Change from supply to demand focus

JohnLovett

Perhaps the most important of the many changes taking place in the grains industry—in Australia and overseas — is the creation of improved value chains.

'Value chain' defines the collaboration between individuals and organisations along a supply chain to meet specific market needs — for the benefit of all links in that chain.

The move from a supply-driven chain to a demand-driven chain, integrating all of the links, from producer to consumer, is driving rapid and globally based changes in the food industry.

To learn more about these changes the GRDC, together with Agriculture, Fisheries and Forestry Australia (AFFA — representing the Federal Government), has hosted a visit to Australia by one of Europe's leading consultants on agrifood chains, Henk Folkert of Rijnconsult in the Netherlands.

Mr Folkert believes value chains create a new way of viewing agricultural production, shifting the emphasis from dispersing product to markets to delivering products along the value chain to consistently meet specific consumer-driven demand. He sees value chains dominating business thinking within 10 years.

According to Mr Folkert value chains benefit the producer by ensuring:

  • flexibility throughout the chain
  • larger and quicker flow through the chain
  • long-term partnerships, and
  • fulfilment of consumer demands.

Mr Folkert gave an example of a company supplying pot plants which was faced with closure because of inconsistent demand and an inability to meet the needs of the distributors it supplied. At the initiative of its CEO the company worked with its suppliers and buyers to identify consumer demand and work to meet this, increasing sales by 25 per cent and reducing wastage by almost half.

Push-vs-pull

Mr Folkert says the good news for Australia is that we are already travelling along the track towards creating value chains. He recognises the strong reliance on export markets for Australian agriculture. As a result, we are accustomed to satisfying consumer expectations, leading to a value chain reversal from 'supply push' to 'demand driven'.

Mr Folkert sees R&D as playing a key role in creating knowledge and delivering results that create linkages and improve efficiencies throughout the value chain. This involves a strong focus on linking consumer and producer requirements and applying this knowledge to sUengthen the grains industry and growers' market share.

The GRDC's own 'value chain', with its links from the national Board of Directors through regional panels to industry linkage groups at a local level, is a great asset in ensuring that R&D priorities are aligned with industry needs.

A recent AFFA report, Chain Stocktake of Some Australian Agricultural and Fishing Industries, echoes Mr Folkert's thinking. The report suggests that Australian agriculture tap into these global changes in agrifood sooner rather than later through improved integration throughout industry chains.

This involves a strong shift from the traditional approach of improving infividual linkages in the chain to improving the flow of information and efficiencies along the value chain. Effective R&D will be vital to this process, to create knowledge and opportunities for growers to become active and well-connected links in value chains.