Nowadays we are seeing a steady rise in transparency across services and business activities among the stakeholders and investors. Customers, regulatory authorities, employees and investors seek information that extends beyond the organization’s direct scope of activities into the value chain to ensure ethical and sustainable practices, as well as regulatory compliance.
Frankly, investors are well aware of the benefits of a transparent value chain and have taken necessary steps to identify any hidden risks that might have negative implications for any stakeholder group, eventually leading to a poor investment decision. A value chain assessment provides investors with a comprehensive understanding of business activities from the procurement of raw materials to the delivery of completed goods and services and helps them identify opportunities and risks.
What is Value Chain Assessment?
The term ‘value chain’ describes the entire set of operations needed to develop, produce, market, distribute and provide after-sale support for a product or service. These include both primary activities, those that are directly responsible for the production of a good or execution of a service (e.g., operations), and secondary activities, which help improve the efficiency of primary activities (e.g., infrastructure development). A service-based business involves analyzing every step of the production and distribution process and identifying inefficiencies, risksband opportunities for improvement.
A value chain assessment aims to evaluate each activity in a company’s value chain to identify and examine any weaknesses or inefficiencies that might have a detrimental effect on the performance of the business. This process helps analyze a company’s operations to understand how it creates value and where it might encounter risks that could compromise profitability.
The Hidden Risks in Value Chains: The Need for a Value Chain Assessment
Financial data provides a limited understanding of a company’s strengths and weaknesses. Delving deeper into the organization’s interactions with its value chain helps identify and enhance a company’s competitive advantage by identifying avenues for cost reduction and service differentiation.
1. Supply Chain Disruptions:
In today’s interconnected global economy, supply chains often span multiple regions and areas. For Bangladeshi MSMEs, this means that raw materials might come from one place, production may occur in different places, and the finished products could be distributed elsewhere. However, this fragmented value chain exposes businesses to vulnerabilities such as political instability, natural disasters or economic fluctuations worldwide. A stark reminder of this was the COVID-19 pandemic, which disrupted global supply chains, driving up the cost of inputs and causing significant delays for businesses overly reliant on a single region for their supply needs.
For MSMEs in Bangladesh, conducting a value chain assessment is crucial and also difficult at the same time. But how does this value chain assessment help? This process helps identify overdependence on specific suppliers and evaluates the resilience of B2B marketplace operations. By understanding the potential risks that MSMEs go under, B2B sector can implement strategies to diversify their sourcing, strengthen partnerships, and ensure smoother operations even amid global uncertainties.
2. Product Sourcing Uncertainty:
Certain critical raw materials, such as oil, and agricultural products, form the backbone of most production processes and are highly vulnerable to market demand fluctuations, geopolitical tensions and environmental phenomena. Analyzing MSMEs’ value chains can reveal which MSMEs are highly dependent on certain raw materials and brands that can be evaluated for their ability to cut costs in case of price variations.
3. Geopolitical Risks:
Geopolitical tensions pose significant challenges for MSMEs, particularly in a globally interconnected value chain. Political instability in one region can disrupt an entire value chain, impacting not just a single business but entire industries or groups of MSMEs. For Bangladeshi MSMEs, reliance on suppliers or manufacturers in regions affected by conflicts, trade restrictions, elevated tariffs or unstable regulatory environments increases their vulnerability to these geopolitical shifts.
Conducting a value chain assessment becomes essential for MSMEs in such situations. This process can identify potential exposure to geopolitical risks and evaluate the ability of businesses to adapt and mitigate these challenges. By proactively assessing these risks, MSMEs can diversify their supply chains, explore alternative markets, and strengthen their resilience against geopolitical uncertainties.
