Facilitating exports: a value chain approach Peter J. Batt Associate Professor Food and Agribusiness Marketing

1. Facilitating exports: a value chain approach Peter J. Batt Associate Professor Food and Agribusiness Marketing

2. 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)

3. Management Waste Logistics Waste Information Waste Waste Waste Waste Socio-economic & political environment Agribusiness system boundary Inputs & services Production system Post harvest Processing packaging Marketing sales Consumers Supply chain Agro-climatic-ecological environment McGregor (1998)

4. 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

5. Globalisation implies that a buyer can purchase whatever they want from anywhere in the world at the cheapest price

6. To remain competitive, suppliers seek to • reduce costs • increase production • relocate production • invest in new technology • differentiate their product offer

7. Quality is the key concept in building customer value and satisfaction

8. Quality is a customer determination based upon the customer’s actual experience with the product measured against the customer’s stated objectives

9. Quality means providing customers with products that consistently meets their specifications

10. Quality does NOT mean best

11. Quality also means the way suppliers go about meeting the needs of their downstream customers

12. Quality can thus be conceptualised at three different levels: • technical quality • functional quality • service quality

13. technical quality describes the customer’s specifications • size • shape • colour • variety • purity • maturity or freshness • product packaging

14. 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

15. 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

16. Quality is a multifaceted concept • consumers requirements • intrinsic • extrinsic • experience • credence

17. consumers requirements • food safety requirements • microbial contamination • chemical contamination • physical contamination

18. consumers requirements(contd) • commodity requirements • conformity of a product to its definition • legal or voluntary regulations or customary practices • fraud

19. consumers requirements(contd) • nutritional requirements • health and nutrition • functional foods • probiotics

20. 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

21. extrinsic • extrinsic cues, although related to the product, are not physically part of it • price • brand • package • place of purchase

22. 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

23. credence attributes • sustainable production • conservation and biodiversity • Fairtrade and equity • worker welfare • animal welfare • organics • religion

24. Competition has intensified • deregulation • low cost producers • globalisation • aggregation and consolidation • market saturation

25. Top 10 food and drink groups Food Sales (US$ million) 2003 Nestlé 46,628 Kraft Foods 38,119 ConAgra Foods 27,630 Pepsico 26,935 Unilever 26,672 Archer Daniel 23,454 Cargill 21,500 Coca Cola 20,092 Diageo 16,644 Mars Inc 15,300

26. Top 100 global retailers Wal-Mart Stores 1 Carrefour Group 2 Tesco 3 Seven and I 4 Kroger 5 Target 6 Home Depot 7 Walgreen 8 Aldi 9 Royal Alhold 10

27. Competition has intensified (contd) • improved technology • transport and logistics • communication • biotechnology

28. Implications for agribusiness firms • fewer customers • customers are more demanding • quality • cost competitiveness • exclusivity • own labels • new product innovations

29. 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

30. 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

31. Implication for agribusiness firms (contd) • emergence of a dual marketing system • “in” suppliers • comply • “out” suppliers • do not comply • risk of becoming increasingly marginalised

32. Firms can respond by • minimising costs • minimise the use of inputs • ipm • focus on what customers really want • reduce wastage • leverage competitive advantage

33. Porter (1990)

34. 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

35. 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

36. Firms can respond by(contd) • differentiation • pursuing alternative market segments • direct marketing • home delivery • internet

37. Firms can respond by(contd) • differentiation • brand • method of production • organics • hydroponic • ethical production • Fairtrade • sustainability • religion

38. Firms can respond by(contd) • building enduring long-term relationships • interdependence • compatible goals • trust and respect • commitment • attitudinal • instrumental • temporal

39. Firms can respond by (contd) • becoming a preferred supplier • regular market access • greater access to market information • production planning • incentives to invest • less risk