What is a Value chain?

Many Definitions

There are many definitions of a value chain. Value Chain Partnerships, an Iowa-based network of sustainable agricultural groups, defines value chains as strings of companies or collaborating players who work together to satisfy market demands for specific products or services. In a value chain business arrangement, each actor in the chain must make a mental shift from simply “What is best for me and my firm now?” to “What can I do in my firm to maximize the economic, environmental and community benefit to all the members of this value chain, including myself?” A significant change often comes in the form of information sharing. In a value chain members need to share a great deal more business information with one another so that all can make better decisions that affect the group.

fjaslfjWhere did the term "value chain" come from?

The term "value chain" was coined by Michael Porter and popularized in his business management book, Competitive Advantage: Creating and Sustaining Superior Performance. In Porter's definition, the value chain includes the activities within and around a company that create a product or service. The value chain contains two main sections - primary activities, which relate directly to the production or delivery of the product, and support activities, which allow the primary activities to happen efficiently and effectively.

 

Value Chains and Values-based Supply Chains

In Michael Porter's orignial definition, the term "value" refered to the value that was added to a product or service by the activities of the chain. As the idea of value chains has evolved, however, many people have begun to think of the "value" in value chains as the set of common values that are shared by the links in the chain. These values might include environmental sustainability, social good, fair wages for workers in the chain, product safety, or local ownership of the businesses in the chain. Consumers who share these values are willing to pay a premium for and develop loyalty to products that meet their values-based standards; therefore, meeting these standards also meets the self-interest of actors within the value chain.

Why do we work to develop value chains?

In rural areas across Appalachia and the Southeast, economic development has often led to profits for large, outside companies with little benefit to local people, businesses, and communities. In these conventional supply chains, each link in the chain was working for their own self-interest. We believe that the idea of a value chain offers a framework for economic development that is more collaborative in nature, and more likely to benefit more of the people in the communities where the chain is based.