the value chain approach and the strategic planning as...

MSc. Vivian Isabel Antúnez Saiz

(University of Havana, Cuba)

July, 2015

The value chain approach and the strategic planning as tools for the sustainable

development in Cuba

Guidelines

Process of upda-ng the

socio-‐economic model

Agroindustrial Poli1cs

Emphasis in the agroindustrial ar-cula-on

Objec1ve

In order to achieve more

efficiency and the sustainability of the na-onal economy

ü  New management models

ü  Effective relations between economic actors.

ü  Achieve the satisfaction of the population demands by delivering quality products and faster mechanisms.

The managers of national organizations need to have clarity in order to analyze and identify the potential of the production chain approach and

strategic planning for achiving sustainable development.

Main Objective

•  Establishing the definitions of the productive forms of articulation.

•  Modelling the main categories in a conceptual map.

•  The Methodology of analysis and development of productive chains.

•  Partial implementation in the case of the value chain of beans in the Central Region of Cuba.

Productive Chains definitions

Gomes Castro and Valle Lima (2003) defines the production chains as a sets of stakeholders - groups of stakeholders involved in the different stages of a production chain which are interrelated such as: agricultural and agro-forestry production systems, service providers, processing and transformation industries, distribution and marketing. Social actors in each production chain may have a cooperative or confrontational behavior with each other in different situations.

UNIDO (2004) defines the productive chains as a structured production processes that share the same market and in which the technoproductives characteristics of each link affects the efficiency and productivity of the whole production. The productive chains are subdivided into links. They are composed by a groups of companies with specific functions within the production process.

Productive Chains definitions

The productive chain can be regarded as the set of actors in an economic activity that interacts from the primary sector to the final consumer, aimed at promoting and encouraging the achievement of higher levels of competitiveness. (Rodríguez, 2007)

The productive chain approach: q Improves the quality of analysis and contributes to obtain high levels of competitiveness of different products to promote the definition of sectorial policies agreed between the different actors in the productive chain. q Contributes to the creation of an articulated network of organizations of production, marketing and distribution. q Contributes to raise the capacity to respond to market demands at local, regional, national and global levels, as well as to increase the quality and the amount of production. q Develops relations of trust and equity between actors and institutions.

Sustainable development definitions

Some authors conceive sustainable development as a harmonious process in which the exploitation of resources, direction of investments, the orientation of technological change and institutional transformation must match the needs of present and future generations. (Pichs, 2002) (Miranda, 2015)

This concept emerges as a holistic approach, which proposes a more comprehensive development model. The Operational criteria for sustainable development: q Zero irreversibility principle. q Sustainable harvesting principle. q Sustainable emptyness principle. q Sustainable emission principle. q Selection of sustainable technologies principle. q Principle of precaution.

Agriculture Sector

The Agriculture sector demands intensive use of energy, which has increased considerably over the evolution of this activity. This has affected the environment, has caused degradation and soil erosion. Air pollution by carbon dioxide due to the intensive use of machinery. According to the Organization for Food and Agriculture of the United Nations (FAO), the global food system needs to reduce its dependence on fossil fuels. The food sector from manufacturing inputs, production, processing, transportation, marketing to consumption represents the 30% of world energy consumption and generates more than 20% of total global emissions of greenhouse gases.

(FAO, 2011)

Productive Chains which are developing in Cuba Form of

produc1ve chain Elements Basis for sustainable

development Support and

related Sectors

Tourism (tourist development

zones)

Backward integra-on with tour operators, travel agencies, air and mari-me lines. Forward integra-on with extrahotel ac-vi-es, culture, health, sports, events and incen-ves.

ü  The protec-on of coastal ecosystems.

ü  The design of Intelligent buildings.

ü  The management of Integrated waste.

ü  The efficient of the energy use and others forms of renewable energy.

ü  The forma-on of an organic and sustainable industrial base: strengthening the conec-ons with sectors such as: food, decora-on, furniture, air condi-oning, tex-le clothing, soap and perfume produc-on, mechanical industry, culture, events.

Provision of equipment and supplies. Strengthening of the links with agricultural produc-on, health, sports, commerce and restaura-on.

Form of produc1ve chain

Elements Basis for sustainable development

Support and related Sectors

Biopharmaceu-cal and biotechnology

cluster

Research, Development, Produc-on, Marke-ng and Trade of biopharmaceu-cal and biotech products

ü  More integra-on among the ins-tu-ons that compose the cluster.

