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Learning to get along with your competitors

Value-chain model seen as a collaborative effort

By: Martin Cash

5/10/2009 1:00 AM | Comments: 1

MIKE.APORIUS@FREEPRESS.MB.CA Guy Roch found value-chain management to be of great value to his creamery in Notre Dame de Lourdes.

When a couple of dairy farmers near Winkler approached a creamery in the area a couple of years ago about processing organic milk, it was presented as a win-win scenario.

But unlike other situations where all the planets need to be properly aligned for everyone to come out ahead, this one was designed to work only if each party benefited.

Notre Dame Creamery had been exclusively a premium butter processor, but it lost access to a substantial portion of cream it had been buying from a cheese producer, thereby reducing the amount of butter it could produce.

Dairy farmers Conrad and Val Zacharias wanted to expand into organic milk, but there was no processor around to make it a viable idea.

So the supplier and the processor talked, shared their ideas and concerns and figured out a way to do it.

Guy Roch, owner of Notre Dame Creamery in Notre Dame de Lourdes, poured more than $100,000 into equipment to process organic milk that is sold under the Organic Meadow label.

The small creamery had not handled organic product before nor did it process liquid milk.

"Now we process goats' milk as well and we are looking at getting into some different organic products," Roch said.

They may not have known it at the time, but those dairy farmers and the rural creamery were engaged in what's called value-chain management.

It's an idea some in the provincial agri-food industry believe is an excellent way to pursue ongoing efforts to help transition the provincial agriculture industry's commodity sector into higher-value production.

Through an initiative funded by Agriculture and Agri-Food Canada and the provincial department of Manitoba Agriculture, Food and Rural Initiatives, an organization called Value Chain Manitoba was formed about a year ago to help spread the idea of value chains.

The goals of value chains are nothing new to the market economy -- figuring out ways of responding to market conditions that will provide sustainable levels of profit.

"The three main triggers for starting value chains are to increase efficiencies, increase quality or to develop a new product," said Eugene Warwaruk, who was hired on as value-chain co-ordinator at the beginning of the year.

Every business needs to be mindful of its relative competitiveness, said Warwaruk, and the value-chain concept especially helps businesses in industries that are under stress to increase quality or increase efficiencies.

"This model helps them do that by connecting with other links in their supply chain," said Warwaruk.

Whereas supply-chain management is all about the interaction between buyers and sellers and driving costs down at every stage of the process, value-chain management takes a different approach.

"The process is getting all the different links to actually share information and collaborate to become more competitive, to get a better product to the consumer or more consistent quality or to increase quality," said Warwaruk.

Roch credits Conrad and Val Zacharias, who formed a co-op with five other dairy producers from Beausejour to Deloraine, with introducing the organic milk concept to his business.

Dave Shambrock, longtime executive director of the Manitoba Food Processors Association, has become a believer in the value-chain concept.

"Its time has come," Shambrock said. "Consumers are getting even more interested in foods -- where they come from, how they are produced, the greenness of the manufacturing, the ethics of their production."

From Shambrock's point of view, the key difference is that the parts of the chain -- producers, processors, retailers -- are working more closely together than they normally would and sharing information.

Some business people might feel they are leaving money on the table if they share too much information with suppliers or customers.

But if customer satisfaction leads to more sales, it's to a business's advantage to get that right.

"People are looking for something not normally on the shelf and retailers are looking to give the consumers what they want," Warwaruk said. "How can retailers get that product on the shelf if they don't interact with consumers and strategize with their other supply-chain links to get the products to the consumers?"

Value-chain management just might provide a solution to that challenge, which sounds very much like a win-win-win scenario.

martin.cash@freepress.mb.ca

Get the goods

on value chains

Value chains -- what they are and how they can boost your business:

"ö Value Chain Manitoba is holding a two-part video-conference on Oct. 13, free of charge, at the Manitoba Food Processors Association office (Unit 13 -- 59 Scurfield Blvd.) The two, three-hour sessions will be available at various video-conference sites across the province.

"ö The seminar will describe what value chains are, the difference between supply-chain management and value-chain management, and how more businesses across the agri-food industry are using the value-chain business model to collaborate and gain a competitive edge.

"ö Video-conference sites have been set up to participate in the seminar in Swan River, Beausejour, Gladstone, Hamiota, Souris, Teulon, Virden, Russell, Arborg, Dauphin, The Pas, Carberry, Carman, Melita and Somerset.

"ö For more information, visit the website at http://www.valuechainmb.ca or call 982-4793

Republished from the Winnipeg Free Press print edition October 5, 2009 B6

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