4. Environmental and Social Risks:
As investors look beyond a company’s direct operations for their ESG assessments – as seen by the growing use of supply chain assessments such as Scope 3 emissions calculations – value chain assessments become increasingly important. These assessments help to understand how ingrained ESG factors are in a B2B company’s long-term decision-making to empower the MSMEs for the upcoming 30 years. Moreover, they may reveal poor labor practices or weak environmental policies that could lead to legal issues, transition risks from regulatory evolution, or reputation risks, such as ESG Controversies. Timely identification of these risks enables investors to divest from or avoid investing in companies that may be amid ESG controversies.
PriyoShop’s Role in MSME Transformation through Value Chain Assessment
PriyoShop goes beyond being a simple e-commerce platform; it acts as a growth enabler for Bangladeshi MSMEs. Here’s how PriyoShop integrates value chain assessment into its ecosystem:
1. Supplier Management Made Simple:
PriyoShop connects MSMEs with a curated and extended network of trusted suppliers or brands, minimizing risks associated with poor-quality products and unreliable delivery. Retailers can source products directly from credible suppliers, ensuring transparency and accountability at the start of the value chain.
2. Efficient Logistics and Distribution:
For small businesses, managing logistics is often a daunting task. PriyoShop takes the burden off the mom-and-pop shops by providing end-to-end logistics solutions. This ensures timely deliveries, reduces transportation risks, and enhances customer satisfaction.
3. Market Insights for Smarter Decisions:
Understanding consumer preferences is a cornerstone of value chain assessment. PriyoShop provides data-driven insights on trending products, seasonal demands, and customer feedback through its customized app. This helps MSMEs adapt quickly to market changes, minimizing the risk of unsold inventory.
4. Financial Support and Accessibility:
One of the biggest challenges for MSMEs in Bangladesh is accessing affordable financing. PriyoShop addresses this by offering buy-now-pay-later (BNPL) solutions and installment plans. This financial flexibility enables small businesses to invest in better inventory management and scale operations without overextending their budgets.
5. Sustainability and Social Impact:
In line with global trends, PriyoShop encourages eco-friendly and ethical practices across its value chain. By supporting local, sustainable products, the platform helps MSMEs align with conscious consumer preferences while reducing their environmental footprint.
How Does PriyoShop’s Value Chain Assessment Enhance Investment Decisions?
1. Risk Mitigation:
Identifying possible risks across the value chain enables PriyoShop to provide more structured and informed capital allocation decisions to its investors. A strong and resilient value chain allows a B2B company to absorb disruptions in product procurement, supply chain management and geopolitical flows. In contrast, a company with a poorly managed or weak value chain may experience reduced returns or monetary loss, as it will lack the systems necessary to address potential risks. PriyoShop’s Value chain assessments help investors avoid potential risks or vulnerabilities by modifying their investment strategy in time.
2. ESG Goals Alignment:
As sustainability continues to be a growing consideration for investors, the importance of value chain assessments in valuing a company’s ESG performance is also increasing. These assessments cover various aspects of a business, including product sourcing, management, contractual worker rights and greenhouse gas (GHG) emissions. PriyoShop conducts such assessments that help investors understand the company’s alignment with their environmental and social goals. For example, PriyoShop doesn’t allow forced labor which maintains the company’s reputation and ethical grounds. This is why a value chain assessment is important for investors to avoid companies with potential ESG-related issues.
3. Enhanced Decision-making:
A key aspect of investment decisions is understanding a B2B company’s operations and its engagement with external stakeholders. B2B companies like PriyoShop optimize their value chains allowing them to distribute higher-quality goods, respond quickly to MSMEs’ needs, and innovate to improve existing processes. Hence, long-term performance and increased profitability are directly correlated with competitive advantage.
A Future of Growth and Sustainability:
As the value chain assessment highlights its importance in uncovering hidden risks and ensuring sustainable growth. PriyoShop’s approach aligns perfectly with these principles, demonstrating how digital platforms can revolutionize MSMEs in Bangladesh.
As PriyoShop continues to evolve, its commitment to empowering retailers sets a benchmark for leveraging value chain assessment in the MSME sector. By addressing risks and creating opportunities, PriyoShop is not just transforming businesses but also contributing to a more inclusive and sustainable economy.