Supply chain the new battleground

By | January 22, 2015

VietNamNet Bridge – Vietnamese farmers need support to create product value chains, Nguyen Do Anh Tuan, director of the Centre for Agriculture Policy tells the newspaper Cong Thuong (Trade and Industry).

Rice HQ

Some argue that in the near future, competition will not be between enterprises, but between supply chains of agro-products. How do you respond to that?

In the near future, the level of international integration will become wider and wider. As a result, consumers – be they Vietnamese or foreigners – will seek out products with good brand names and clear countries of origin. This factor will make companies compete on the basis of their supply chains. Of course, each company’s supply chain has its own strengths. The winners will be the supply chains that generate new value-added products of better quality.

Export is often considered the most important link in the product value chain. Do you agree?

Consider rice, for example. For our rice sector, various distribution networks have been set up. One distribution network focuses on the domestic market while the other focuses on foreign markets. However, I have to concede that from the inputs to the outputs, the system is not good. It is fragmented from production to collection. There are tens of thousands of distributors, millions of farming households and tens of thousands of sellers providing inputs for production. The driving motivation for these activities is price, not quality.

The performance of some firms, particularly those at the end of the supply chain, is better than that of others. These firms collect products from various small suppliers for export. However, throughout the process, the companies’ owners care very much about product quality because they have to meet international buyers’ requirements.

If these companies started managing the entire supply chain, they would add more value to products and would no doubt be winners in the international market. However, not many such companies operate in Viet Nam.

Vietnamese companies compete with each other in terms of price and have to bear pressure from foreign importers. This is a key reason why the value of Viet Nam’s rice exports is always lower than that of other countries, even though Viet Nam is one of the world’s major rice exporters. As a result, those who suffer the most are the farmers!

Will forming agro-product value chains benefit farmers and the ongoing restructuring process of our primary industry?

In the proposal to restructure the agriculture sector, Prime Minister Nguyen Tan Dung emphasised the importance of improving the value of our agro-products alongside sustainable production.

I’m confident that when our agro-product quality improves, we will able to export more for higher prices. Thus, our farmers’ lives will improve.

When we can improve the quality of our rice, we’ll also come up with better means of production in the context of climate change and sustainability.

In each stage of the production chain, it is very important to think of giving new value to products and to create new products from the original product that improve on its quality.