WAtM 5 - Gaps and risks in the value chain

1. Income and expenditure analysis

At this stage, an income and expenditure analysis is used to test the feasibility and likely profitability of the value chain ideas the group is considering. An analysis should be completed for whichever products and services seem most promising based on the results of the previous sections. By estimating the costs of each function in the chain (including the value of paid and unpaid labour) and the likely returns from the market for each proposed good or service, the producers’ group can begin to see which products are likely to be profitable and which are not. They can also see which functions are most expensive and can begin to consider alternative approaches that would reduce the costs. Finally, the analysis will help the group identify where more information is needed.

Participatory tool:

Leaky Pot - applied to specific goods and services desired by buyers in the market.

2. Identifying gaps and bottlenecks for producer groups

Here producers’ groups reflect on what they have and what they need in order to produce successfully.

A gap refers to a function in the value chain for which producers lack the knowledge, skills, infrastructure or access to natural resources required for them to produce to market standards. For example, if producers know how to grow greens, but do not know how to prevent insect damage, that is a gap in their ability to produce to market standards. Existing policies (e.g. against women owning property) or the lack of a policy (e.g. favouring local production) can create a gap.

A bottleneck is something that creates inefficiency in a value chain. For example, if producers must travel long distances to market their products individually, there is a bottleneck in getting a high volume of product to market. Organising to share transportation may be one way of addressing this bottleneck. Policies, such as requirements for costly inspections of small operations, may also be bottlenecks that need to be addressed to improve efficiency.

Once producers have a value chain map, they can begin to identify gaps and bottlenecks that need to be addressed and discuss ways to address them.

Participatory tool:

Balloons and Stones

3. Power analysis in relation to gaps and risks

Some gaps can be filled by simply reorganising existing resources, for example, by changing the timing of harvests. Other gaps will require additional resources, such as the installation of equipment to cool the harvest after it is picked or cut. The power analysis allows producers to consider who controls the specific resources they might need. For example, perhaps another producers’ group has a mobile cooling unit that is not in constant use and an arrangement could be made to borrow or share it. Or, perhaps there are trucks making deliveries to the village that return empty and could be carrying producers and their goods to market. A power analysis can help identify potential partners to fill gaps and address bottlenecks.

Participatory tool:

Chapatti diagram: Understanding Power or Influence of Value Chain Partners

4. Identifying supporting and hindering policies, programmes and institutions and changes required

As the focus of the value chain becomes more precise, it becomes easier to identify supporting and hindering policies, programmes, and institutions and the changes required to support a successful value chain. For example, there may be specific policies regarding who is allowed to sign contracts that make it impossible for women to negotiate on their own behalf. There may be policies that restrict the movement of goods or the use of certain resources. There may be programmes, e.g. micro-finance, agro-industry or others, that could assist producers’ groups but of which they are not aware. There may also be programmes that are ineffective but could be changed to become effective. Sometimes there are programmes or policies that no one knows about which, if properly implemented, would actually be helpful! Often, existing policies are misunderstood and this results in missed opportunities. This is the stage in the work where producers’ groups can begin to learn more about the policies that affect their value chain and livelihoods and who controls those policies. This is the first step in separating fact from fiction and developing a plan to address restrictive policies and benefit from expansive policies and programmes.

Participatory tool:

Forcefield analysis.

Resources

Here you can download some useful resources.