ü  Product development, technology, patents and know-‐how (knowledge-‐intensive sector).

ü  Design and implementa-on of quality, environmental management systems.

ü  Design and implementa-on of energy management systems.

ü  Cer-fica-on of products and processes.

ü  Accredita-on of laboratories.

ü  Development of nanotechnology and bioinforma-cs.

ü  Transporta-on ü  Packaging

(thermal boxes) ü  Supply of

equipment and cri1cal supplies to produc-on.

ü  Strengthening of the links with the health system and medical services.

Productive Chains which are developing in Cuba




Sugar agroindustrial

chain

Agricultural produc-on, sugar industry, deriva-ves of sugar cane (rum, animal food, energy), Marke-ng and Trade.

ü  The forma-on of an organic and sustainable industrial sector: enhancing the added values of the final products.

ü  Increasing energy efficiency and use of resources.

ü  The produc-on of weather resistant varie-es.

ü  The introduc-on of results of science and technology to increase yields and higher added values products.

Mechanical industry, produc-on of equipment and spare parts. SoPware industry (systems and informa-cs services) Logis-cs and transporta-on. Produc-on of biofer-lizers and biopes-cides.





Cluster of tobacco (Vuelta Abajo, Vuelta Arriba, Remedios)

Agricultural produc-on, drying and processing, manufacturing, marke-ng and trade.

ü  More integra-on between the components of the cluster as suppliers of packaging and others kind of supplies of the produc-on.

ü  Development of products and brands.

ü  Making interna-onal fairs and events.

ü  Specialized marke-ng at na-onal and interna-onal coverage.

ü  Strategic alliances for marke-ng and development cluster.

Environmental services. Services of soils analysis, phytosanitary (plant health) and weather forecast services. Tex-les industry (Tobacco capping), graphic industry and packaging.





Nickel Cluster

Mining, industry, marke-ng and

trade.

ü  Mineral separa-on technologies.

ü  Technologies for the produc-on of higher added value products.

ü  Design and implementa-on of environmental management systems.

Environmental services.


Methodology for analysis and develop of productive

chains in Cuba

Elements of different methodologies were taken into account for this design:

ü  Methodology for the prospective analysis of productive chains (Gomes de Castro, 2012)

ü  Methodology for the promotion of alliance of Agriculture Productive Chains in Latin America. (Kobrich, 2012)

ü  Methodological guide for the analysis of production chains. (Van Der Heyden and Camacho, 2006)

ü  Procedure of analysis and design of agricultural productive chains (LOGESPRO, 2012)

ü  Methodological guide for studies of productive chains. (Garcia-INIE, 2012)

Creation of the analysed group of productive chains

Aplication of instruments and techniques

Identifying the critical points and the competitive

advantages

Processing all the information obtained

Identifying the results and the impact of

development project

PHASE

I: PREP

ARATOR

YSelecting the productive

chain and the main product

Detecting the objective of the productive chain

PHASE

2 ANAL

YSIS O

F THE

PRODUC

TIVE C

HAIN

PHASE

3: ANAL

YSIS O

F THE

DEVEL

OPMENT

OF

SOCIOE

CONOM

IC REL

ATIONS

Identifying the limit of the analysis

Design of all techniques and instruments for

colecting information

Design of StrategiesIndustrial Strategy, Market,

Innovation, RelationEnvironmental Strategy

Project design of creation and development of the

productive chains

Brain StormingGroup sessions

Delphi methodBrain StormingGroup sessions

Mapping TechniquesTypes of actors and

functionsProduct flows

InterviewsCheck Lists Workshops

Expert sessionsFODA Analysis

Statistics ToolsBoxplots

Descriptive methods

Evaluation indicators

Management project

TRAINING (CREATION PROCESS AND TRAINING PROGRAMME)

Components of the Action Strategy 2 Strategy

Components

Ac1on Strategies of the produc1ve chains

Integral Training and Tecnhical Support

2 C

ompo

nent

s

Analysis and design of Strategies and Ac1on

Plans

Establisment of the Program Design and the Training and Technical Support Network

Making the proposals and defini1on of the interven1on to the local level

ORIENTATE SUPPORT AND GUIDE

Implementa1on and Evalua1on

Technological Specialization. Value added processes:

ü To improve the production processes and services by incorporating and modernizing technology: emphasizing on cleaner production technologies, looking for the reduction of environmental impacts in the monitoring and control of environmental variables in the production process. In order to acomplish the principle of sustainable selection of technologies they have to promote technologies that increase resource efficiency (the amount of value extracted per unit of resource) compared to technologies that increase the amount of resources extracted. (Efficiency vs. growth) ü To develop new products with higher added value. For example: in the value chain of the beans, it means to achieve the production,marketing and trade of beans in different formats with a higher degree of completion based on market requirements and to obtain the quality characteristics of the product as: brightness, % moisture , among others.

