Agri-value chain: Understanding primary and support activities and

their linkages.
Introduction
A value chain is not an object that you can see. Rather, a value chain is simply a useful
way of understanding how the world of producing, buying and selling things works.
We are all part of value chains in one way or the other as producers, consumers of
goods and services, processors, retailers, finance providers, etc. As consumers we all
eat and we all wear clothes, and so we are linked to many value chains – chains of
grain crops, roots and tubers, fruits and vegetables, legumes, oils, and textiles. These
chains stretch from growers to our kitchens, eating tables, clothing, and beyond.
At one end of the agricultural value chain are the producers – the farmers who grow
crops and raise animals. At the other end are the consumers who eat, drink, wear and
use the final products. And in the middle are many thousands of men and women, and
small and large businesses. Each person and each business performs one small step in
the chain, and each adds value along the way – by growing, buying, selling, processing,
transporting, storing, checking, and packaging.
Other people a and other businesses have important roles supporting the chain. Banks
provide loans; governments establish laws and policies, and agricultural research
organizations develop ways for farmers to more successfully participate in value chains.
Radio stations also have an important supporting role. Radio can inform farmers about
prices, value chain successes and innovations, opportunities for farmers to be involved
in value

Why talk about agricultural value chains?

Small-scale farmers in the world often say that receiving low prices for their produce is a
major challenge. Typically, a farmer waits for traders to visit his farm.
The trader offers a low price and won’t buy the entire crop. The farmer is unhappy – her
time and effort are not well-rewarded. She may blame the trader for her problems.
Farmers and traders often fight over prices. Farmers may cheat traders by putting low-
quality produce at the bottom of crates, and traders may cheat farmers by using
inaccurate weights and measures. There is often a lack of trust between the two. This
results in the value chain not working as well as it could, which means worse outcomes
for everyone.
The trader sells the farmer’s produce to a processor, who supplies a wholesaler, who
supplies a retailer, who supplies a consumer, with transport and other links in between.
Each player in this chain adds value, and in return receives an economic return, usually
called “economic rent.” The amount each actor in the chain receives varies between
different products and
value chains. But the price the farmer receives for his raw goods is only a small fraction
of the price paid by the consumer.
As individuals, small-scale farmers are often at a disadvantage in these kinds of value
chains.
Because many farmers grow crops or raise animals on an individual basis, they have
little bargaining power. They have little or no influence on the price traders pay them for
their produce, or the price they pay input suppliers for seeds, fertilizers, pesticides, etc.
Also, farmers often lack information about the market for their produce. For example,
they may not know how much their produce is really worth, and how much more they
could earn if, for example, they transported it to a nearby market rather than selling it to
a trader. They may not know who the other players in the market are; they may not
know what happens to their produce after they sell it; and they may not know what types
of products consumers want. In many cases, the farmer is growing the wrong crop for
the market. For all these reasons, it is difficult for African farmers to benefit fully from the
value chains they are already involved in.
In part, farmers unknowingly contribute to their own problems. For example, a farmer
might produce mangoes of all kinds. Some are large and healthy, others small and
spotty. The farmer packs all her mangoes together in a crate. The trader doesn’t know
what quality to expect, so offers a low price.
To increase their income and capture more of the value (“economic rent”) in the value
chain,
farmers need to “upgrade” their involvement in the value chain. There are many ways to
do this. One step they must take is to become a “crop specialist.” A crop specialist is a
farmer who has improved his or her farming practices and is producing goods for the
market in an efficient and productive way. For example, by using better farming
practices, the farmer can produce more mangoes – and higher quality mangoes. This
satisfies both the buyer and the consumer. We will look at other ways of upgrading later
in this info doc.
What are the benefits of taking a value chain approach?
The value chain approach considers the role of existing chain actors, supporting actors,
and the policy environment. It allows us to look at current challenges in a value chain,
as well as the opportunities for improving the efficiency of the value chain and the
benefits for everyone involved. From a farmer’s perspective, being part of a well-
functioning value chain can bring greater income.
Analyzing a value chain – identifying its challenges, weakness, and strengths – can help
to identify new income-generating opportunities.
Sometimes, participating in a well- functioning value chain brings farmers not higher
incomes or prices, but a more stable and predictable income.
Well-functioning markets and value chains can attract young people to farming or
persuade them not to leave rural areas by offering better ways to earn money.
Participating in value chains can help a farmer learn new skills and adopt improved
practices. Instead of piling vegetables in a crate and trucking them to a trader or market,
farmers can earn more money by doing basic processing on the farm. Even cleaning
and grading produce can make a difference. Washing and packaging lettuce or
tomatoes and delivering them to a local store or supermarket can earn a higher price.
Peeling and cutting fruit can be an effective way of getting into the growing market for
ready-to-eat food products near urban areas.
Who benefits from value chains?
Everyone who participates in a value chain adds value as the product moves from the
beginning of the chain towards the consumer. In exchange for adding this value, all
participants receive an economic rent. That is the main benefit or incentive for
participating in a value chain.
The people most likely to benefit from value chains are entrepreneurial, have a
willingness to communicate with people in different parts of the value chain, and have
the farm and financial resources and the knowledge to develop new markets or
participate more effectively in current markets. Farmers who have little land, who are
more remote from markets, who have fewer assets, who have language barriers, who
have no irrigation, and who are not involved in effective farmer organizations may find it
more challenging to benefit from a value chain.

