Value Chain Partnership for Social Enteprises

Mel Fonollera, Blogger

Revised August 9, 2017

Poverty has been the scourge of man since the dawn of civilization.  There has always been that great divide. It has become more pronounced today with countries living in total excessive luxury and with countries whose people worry about the next meal.  Is there a solution to this? Value Chain and Social Enterprise may be the answer.

Development agencies have been promoting value chains in very poor countries as an inclusive mechanism for marginalized people to have economic opportunities.  This article offers a look into the workings of a value chain.  The contents of this article have been extracted from an actual value chains for organic rice and muscovado sugar in the Philippines.

Value chain is a chain of interrelated group of players, operating within an industry, that provides specific value adding activities to a product as it moves along the chain to allowing it to gain competitive advantage as it reaches the market  (http://en.wikipedia.org/wiki/Value_chain).

A value chain partnership can best be described as a collaborative partnership among the value chain players with value chain roles complementing each other as the product finally reaches and competes in the market.  Value chain partnerships success and sustainability can be measured if it has continued to function and adapt despite the challenges affecting the value chain. Regular value chain forums should be institutionalized to strengthen and enhance the partnership's resiliency.  Forums encourages open communication and positive action within the value chain if done right.

However, there is a need for a value chain facilitator to handle the forum. The facilitator should astutely facilitate handle issues such as bottlenecks, risk management, operations, margins, quality, volumes, etc. Concerns and requirements from each player in relation to the issues should be surfaced, discussed and resolved by the end of each forum. Issues should be resolved promptly and diplomatically.  Agreements should always be reached and honored by each player after the forum, otherwise the forum will only end up as a gripe session.

Forums should further develop the value chain partnership towards an atmosphere of shared risk which are ever present in the macro and micro environment of the value chain.  Risk such as market, technology, people, force majeur, etc.  Risk management should also be a primary point of discussions in forums.  An atmosphere of shared risk will  help to strengthen the value chain.

The 5 P's of product marketing should also be included in value chains discussions to constantly improve the competitive advantage of the product of the value chain.  The 5P's of marketing are discussion points to which the value chain players should continuously work on to improve the product's appeal to its market or end consumers. More importantly, quality should be the primary consideration of every member of the value chain. Quality should not be compromised by each member.

For the value chain partnership to last it would require active participation of each player in the chain. The players should be transparent and allow for open communication in the chain. This would be very difficult for each entity because of divergent and sometimes conflicting interest and the prevailing instinct of self-preservation.  The players also should be willing to adjust, if need be, especially  if the value chain is undergoing difficult times.  Increased participation of the weakest voice in the chain should be encouraged emphasizing that each member is valuable to the chain.  A further step forward is, actual ownership of entities in the chain.  Ownership increases the stake of each member in the chain, therefore, strengthening the chain.

A likewise important and parallel value chain partnership, working along the value chain, is the value chain financing.  The financial value chain should exist side by side with the value chain to ensure available sources of funds to address opportunities, bottlenecks and financial floats in the value chain. The financial value chain should also be incorporated in the forums to arrive at agreements and actions in the value chain.

A value chain partnership is only as good as the level of active participation and candid communication.  Finally, a simple token of commitment to the value chain partnership is the shared cost of the forum expenses such as food and meeting venue.

Value chain can be an effective framework for social enterprise and community enterprise development. Partnering to form a value chain partnership can be employed as strategy for sustainability for both a social enterprise or community based enterprise.  More importantly a solution to poverty.