Dr. D.A.M. De Silva
“Supply chain” is not synonymous with “value
chain”, because…
 Value chains are concerned with what the
market will pay for a good offered for
sale
 The main objectives of value chain management are to
maximize gross revenue and sustain it over time
 Supply chains are concerned with what it costs and how
long it takes to present the good for sale
 The main objectives of supply chain management are to
reduce the number of links and to reduce friction
(bottlenecks, costs incurred, time to market), but
 Need a good supply chain to build a value chain
Source: Michael Porter (1985)
VALUE CHAIN: Creating value chain for fish and
fishery products
Production
(From: Farm
or water
bodies)
Distribution
(Transport
and logistics)
Marketing
(To: Final
consumer)
Production
Year round
production; multi
regional and
international
Fresh, cut
Service
oriented
customers
Fisher or shipper controlled;
cost driven
Differentiated
produce
Branding and
private labels
Retailer controlled; revenue driven
Streamlined
Distribution,
Acct-oriented
marketing,
Category
Management
Food fish value chains in Asia
1
Importers
fishermen
Retailers
2
fishermen
Processors
Export
Retail
Chain
3
fishermen
Export
Processors
Wholesaler
Export
Retailers
Importers
4
Processor
Wholesaler
5
Export
Re-Export
Wholesaler
Processor
Retailer
Retailer
Dry dish value chain - Bangladesh
Fishers (100%)
60% Dealer
Middlemen
(25%)
Middlemen
(15%)
Dealer
(80%)
10%
5%
5%
Dry fish producers (20%)
Dry fish producers (20%)
Low income
(16%)
Feed
Industry
Middle income
(3.5%)
Wholesaler
(16%)
Middlemen
(3%)
City wholesaler
(14.%)
Retailer (3%)
Retailer (14.5%)
Imports
Consumers
Source:(Shamsuddoha, 2007)
Entrepreneurs
(0.5%)
Supermarket
(0.4%)
Export
(0.6%)
Value chain analysis – Hilsa marketing, Bangladesh
 Hilsa (Tenualosa ilisha) – national fish
 Most important single species, economically and


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
emotionally
30% of national fisheries prodcution
88% marketed internally for domestic consumption
12% exported to ethnic markets
Fish marketing system are complex, traditional, and
less competitive
Value chain analysis -Hilsa
Primary market
Purchase price (PP)
0.88
Marketing costs (MC)
0.05
Sales price (SP)
1.02
Market margin (MM=SP-PP) 0.14 (8%)
Marketing profit (MP=MM-MC)0.09
Secondary market
Purchase price (PP)
1.02
Marketing costs (MC)
0.07
Sales price (SP)
1.39
Market margin (MM=SP-PP) 0.37 (23%)
Market profit (Mp=MM-MC)
0.30
Retail market
Purchase price (PP)
1.39
Marketing costs (MC)
0.04
Sales price (SP)
1.61
Market margin (MM=SP-PP) 0.22 (14%)
Market profit (Mp=MM-MC)
0.18
Market margin and Marketing Profit – Hilsa marketing
1.8
1.6
1.4
Price US$/Kg
1.2
1
Primary market
Secondary market
0.8
Retail Market
0.6
0.4
0.2
0
pp
mc
Source: (Ahmed, 2005)
sp
mm
mp
Vietnam’s seafood industry: A socially embedded
division of state owned and local Chinese owned
enterprises in regional value chains?
 Seafood industry is the country's third largest exporter
 Dominating position on the Japanese market and market of Mainland China has
increased in importance
 To illustrate how the structures of value chains are embedded in lead firms
as well in the supplying firms in the value chain
 State owned enterprises (SOEs) and the local Chinese dominated private
seafood sector
 Nature of the value chain as shaped by the institutional environments and the
social actors, who give specific attributes to the different nodes of the chain in
local, national, regional and global spaces
 Shrimp Value chains are three types:
1. Local Chinese Owned Pvt. Companies:
i. Marginalized in HACCP standard procedure
ii. Minor group of enterprises succeed to upgrade to HACCP
2. State Owned Enterprises /SOE
***Overseas Chinese dominated shrimp value chains***
Shrimp value chain: SOE or Local Chinese owned pvt. Co.
