Demand, transactional and support partners

Demand, transactional and support partners

There are three primary types of partners in a value chain—demand, transactional and support—and they each play different roles.

WealthWorks considers any person, business, agency or organization that is involved in a value chain a “partner.” Some value chain partners are very involved with the coordinator in thinking about, designing and building the value chain. Some are aware of the chain and supportive, but dip into the work of constructing the value chain only in relation to their specific contribution or connection to its effort. A few partners may be largely unaware they are even in the value chain, but because other partners and the coordinator are aware of those partners’ value, they maintain relationships with them.

Types of value chain partners

There are three primary types of partners in a value chain, and they each play different roles.

  • Demand partners are the buyers who have significant interest or commitment to buy your products or services. Any market opportunity that you want to address through a value chain is defined as a market opportunity primarily because you have developed relationships with buyers and documented their actual demand for something you can do or make in your region. Demand partners are in your value chain by necessity and default—without them, you are producing on blind faith that someone will buy what you make or do.

    Some demand partners are interested in more than price and supply. They might buy goods produced through your value chain specifically because of additional wealth-building benefits—and thus might be willing to invest in it further.

    For example, in weighing several options for buying organic tomato soup, your WealthWorks value chain might offer the buyer more because you provide soup that is processed in a zero-emissions facility and packaged in biodegradable containers, or because it benefits small growers and provides apprentice opportunities for new farmers. If this buyer is a high-end national grocery store company, and it wants to beef up its local and organic food offerings, it might make a commitment to become a support partner by providing funding or technical assistance to help more farmers in the region get certification as organic growers.

    Once your value chain develops solid, trusting relationships with them, demand partners can also help identify new market opportunities and new product ideas. Getting to this kind of relationship with demand partners is key to developing resiliency.

  • Transactional partners are the businesses, organizations and people that play a direct role in sourcing, producing and distributing the actual product or service you are delivering to the demand partners. Who becomes a transactional partner depends on what must happen to turn local resources into the product or service the buyers want—and then get it to the buyers. Transactional partners typically include businesses or others that:
    • Supply materials
    • Produce basic goods or services from the materials
    • Process those goods or services into different products or package them
    • Aggregate a batch of the products for sale—or bundle demand from a set of buyers
    • Distribute goods and services to buyers.

    Because our organic tomato soup value chain partners started by building relationships with demand partners, they realized that the local school district and regional hospital needed organic tomato soup in quantity. They also found other buyers that wanted to sell the soup retail to individual consumers inside and outside the region. Such demand information begins to outline different transactional partners that must be a part of their value chain.

  • Value chains also include support partners—people, businesses and organizations that directly assist transactional partners with fulfilling their roles, or that help utilize all the benefits and waste that flow from the transactions to leverage more wealth building in the region. Support partners can be as diverse and specialized as transactional partners. Services provided by support partners can include financing (debt and equity, philanthropic), policy and regulation, certification, research and development, as well as technical assistance. Just like transactional partners, support partners are energized to participate in a WealthWorks value chain by what they get in return that meets their self-, shared or common interest.

    In our tomato soup value chain, a support partner might be a local expert or program that helps entrepreneurs better market their “just like mom’s” tomato soup. A state-sponsored campaign might help promote organic products. A local bank and community development financial institution might jointly pilot a new small-loan product that low-income farmers need to get up to organic speed. Or a community foundation might provide a grant that pays for the value chain coordinator.

Potential partners in an emerging organic tomato soup value chain

There are three primary types of partners in a value chain, and they each play different roles.

Demand partners

  • Buyers
  • The school district or hospital that buys organic tomato soup in quantity, in large-batch no-frills cans, at a low price point

    The high-end food market chain or farmers market customers that buy the organic soup in small containers with local-brand labeling at a higher price

Transactional partners

  • Suppliers
  • Seed catalog providers, water or irrigation services, organic fertilizer firms, equipment shops that supply tomato growers

  • Producers
  • Growers of tomatoes, onions and garlic that will be used to make the soup

  • Processors
  • Soup-making firm that turns the vegetables into a fresh, tasty soup— and packages it

  • Aggregators
  • Firms that collect and bundle the output from many producers and/or processors to facilitate marketing and sale of soup products to buyers

  • Distributors
  • The transportation company that delivers the soup to the buyers

Support partners

  • Technical assistance
  • University extension service that transition tomato growers to meet organic crop certification; small business development group that helps the farmers and soup-making firm with business plans and marketing

  • Financing
  • Bank, credit union, or community development financial institution (CDFI) that provides loans or start-up capital to tomato growers or processing firms; community foundation that subsidizes organic certification fees for low-income farmers, or makes a grant to cover the cost of the value chain coordinator

  • Policy and regulation
  • Coalition of farmers, processors and buyers that lobby a state agency to lower the cost of organic certification

  • Market development
  • Healthy Kids non-profit that offers local food taste-tests at schools and food markets, building demand for foods produced by local farmers

Mapping a WealthWorks value chain

A wide range of strategies and partners can be incorporated into any single WealthWorks value chain. And they vary widely by product or service, sector, region, economy and local culture and connections. One tool for assembling and seeing the connections among the WealthWorks value chain partners is a value chain map.

A value chain map is a diagram of all the processes and functions that make up a value chain, the partners that are performing those functions, and the multiple links that connect them to each other. It shows how the “market opportunity”—the product or service at the center of the value chain—is produced and moves from one partner to the next on its way to the buyer. But it goes beyond the normal “supply chain” map typically used in economic development circles, because it shows the essential functions that support the transactional partners, and the “flows” of by-products from the value chain that might present more opportunities for wealth building.

The mapping process can be carried out in a myriad of ways, for example, a series of conversations, a large-group work session, or design by the coordinator, who then checks it with other partners. With time, additional products or services may be added to the core value chain. However, the design principle is generally to start with one product or service, in order to gain an understanding of the value chain dynamics, and add products or services, new benefit flows, and partners as they emerge.

The process of mapping a WealthWorks value chain—and keeping the map current—is critical. The key is to see the map as a living document, continually tended and updated. That brings us to the third essential activity in constructing a WealthWorks value chain.

Mapping a WealthWorks value chain

The chart below shows what a tomato soup value chain map might look like at the start.

What a tomato soup value chain map might look like