Aspects for the strategic planning of Productive Chains in Cuba

Technological Specialization. Value added processes:

ü To develop new activities or functions that add value such as: engineering activities, design, develop national brands, integrated logistics in terms of reducing economic losses due to the unavailability of transportation for the distribution of critical inputs and products in a timely manner in quantity, quality, frequency. To improve as well the conditions of the facilities that perform functions of products storage and incorporate systems for the efficient management of their inventories.

ü To look for the enlargement of the value chain in sectors such as the agroalimentary, by incorporating (adding) new links in order to substitute imports or increasing the degree of integration at national, regional and local levels in order to rase the value creation in the country. ü  To concentrate efforts on the technology management in specific sectors (such as: biotechnology, medical-pharmaceutical industry, the nickel industry) where there is a potential for international development.


Productive specialization: management and process integration capabilities:

ü To apply advanced schemes of industrial organization, specialization and cooperation. To encourage the development of networks, development centers, clusters, technological and scientific parks. To achieve efficient scale, more production flexibility and more concentration of production. Making more effective decisions about what to produce and what to import. Also assessing the benefits and risks of outsourcing and its incorporation by companies to those activities where there are not competitive advantages. ü To achieve national and international production and marketing of integrated packages of goods, services and technologies. ü To optimize production processes through the assimilation of advanced systems for the development of production in terms of energy saving, industrial maintenance systems, quality management, environmental, security and health systems, recycling and use of subproducts.


Productive specialization: management and process integration capabilities:

ü To manage organizational innovations to have a real impact on productivity and the generation of economies scale by reducing the time limits for manufacture, storage and distribution.

ü To ensure the integration of the supply chain through more coordination of production flows, informational, decision, energy, economic, financial, value in terms of obtaining timely response to changes in demand, in order to achieve maximum capacity utilization with minimal inventory, minimizing operational, administrative and transportation costs.

ü To minimize losses costs of transportation and logistics by the territorial redistribution of productive capacities. For example: we can reduce production scales using several small plants close to the source of raw materials rather than using larger plants with higher total costs.


Commercial Specialization: ü To use tools and techniques of market research and monitoring, after sales service and customer interaction in terms of achieving a sustainable market positioning. Introduction of marketing information systems.

ü The creation of business networks and develop strategies for promote activities and marketing management.

ü To modernize the infrastructure and logistics of distribution and sales.

ü To define the chain's contribution to the strategy of national and international integration of the country. Analyzing its link with other existing productive chain insert into regional production or in the context of global economic integration agreements chains. The strategy of strengthening relations and alliances of the chain.

ü To develop systems of quality management in the productive chain links and actors to establish mechanisms of traceability of processes and products.


Development of the production factors, value networks and infrastructure building policies:

ü To establish policies for raising the skill level of the workforce and improving the processes of managing human capital from their selection to their development, stimulation, etc. To achieve the strengthening of managerial and strategic planning skills and competencies to manage costs, inventories, process management, quality management and environmental management, in order to identify more accurate the non-value added activities. ü To strengthen technical activities related to technological and scientific infrastructure of laboratories, by developing systems and the required metrological assurance. ü To reinforce engineering activities, project development, design and research, development and innovation. (R&D&i)


Development of the production factors, value networks and infrastructure building policies:

ü  To develop value networks, technological and scientific parks, clusters composed

of engineering entities, universities and research centers which guarantee the value added processes and technological development of the chains.

ü  To strengthen the infrastructure of standardization, metrology and quality as central

activities in the productive chain development. ü  To ensure infrastructure for communications and transport activities and the

strategic processes as: planning, finance, accounting and economic control for the productive chain development .


