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The need for cooperation to support integration of Value Chains has also been identified by O Keefe
(1997) and is illustrated in Figure 6.2. Transaction costs are reduced in an integrated value chain
because trust and strategic alignment replace contracts and negotiating tactics; time spent negotiating
is replaced with time spent developing joint strategies to create more income or reduce costs
(Millford, 2002).
• Trust is critical to progress the other areas.
• The Foundation on which successful value chains are built includes a shared vision, a commitment to
cooperation and a shared history.
• The Relationship Investments area is where cooperative personal and institutional relationships are
built, leadership is focused, processes and systems are implemented to drive change and
performance, transparency is fostered by sharing information, and the competitive advantage of the
system is built.
• There is a need for greater interdependency to improve overall system performance.
• Rewards need to be seen by all sectors to be distributed fairly in accordance with investments made
and risks borne.
• Successful completion of the cycle further reinforces the Foundation and builds confidence that
bolder changes can be undertaken in future cycles.
• This applies even in the tentative early stages of value chain improvement when only small increases in
trust and small improvements in value chain performance are achievable.
Figure 6.2 : Cooperation requirement for value chains (SRDC, 2006b and O Keefe, 1997)
A key to successful implementation in the sugar industry has been strong industry support via local
reference groups and technical working groups to ensure a systems view of the value chain.
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