McCormick+Schmitz Handbook for value chain research on - PACA

and rationalisation of their operations. The process intensified in the 1980s and 1990s,
when greatly improved transportation and communication technologies made it feasible to
subdivide the production process so that even a single product could be made in multiple
locations. By the mid 1990s it was not uncommon <strong>for</strong> a consumer in Washington or New
York to buy a product labelled “assembled in the Dominican Republic of components
manufactured in the United States.”
The concept of the global <strong>value</strong> <strong>chain</strong> recognises that the design, production and
marketing of many products now involves a <strong>chain</strong> of activities divided among enterprises
located in different places. The <strong>value</strong> <strong>chain</strong> describes the activities required to bring a
product from its conception to the final consumer. Figure 1.1 offers a stylised view of a
typical <strong>chain</strong>. The <strong>chain</strong> includes all of a product’s stages of development, from its design,
to its sourced raw materials and intermediate inputs, its marketing, its distribution, and its
support to the final consumer.
Figure 1.1: Chain of <strong>value</strong> adding activities
Design Raw Materials Production Distribution
The <strong>value</strong> <strong>chain</strong> concept has several dimensions. The first is its flow, also called its
input-output structure. In this sense, a <strong>chain</strong> is a set of products and services linked
together in a sequence of <strong>value</strong>-adding economic activities. At its simplest, we can think
of a <strong>chain</strong> as having five main sections. A product is first designed, then raw materials are
purchased and production takes place; the product is then distributed through wholesalers
and retailers. At each stage, services such as transport or finance may be needed to keep
the process going. As we will see when we start mapping real <strong>chain</strong>s, some of these stages
may be subdivided and others combined or compressed. Nevertheless, the five stages -
design, inputs, production, wholesale, and retail - remain a handy device <strong>for</strong>
understanding each step of the process.
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