farmiq value chain model
Background to the Role
FarmIQ was established in August 2010 following a successful bid to the New Zealand Government's Primary Growth Partnership (PGP) Funding programme. Its vision is to deliver transformational change to the New Zealand Red Meat Sector through the creation of a demand-driven value chain that creates sustainable benefits to all participants: farmers, processors and marketers. At the time the Fund was established it was estimated that at the conclusion of the investment programme FarmIQ initiatives would contribute an additional $1 billion to New Zealand's GDP.
The Business Need
From the outset it was recognised that the purpose of the FarmIQ fund was to deliver innovation that created economic value. Accordingly, the Board and Management of FarmIQ wanted to develop a means to periodically measure the economic value generated by FarmIQ investment initiatives and identify the key value drivers that needed
to be achieved to return the forecasted economic benefits.
Cranleigh was engaged by FarmIQ to develop an appropriate means to:
Determine the detailed value drivers that need to be achieved to deliver the forecasted economic benefits.
Continuously evaluate the return on investment of the programme to all shareholders of FarmIQ, including private sector investors and the Crown.
The Cranleigh Solution
Cranleigh's solution was to develop a detailed Integrated Value Chain Model which was designed to provide a "paddock to plate" perspective, incorporating information and inputs from all key stakeholders in the red meat sector.
The Value Chain Model was an integrated financial model of the entire red meat value chain, incorporating the operations of the three major participants of the red meat industry (i.e. farmers, processors and marketers). Individual component models were developed for each of the value chain participants using data provided by the sector and industry experts.
The models were then integrated by defining the key relationships between each participant. This involved modelling real processes from real red meat farms, processors and marketing entities actively involved in the sector.
Utilising the Value Chain Model, Cranleigh was able to identify which projects within the fund and which specific investment initiatives created the greatest value to the New Zealand economy and the red meat sector. The Cranleigh Value Chain Model was able to validate that the FarmIQ investment programme would deliver the forecasted economic gains to the New Zealand economy based on achieving specified investment objectives in respect of key value drivers within the value chain. Importantly, the model demonstrated that the fund was on track to deliver the targeted benefits.