collins, 2002) 1. Focus on Customers and Consumers 2. Create, Share, Realize and Protect Value 3. Get the Product Right – Every Time and aspect 4. Ensure Effective and Efficient Logistics 5. Ensure an Effective Information and Communications Strategy is in Place 6. Build and Maintain Effective Relationships 14

15. A closely aligned VC Gooch & Felfel

16. Strategic management – creating the environment Constructive relationships – willingness to share info  Attitudes and mindsets of individuals  sharing risks and benefits,  joint planning, decision making, problem-solving and conflict resolution,  communicating benefits of relationships,  clarifying partners’ needs and expectations. Learning environment – critical for sustainable VC alliance  Shorter product lifetimes and speed of changes – learning environment influence the viability of the VC  plans for developing the human capital required to leverage skills, expertise and capabilities, and to facilitate a learning environment that benefits the chain by turning internal and external information into valuable knowledge ICT – reduce paper work and lead times  Streamline communication and improve partners’ response deficiencies  Opp to decrease cost and increase profitability  Transaction and analytical 16

17. Strategic management Alignment of capabilities (organizations and operations) – delivering end product better than competition Corporate culture, based on:  mutual respect, collaboration, commitment, trust and a win-win mindset Requires:  commitment and involvement of senior and middle managers,  undertaking multi-function and business planning processes, and  providing mutual feedback 17

18. Strategic management Performance measurement and benchmarks  Performance measures – predetermined and agreed upon  Chain links must be made aware of performance measures accountable for  Improving value chain performance depends on the ability to address, evaluate and benchmark against specific measurables 18

19. Operational management – increasing effectiveness and efficiency Consumer research and forecasting - proactive in satisfying consumers’ demands and identify opportunities to capture value more effectively R&D activities – can be used to gauge performance Mapping VC activities - a schematic description of the activities occurring along the value chain Managing flow of info – express needs and constraints (own and others’ performance)  Cornerstone for meaningful governance system Managing cross-functional teams – more effective decision making, reduce redundant and duplicate actrivities  Faster more effective problem solving 19

20. Operational management – increasing effectiveness and efficiency Managing ICT – analysing quantitative and qualitative data for effective decision-making information Optimizing logistics –  reduce partners’ costs by enabling them to lower inventory levels minimizing variations in demand and supply, enabling suppliers to more cost effectively meet customer requirements 20

21. Environment requirements External  Policy and legislation – influence on competitiveness  Industry structure  Industry culture 21 Internal Mindsets/attitudes Incentives Productivity focus rather than value

22. Industry structure “ The fewer organizations that directly influence the commercial decisions of businesses’ operations, the more conducive the environment will be for enabling and motivating market-focused innovation” (McDermott et al, 2008; Tamilia & Charlebois, 2007; Harris & Rae, 2004; Scrimgeour & Sheppard, 1998) Should not: be limiting competitiveness by encouraging the production of “largely unimaginative, undifferentiated products,” (Hart, 2005) restrict the ability and motivation of the commercial stakeholders they represent to innovate in relation to market demands (Scrimgeour & Sheppard, 1998). discourage, or even prevent, the same sectors from working closely with the overall chain to improve their competitiveness through continually improving their effectiveness and efficiency 22

23. Industry culture Characteristics of an unfavorable culture includes: mistrust, lack of mutual respect, commodity-orientation, more focused on reacting to competitors' behaviour than proactively adapting to consumers' demands, discounting the possibility of win-win outcomes while striving to remain staunchly independent, lack or absence of communications, lacking or failure to fully utilize information technology, and no or little strategic planning 23

24. AGRIBENCHMARK – BEES EN SKAAP 24

25. Die internasionale AB groep www.agribenchmark.org Drie afdelings: Bees (asook skaap vanaf 2010), kontantgewasse en suiwel “Benchmarking” is ‘n instrument waarmee verskillende besighede binne ‘n sektor ontleed en vergelyk kan word. Agri-benchmark is ‘n globale netwerk van produksie (plaasvlak) ekonome wat volhoubare kwantitatiewe inligting genereer wat vergelykbaar is. Die inligting handel spesifiek oor boerderysisteme, die ekonomie daarvan asook die raamwerk waarbinne hulle opereer binne die globale omgewing.