Aquaculture
Traders
Processors
Retailers
Source: Lindhal, 2005
Local Chinese Owned Pvt. Companies vs SOEs
 Forward linkages with farmers
 Provide feed, capital, antibiotics and other inputs to






farmers
Price is higher (15%)
Use new technology; IT, market information,
certification
New processing plants
Long term supplier contracts
Use ethnic networks to market products
Strong ties with diaspora
Shrimp value chains to Japanese market
Farmers
Processors
Traders
Retail chains in Japan or
Trading Houses
Trading houses in Hong
Kong & Singapore
Processors
in Japan
Retailers
Source: Lindhal, 2005
Overseas Chinese dominated shrimp value chains
 1. Local Chinese Owned Pvt. Companies
 Use regional relationships to enhance ;
market power, coordinating skills, market penetration,
brand establishment, & entering into high value markets
 2. Minor group of enterprises succeed to upgrade to
HACCP
 Use relationship in Diaspora communities to clear branding
strategies, contact variety of regional and global retailers,
developed market linkages through ICT
 Products to ethnic markets: low level of value addition and
traditional tastes, flavours, methods...
Similarities of fish marketing systems in
developing vs developed countries
 Both have to face the same basic challenge of providing





safe food of right type and quality, to right place to right
people those who are willing and able to pay
Market composed of mixture of local and imported fish
and fishery products
Complex panorama of actors, enterprises and institutions
Important role of supermarkets in fish and fishery product
retailing
Presence of hotel restaurant and institutional channels,
and therefore some food service suppliers
Increasing role of regulations and standards
Differences of fish marketing systems in
developing vs developed countries
 Vastly different scale at system and enterprise level
 Percentage of product handled formally lower in
less developed countries
 Share of fresh versus processed or manufactured
much higher in less developed countries than
emerging or developed countries
 Supermarket share is rising still and fast in less
developed countries to detriment of smaller
retailers and wholesale markets
Challenges for developing country suppliers in general
Choosing between commodity and specialty
markets
Retaining and expanding market access
Gaining and holding a position in lucrative
value/supply chains
Penetrating, holding, expanding better markets
Raising productivity and competitiveness
Increasing value added
Dealing effectively with emerging standards
PESTLE analysis
 Is a useful tool for understanding the “big picture” of the







environment in which industry is operating and
environmental understanding will bring the advantage
of the opportunities and guide to minimize the threats
PESTLE components are;
P-Political
E – Economic
S – Social
T – Technological
L - Legal
E - Environment
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Political Factors
•Low political interest among the general
public and therefore little or no pressure on
government
• Low political pressure from fishermen and
boat owners
• Low interest among politicians
• High interest among government to improve
the situation on post harvest losses
• Frequent changes in policy due to rapid
changes in politically elected authorities
within the government affecting stability of
practical resolutions
• Possibilities for fishermen- and vessel owner
associations to influence future policy making
and contributing to political decisions
•International agreements e.g. IOTC
=
>
=
>
>
>
>
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Economical Factors
•Low average catches affect fishermen’s incomes
and availability of capital to invest in
improvements
• Low purchasing power among a large group of
customers in the domestic market
•Un equal income distribution and growing
upper middle class
• Limited knowledge in financial accounting
affects operation of small and medium sized
fishermen’s businesses
•The ongoing civil conflicts in Asia affects
governmental expenditures and decreases the
possible funding of development in the fisheries
sector
•The tsunami disaster had severe effect on the
Indonesian, Sri Lankan, and Thailand fisheries
sectors e.g. on development and capacity
=
>
>
<
>
<
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Sociological Factors
•Acceptance of low quality fish
•Lack of awareness
•Food safety and health problems due to low
fish quality
•The attitude of fishermen
•Lack of specialized education among
fishermen
•Religious sentiments affecting industrial
practices
<
<
>
>
>
=
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Technological Factors
•Lack of infrastructure (e.g. facility,
machinery, tools, practices)
•Inferior boat design
•Inferior harbor design
•Insufficient availability of freezing
facilities
•Inadequate processing facilities
•Selectivity of fishing gear (i.e. gillnets)
•Lack of technological improvements (e.g.
freezers, insulating boxes etc.)
