Facilitating exports:
a value chain approach
Peter J. Batt
Associate Professor
Food and Agribusiness Marketing
Definition supply chain management refers to the coordination and alignment of resources financial and information flows for all actors and activities involved in a supply chain Simchi-Levi et al (2000)
Socio-economic &political environment
Agro-climatic-ecologicalenvironment
Inputs &services
Productionsystem
Postharvest
Processingpackaging
Marketingsales
Consumers
Agribusiness systemboundary
Information
Logistics
Management
Waste
Waste Waste Waste WasteWaste
Supply chain
McGregor (1998)
A supply chain describes
the full range of activities that are required
to bring a product or service from
conception through the different stages
of production and processing
to deliver superior value to the customer
at least cost
Globalisation
implies that a buyer can purchase
whatever they want
from anywhere in the world
at the cheapest price
To remain competitive, suppliers seek to reduce costs
increase production relocate production invest in new technology
differentiate their product offer
Quality
is the key concept
in building customer value
and satisfaction
Quality
is a customer determination
based upon the customer’s
actual experience with the product
measured against the customer’s
stated objectives
Quality means
providing customers
with products that
consistently meets their specifications
Quality does NOT mean best
Quality
also means
the way suppliers go about
meeting the needs of their
downstream customers
Quality can thus be conceptualised at three different levels: technical quality functional quality service quality
technical quality describes the customer’s specifications size shape colour variety purity maturity or freshness product packaging
functional quality describes the way in which the supplier goes about delivering the product to the customer transport and logistics production scheduling storage and warehousing ordering and invoicing credit arrangements
service quality describes the extra things a supplier is prepared to do to retain the customer’s business providing technical assistance promotional support new product innovations advance notice of impeding changes in price or shortages in supply
Quality is a multifaceted concept consumers requirements intrinsic extrinsic experience credence
consumers requirements food safety requirements
microbial contamination chemical contamination physical contamination
consumers requirements (contd)
commodity requirements conformity of a product to its definition legal or voluntary regulations or customary
practices fraud
consumers requirements (contd)
nutritional requirements health and nutrition functional foods probiotics
intrinsic cannot be changed without also changing
the physical characteristics of the product freshness firmness colour size and shape freedom from blemishes freedom from pests and diseases freedom from chemical residues
extrinsic extrinsic cues, although related to the
product, are not physically part of it price brand package place of purchase
experience ascertained on the basis of actual
experience taste includes
sweetness acidity astringency
texture relates to the mechanical properties of the flesh, mouth-feel and juiciness
flavour is related with aroma
credence attributes sustainable production conservation and biodiversity Fairtrade and equity worker welfare animal welfare organics religion
Competition has intensified deregulation
low cost producers globalisation
aggregation and consolidation market saturation
Top 10 food and drink groups Food Sales (US$ million) 2003
Nestlé 46,628Kraft Foods 38,119ConAgra Foods 27,630Pepsico 26,935Unilever 26,672Archer Daniel 23,454Cargill 21,500Coca Cola 20,092Diageo 16,644Mars Inc 15,300
Top 100 global retailers
Wal-Mart Stores 1Carrefour Group 2Tesco 3Seven and I 4Kroger 5Target 6Home Depot 7Walgreen 8Aldi 9Royal Alhold 10
Competition has intensified (contd)
improved technology transport and logistics communication biotechnology
Implications for agribusiness firms fewer customers customers are more demanding
quality cost competitiveness exclusivity
own labels new product innovations
Implications for agribusiness firms (contd)
customers have more power reject poor quality product impose penalties require suppliers to invest
production capacity infrastructure information and communications technology quality assurance systems
Customers have a legitimate right to command most basic principle of marketing is the need
to satisfy customer wants power is not always negative power is the means by which supply chains
are coordinated suppliers must make choices
Implication for agribusiness firms (contd)
emergence of a dual marketing system “in” suppliers
comply “out” suppliers
do not comply risk of becoming increasingly marginalised
Firms can respond by minimising costs
minimise the use of inputs ipm
focus on what customers really want reduce wastage
leverage competitive advantage
Porter (1990)
Firms can respond by (contd)
consolidation improve reliability of supply
secure greater volumes production planning
improve quality implement quality standards make investments in infrastructure/logistics
Firms can respond by (contd)
differentiation offering superior service to customers
cultivating desired proprietary varieties greater product assortment pre-packing pre-cut and semi-prepared products
Firms can respond by (contd)
differentiation pursuing alternative market segments
direct marketing home delivery internet
Firms can respond by (contd)
differentiation brand
method of production organics hydroponic
ethical production Fairtrade sustainability
religion
Firms can respond by (contd)
building enduring long-term relationships interdependence compatible goals trust and respect commitment
attitudinal instrumental temporal
Firms can respond by (contd)
becoming a preferred supplier regular market access greater access to market information
production planning incentives to invest
less risk
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