The importance of farmer groups

Farmers need to be well organized to compete in an increasingly demanding
marketplace.
Like becoming a crop specialist, joining a farmer organization is a necessary step for
smallscale farmers who want to increase their income and capture more value in the
value chain. Unlike individual farmers, farmer organizations have the resources to
attract and build relationships with different links in the value chain, both locally and
further afield. Farmer organizations help individual farmers by combining the harvests
of a number of producers, buying bulk inputs at lower prices on farmers’ behalf, and
giving farmers access to farm support services. By their sheer size, co-operatives have
enough market power to raise the prices received by individual farmers and ensure that
farmers receive a steadier, more secure income. Many farmer groups also include
savings and loan schemes for their members. These schemes help farmers work with
money, keep records, and learn financial skills that are essential to improve their
businesses.

Value Chain Primary Activities

Inbound Logistics
Inbound logistics include the receiving, warehousing and inventory control of a
company's raw materials. This also covers all relationships with suppliers. For example,
for an e-commerce company, inbound logistics would be the receiving and storing
products from a manufacturer that it plans to sell.6

Operations
Operations include procedures for converting raw materials into a finished product or
service. This includes changing all inputs to ready them as outputs. In the above e-
commerce example, this would include adding labels or branding or packaging several
products as a bundle to add value to the product.7

Outbound Logistics
All activities to distribute a final product to a consumer are considered outbound
logistics. This includes delivery of the product but also includes storage and distribution
systems and can be external or internal. For the e-commerce company above, this
includes storing products for shipping and the actual shipping of said products.7

Marketing and Sales

Strategies to enhance visibility and target appropriate customers—such as advertising,
promotion, and pricing—are included in marketing and sales. Basically, this is all
activities that help convince a consumer to purchase a company’s product or service.
Continuing with the above example, an e-commerce company may run ads on
Instagram or build an email list for email marketing.7

Services
This includes activities to maintain products and enhance consumer experience—
customer service, maintenance, repair, refund, and exchange. For an e-commerce
company, this could include repairs or replacements, or warranty.7
Value Chain Secondary Activities
Now, companies can further improve the primary activities of their value chain with
secondary activities. Value chain support activities do just that, they support the primary
activities. The support, or secondary, activity generally plays a role in each primary
activity.8 Such as human resource management, which can play a role in operations
and marketing and sales. Here are the four supporting activities.

Procurement
Procurement is the acquisition of inputs, or resources, for the firm. This is how a
company obtains raw materials, thus, it includes finding and negotiating prices with
suppliers and vendors. This relates heavily to the inbound logistics primary activity,
where an e-commerce company would look to procure materials or goods for resale.9

Human Resource Management

Hiring and retaining employees who will fulfill business strategy, as well as help design,
market, and sell the product. Overall, managing employees is useful for all primary
activities, where employees and effective hiring are needed for marketing, logistics, and
operations, among others.10

Infrastructure
Infrastructure covers a company's support systems and the functions that allow it to
maintain operations. This includes all accounting, legal, and administrative functions. A
solid infrastructure is necessary for all primary functions.11

Technological Development
Technological development is used during research and development and can include
designing and developing manufacturing techniques and automating processes. This
includes equipment, hardware, software, procedures, and technical knowledge. Overall,
a business working to reduce technology costs, such as shifting from a hardware
storage system to the cloud, is technological development.12

Bottom Line
The primary activities within Michael Porter's value chain are used to provide a
company with a competitive advantage in any one of the five activities so it has an
advantage in the industry in which it operates.13 In general, the analysis was meant for
companies that manufacture goods. But almost any company can use the value chain
analysis laid out by Porter even if they don’t have all the components.