Management model of the productive chain: ü The management model will be conditioned by the strategic purpose of the chain, the type of sector. (Intensive knowledge sector, capital, labor, natural resources sector) (volume industry, technology, concentration on the basis of raw materials, on the demand, specialization), level of technological development, market type, market power, level of centralization and decentralization (autonomy), level of integration (sectors that compose it, relationships and power of actors, distribution of profits) ü The management model must promote the autonomy and deployment the capacities and capabilities of the chain through: integrated strategic direction considering strategic planning for the chain as a system and their relationships, strategic technology management including research, development and innovation and knowledge transfer, determination of resources and suppliers, outsourcing of activities and support services, and the need for qualified personnel and skills development. ü Financial planning and management of the chain as a system and each component that integrate the chain. (Capital investment needs and working capital, internal and external source of financing: direct foreign investment, state funding and loans) also includes funding for the development of the chain with an emphasis on research and development activities and development of core competencies. (Example: In the case of the beans value chain: varietal management strategy, production technology, extension of best practices and technologies)


Management model of the productive chain: ü  Integrated logistics: ensuring coordination from supplier to delivery to consumption and

foreign trade activities (import and export).

ü  Structure and governance of the chain. Components, coordination mechanisms (Example: mutual adjustment and standardization of skills and processes), administrative and information systems. Example: chain lead by the producer or marketer. Forms of regulation of relations in the chain, feedback mechanisms, operating rules, norms, technical parameters, quality specifications.

ü  Integration of different forms of ownership, balance between cooperation and competition.


Example of the aplication of the methodology in the Cuban context

Central Region of Cuba Sancti Spiritus and Villa Clara provinces

ü  The lack of a development strategy focusing on the productive chain, enabling the growth and results of each of the members of the productive chain and the system as a whole.

ü  The money transactions are based on the material flow and

administrative provisions from seed production to the final consumer. They are developed in the absence of a comprehensive integral conception of the chain operation. They are shown in the independent actions of each entity and producers members.

ü  There is no equal level of development between different links in the

chain: the Acopio (Colect) link hinders the normal flow of the chain (operations and activities such as transport, reception, storage, despatch) instead of deploying an uninterrupted flow, creates bottlenecks not having access to basic resources and have poor logistical operation.

ü  The absence of a national varietal strategy with its proper territorial

planning. (Communication, working with farmers and organizations to promote the use of more resistant varieties with higher yields) To Promote the culture of using certified seeds.

Differents Aspects to improve in the beans productive chain

ü  Lack of culture to perform soil analysis as a tool, not using the information for weather forecasts for producing beans.

ü  No consideration of the link industry (drying and processing of the bean),

which results in making processes completely handmade by the farmers. Absence of processing plants, and drying plants to ensure compliance with the specifications of product quality, decreasing product value and revenues to producers.

ü  The producers don´t follow the good manufacturing practices. For example:

they don´t know the balance in the use of chemical fertilizers and organic treatments that lead to damages to crops.

ü  Difficulties accessing the inputs of the production process in terms of

quantity, quality specifications, timing and levels of enforcement of contracts. No arrival in time or completion of the technology package in line with the technological and productive needs of the producers.


ü  The manual production processes ruled over other type of processes due to the lack of equipment (Fertilizing, seeders, threshers) leading to damages in performance, productivity and working conditions.

ü  There is no contractual culture, the contract document must be accepted

without bargaining by producers, they don´t have power to negociate. ü  Reception performing by Acopio has not the necessary equipment to

determine the quality specifications, or for issuing certificate of traceability. ü  Non existing of means to ensure the transfer, storage, preservation and

delivery of beans product. It affects the quality of the product and it´s technological requirements and specifications in these operations.

ü  Non consideration of product packaging as a communication tool to target

clients and as an important aspect of traceability.


ü  Lack of demand orientation of the chain by the support services such as soils analysis, plant health, Institute of grains, financial services and insurance. (The producers don´t know the benefits of them).

ü  Insufficient training services in areas such as: use and management of new

technologies, new hardier varieties, technology of cultivation, processing and technical areas as information technology, accounting and costs, market research and quality management.

ü  Complexity in the process of decision making and coordination of actions

from the local to ensure the territorial development strategy, due to the diverse structure of business entities and representative institutions with different degrees of subordination to the national, provincial and municipal levels. (For example: the Seed Company which provides the seeds to producers has provincial character and sometimes has trouble making decisions and establishing relations with the producers)

ü  The integral development plans as planning tools are not centered on the

production chain focus, so the actions don´t have an integral character in terms of the sustainability of the chain.


MSc. Vivian Isabel Antúnez Saiz

(University of Havana, Cuba)

July, 2015

The value chain approach and the strategic planning as tools for the sustainable

development in Cuba

the value chain approach and the strategic planning as...

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