26. Die internasionale bees-netwerk Huidige status Twee basiese afdelings: – Koei-kalf (speenkalfproduksie) - 42 plase in 21 lande – Beesafronding (voerkraal) - 58 plase in 23 lande Nuwe inisiatiwe Byvoeging van ‘n skaap-afdeling – aanvanklik 5 lande betrokke: RSA, Australië, Spanje, Verenigde Koninkryk, Brasilië

27. Van die resultate van die 2009 “Beef report” - Speenkalf

28. Weaned calves per 100 cows and year Source: Own calculations calves per 100 cows & year

29. Total cost vs. total returns Source: Own calculations US$ per 100 kg carcass weight sold

30. Resultate van die 2009 “Beef Report” – Voerkrale

31. Finishing period and daily weight gain by production system Source: Own calculations g per day PastureFeedlotSilage Cut & Carry days

32. Ranking by total cost Source: Own calculations US$ per 100 kg carcass weight sold

33. Medium-term profitability Source: Own calculations US$ per 100 kg carcass weight Integrated farmsCombined farms

34. Plaaslike netwerk-inisiatief Idee in 2008 gebore en daarna verder beplan Doel: Om ‘n plaaslike bees- en skaapnetwerk te stig wat waarde tot die plaaslike industrie kan toevoeg i.t.v. plaaslike vergelykings asook internasionale “benchmarking” teenoor marktendense Toepassings van netwerk: – Komparatiewe analises van huidige produksie sisteme (insluitende wins- en produksiekostes) – Impakevaluasie van tegnologie, beleid, asook bestuursstrategieë – Platform vir sektor/industrie-analise – Plaaslike en internasionale “benchmarking” Projekspan: – Prof Johan Willemse – Prof Andre Josste – Dr Pieter Taljaard – Walter van Niekerk

35. Plaaslike vennote reeds finansieel betrokke RMRDT / RMIF

36. Conclusions Important “meat links” Traceable and disease free Food safety Animal health and breeding Innovation (NZ as example) Productive and efficient Packaging Environmental Processing and exporting Legislation programs aiming at improving competitiveness with freer trade as driver Legislation shouldn’t favour one link in terms of negotiation and market power Proactive policies providing the “enabling business environment” 36

37. 37 Baie dankie Die huidige uitdagings is nie uniek of die eerste keer dat ons met dit te doen kry nie, maar ons reaksie kan verskil. Dit is die aksies wat gaan bepaal wie suksesvol sal wees en gaan oorleef!! Die huidige uitdagings is nie uniek of die eerste keer dat ons met dit te doen kry nie, maar ons reaksie kan verskil. Dit is die aksies wat gaan bepaal wie suksesvol sal wees en gaan oorleef!! Globalization is changing the environment in which poverty reduction strategies are being implemented

38. PRYS MARGES - NASIONAAL 38 Doel van studie:  Ondersoek prysmarges tussen produsente en verbruikersvlak namate die faktore wat die wisseling in die marges veroorsaak te identifiseer en beter te verstaan. Prystransmissie Asimmetriese (onvoldoende vloei) inligting  Aanbevelings aangaande besluitnemingsondersteuningsstelsel vir tydige inligting aan skaap- en beesvleisprodusente te kan verskaf.

39. 39 Prysmarges......... Data en inligting  Kleinhandel (industrie) – gestruktureerde onderhoude met supermark kettingwinkels: Groot verskille tussen winkels in selfde kettinggroep Toenemende klem op waardetoevoeging:  50% karkasse  30% snitte  20% waardetoegevoegde produkte – Handelsmerke (“Steakhouse classic”, “Certified Natural” ens) “Proudly SA” vs. Internasionale (i.e. Laagste koste)  StatsSA & AMT – sekondêre data

40. Reële beespryse Note: Wholesale and retail prices include distribution and VAT Source: Various sources (2010) – AMT (RMAA), DAFF, Stats SA, P&P & own calculations

41. Reële skaappryse Note: Wholesale and retail prices include distribution and VAT Source: Various sources (2010) – AMT (RMAA), DAFF, Stats SA, P&P & own calculations

42. 42 Prysmarges.......... Ondersoek na prys transmissie & simmetrie van inligting Prysstygings vinniger deurgegee van produsentevlak na kleinhandel as teenoorgestelde rigting – asimmetriese inligting  Moontlike redes: Gapings in ekonomiese teorie: Onvolledige kompetisie Aanpassingskostes (i.e. Veramdering van pryse op kleinhandel rakke)  Politieke inmenging (i.e. Zim)  Inventaris/voorraad bestuur Mark konsentrasie Stoorbaarheid, i.e. Bederfbaarheid Vervoer en transaksiekoste – beide hoog en stygend Mark krag – konsentrasie, monopolië, ens Ekonomie van skaal Produk eienskappe – homogeen of differensieerbaar Wisselkoerse Buitelandse en plaaslike beleide Nie veralgemeenbaar nie

43. 43 Prysmarges........ VSA pluimveeindustrie – kleinhadelprys as prys- leier en hoewel asimmetriese inligting beperk was word afwaartse prysaanpassings vinniger deurgegee as stygings VSA beesvleisbedryf – transmissie van skokke hoofsaaklik in een rigting, i.e. van produsent na kleinhandel Grane en oliesade relatief beter transmissie in vergelyking met lewendehawe markte – produk eienskap Asimmetriese aanduidings gevind in die SA beesvleisbedryf – maar nie statisties betekenisvol nie