Stakeholder perceptions on the New Zealand velvet supply chain

Abstract

The aim of this study was to identify stakeholders' perceptions on the issues within the New Zealand velvet supply chain. Producer's returns within the industry have widely fluctuated, with a general decreasing trend. It is often accepted that the first step to solving a problem is to define the problem. The aim of this study has been to define the problems in the New Zealand velvet supply chain. The New Zealand velvet industry is 35 years old, exporting velvet for consumption in the East Asian traditional oriental medicine market. Velvet has been consumed in this market for. nearly 2000 years as a tonic to promote well ness. In 2007/08 New Zealand produced 450t of a predicted world supply of 1,100-1,300t. The long term average price has been $91kg but has ranged between $40kg - $160kg since 1994. The main consumption market for New Zealand produced velvet is currently Korea although it is believed Chinese consumption is growing. Through a purposive sampling technique, six key industry informants were selected and interviewed. The aim was to identify the issues each respondent believed existed in the supply chain by applying the problem framing technique to each of the individual case studies. Firstly, the respondents agree that volatility and declining real returns are major issues for the New Zealand velvet industry. Due to this, the size of the industry is declining rapidly with many people exiting and changing to alternative land uses. The respondents agreed there are a large range of motives between producers due to different levels of understanding and independent levels of thinking. Tariffs and legislation are seen as a major constraint in the supply chain as they encourage illegal trade and limit the number of participants that can import velvet into the key Korean market. Furthermore, it was viewed that a lack of science to prove the efficacy of velvet is also restricting the ability to diversify the product and market. The Korean consumption appears static but it was not clear if the Chinese consumption is growing. Therefore, if the Chinese consumption is growing the net consumption must be increasing. It was agreed that velvet is a commodity that is supplied to a limited market. Some respondents believed that velvet could be diversified into new value added supply chains but realised this requires investment that is difficult to obtain. Others feel that the lack of science (an issue outside the supply chain) severely restricts what can be achieved in the market and ensures velvet remains a commodity driven product based on arms length relationships and therefore faced with volatility.