•Lack of proper hygienic practices
•Inadequate transport facilities
<
>
>
>
>
=
>
>
=
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Legal Factors
•Lack of regulations, monitoring and
enforcement on:
Quality standards
Food safety
Hygiene standards
Fish handling
Illegal inland fishing
• Regulations in foreign export markets
(e.g. EU, USA and Japan)
•General trade agreements and tariff
>
>
>
>
>
>
>
=
Factors
Importance : Increasing >;
Unchanged =; Decreasing <
Environmental Factors
•Insufficient availability of clean water
•Tropical weather conditions and climate
change
•Pollution in harbor basin water
•Lack of adequate sewage management
•Oil spills in harbors
•Hygienic conditions onboard boats and in
harbors
•Sustainability of fish stocks
•Stock size (When stocks are large and
catches good, post harvest losses tends to
increase)
>
>
>
>
=
>
<
=
Drivers and governors of change on the
demand side…
1. Demographics: growth rate; age distribution; ethnicity;
race; geographic distribution; extent of travel; exposure
to food-related information and retailer promotion
2. Consumer preferences: price vs. quality/condition;
convenience; year-round availability; variety; nutritional
content; safety; greenness; fair trade; luxury goods
3. Buyer specifications: volumes; presentation; labeling;
private standards; certification; price point; service
4. Technology: marketing information systems; category
management methods; progress in supply chain
management; transport and handling advances
5. Regulatory change: official standards and associated
certification; labeling (nutrition, COOL, allergens);
market access; environmental protection; OSHA; labor
rights; animal rights
6. Market access: tariffs; quarantine restrictions; other
non-tariff trade barriers (NTBs)
7. Factor costs in distribution and retailing: energy;
transport; labor
8. Economic growth trends: GDP; disposable income;
levels and use of consumer credit; inequality of wealth
Drivers and governors of change on the supply
side…
1. Product/market conditions: effective demand; prices;
competition
2. Procurement practices: value chain integration;
compliance with private standards; preferred supplier
arrangements; new terms of sale
3. Factor prices and availability for production and
shipping: land; capital; labor; energy; transport
4. Producer preferences: overall investment per crop
area; price levels and their variability; production risk
5. Technology: marketing information systems; supply
chain management; quality assurance regimes;
transport and handling technologies; post-harvest and
production technologies
6. Regulatory change: capacity to deal with market
access requirements and standards; dealing with local
and national restrictions on land use, inputs, labor
contracting and treatment
7. Demographics: availability of seasonal labor;
existence of a local market for seconds and an urban
market for export-quality product
Conclusions and Implications
 Different institutional contexts of end-markets are
linked to different forms of coordination and control of
value chains
 Economically and socially important species and value
chains are differ widely across Asia
 Networks both local and regional enhance the value
addition
1. Need to develop vision on: learning, investment,
market access, sales, and exports
2. Make sure the policy environment as favorable as
possible, but don’t assume that will be enough
3. Identify and support promising value chains with
assistance at key point in the supply chain based on
collaborative analysis of challenges, joint definition of
priorities, and expert assistance from industryexperienced people
4. Take a cluster approach only as the starting point for
value chains, not as an end in itself.
5. Concentrate on competitiveness and productivity
6. Look for and exploit multiple ways to add value once
initial success has been attained with a single deal
7. Seek sustainability within value chains, not in the
development programs or projects
8. Recognize that some keys to success require mainly
public sector intervention, others only private, and
some a mixture of the two
9. Seek private sector alliances at all stages of supply
and value chains
Thanks!