Agri-Supply Chain Management

Transcription

1 Agri-Spply Chain Management To Stimlate Cross-Border Trade in Developing Contries and Emerging Economies Jan van Roekel, Director, Agri Chain Competence center Sabine Willems, Agri Chain Competence center Dave M. Boselie, Wageningen UR Agricltral Economics Research Institte (LEI) s-hertogenbosch, 19 Agst 2002

2 Table of Contents Smmary...3 Perspectives for Chain Partners in Developing Contries...4 Agri Spply Chain Management...5 Spply Chains...6 Bilding Spply Chains...7 Chain Competence...8 Cross-Border Chains...9 Spply Chain Management and its Benefits Spply Chain Management Tools Role of Government in Agri-Chain Development Pblic-Private Partnerships International organizations Developing cross-border chains Raising Awareness Instittion Bilding Pilot Projects Toolkit Examples of Food Spply Chains The Ghanaian Processed Frit Spply Chain Soth Africa The Netherlands Fresh Frit Spply Chain Fresh Food Spply Chain in Thailand Factors for Sccess and Risks Pblic and Private Responsibilities Appendix 1: Tool for Food Safety Assrance and Certification Introdction The project The Road Map Appendix 2: Tool for Knowledge Development Introdction Training Inpts The Crriclm References

3 Smmary Market liberalization and increasing consmer demand in OECD contries offer attractive opportnities for agricltral exporters from developing contries. Trade in fishery prodcts, exotics, pre-ct prodcts, organic prodcts and off-season fresh frits and vegetables extend altogether new options for bsinesses. Yet, global market standards are stringent. Consmers in these contries and in rban areas in developing and transition economies demand safe and ntritional food, excellent qality and jst-in-time delivery. This presents major challenges to prodcers and contries that lack state-of-the-art technologies and infrastrctre. Particlarly for prodcers in these contries, collaboration between trade partners has become increasingly important for the sccess of cross-border trade in the competitive market. Spply chain management is a powerfl tool to achieve this collaboration. Throgh spply chains, prodcers in developing contries and emerging economies can access market information and knowledge to hone their vale-added activities. Developing cross-border spply chains is complex, however, and reqires information and expertise abot how to bild chains, as well as commnication and commitment from all the chain partners. The advantages of spply chain management are nmeros, like the redction of prodct losses, increase in sales, redction of transaction costs, a better control of prodct qality and safety and the dissemination of technology, capital and knowledge among the chain partners. Spply chain management tools have been developed and implemented throghot the chain to garantee optimal chain performance. Spply chain development not only benefits the private sector bt also creates spin-offs that stimlate social, economical and environmental sstainable development in the region (employment generation, added vale, decreases of prodct losses, etc.). Pblic spport (e.g. development of the instittional infrastrctre) plays an important role to create an enabling environment for private sector development. Pblic spport might take the form of a pblic private partnership in a spply chain to share experiences, risks and bottlenecks. In developing contries and emerging economies, however, spply chain development is often hampered de to lack of governmental spport. International organizations can assist these governments to pgrade cross-border trade and to link national and international partners to jointly tackle crossborder trade obstacles. Instittion bilding, raising awareness, pilot chain projects and the development of a toolkit are important activities to foster spply chain development. This paper reviews isses of the development of spply chains with special emphasis on challenges for developing contries. Three cases of cross-border spply chain pilot projects are described in this paper. These cases show factors for sccess and risks for spply chain development. Trst, commitment and transparency among the chain partners are important sccess factors for spply chain collaboration. Social and cltral differences between the chain partners, as well as hidden agendas, can lead to slow down of chain performances. The cases also indicate that certain aspects of chain development (e.g. food safety and social accontability) toch pon the responsibility and mandates of both pblic and private agents. Pblic-private partnerships are therefore indispensable in these areas. 3

4 Perspectives for Chain Partners in Developing Contries Globalization offers opportnities to developing contry prodcers and exporters. One sch opportnity is the year-rond provision of fresh agricltral prodce. Transnational companies, as well as retailers and importers are expanding their international operations to meet new consmer demands. This means that demand is no longer confined to local, at best regional, spply. Fresh prodce can now be shipped from halfway across the world at lower costs and competitive prices. Moreover, advanced information technologies enable traders to respond qickly to changes in consmer demand and facilitate the flow of goods in today s highly complex global marketplace. Consmers monting concerns regarding food qality and safety, government-implemented trade reglations and togh retail standards have increased the reqirements for prodcers throghot the world. In developing contries and emerging economies, however, companies face particlar challenges in adapting to these changing reqirements. Prodcers in developing contries are capitalizing on opportnities by entering into partnerships with other bsinesses active in the global food chain. This is seen, for example, in East African prodcers involvement in the fresh ct-flower bsiness and in the fresh frit sector in Soth America (Jaffee, 1994). In varios cases, local farmers have linked their prodction activities to the interests of transnational companies, ths achieving vertically controlled operations in a crossborder spply chain. Cross-border spply chains are incontrovertibly a vehicle by which new forms of prodction, (onfarm) technologies, labor processes and organizational relations and networks are introdced. The trade relations between Mexico and the United States are an example of how spply chains indced shifts in prodction methods, social divisions of labor, on-farm technologies, and can cmlatively reorganize an entire fresh prodce spply system. It is throgh these shifts that Mexican prodcers have become the sppliers of North America s salad bowls (Little and Watts, 1994). With the increasing scale and international consolidation of markets for agroindstrial prodcts, investments and activities in local markets are set to increase throghot the world. Spply chains not only benefit the companies directly involved, they also stimlate social, economical and environmental sstainable development within a region or contry. Cross-border spply chain development can, for example, stimlate the development of local agro-indstry, employment generation, local food prodction, vale addition to prodcts, introdction of new technologies, decreasing prodct losses, increased export earnings, and improved food safety and ntrition by connecting chain partners and their activities. Box 1: Cross-Border Spply Chain Development Defined Cross-border spply -chain development seeks innovation in the agricltral sector, on the one hand to foster a market-oriented integrated agro-system and on the other hand to provide an arena for economically, socially and environmentally sstainable development. 4

5 However, there are concerns that poor small-scale prodcers are in a disadvantageos position to adjst to new market conditions. These prodcers are often the least organized grop in the spply chain. Most have small-scale operations, se traditional techniqes, depend on family labor, and have little capital to invest. Prodcers with access to capital, technology and logistics may be best positioned to reap the benefits. As a reslt of increased competition, poor small-scale prodcers may trnot as the losers. To grasp new opportnities for trade and income, chain partners in developing contries - prodcers, processors and exporters - mst adapt to the qality and safety reqirements and standards of importers and retailers. To adapt, however, they first need to nderstand markets, strategically plan their activities, have access to means to improve prodcts and to pgrade prodction systems. Above all, to profit from the emerging opportnities, chain partners in developing contries and emerging economies mst shift from an internal prodct orientation to an external market orientation (table 1). This is, however, a big challenge. Table 1: Prodct-oriented verss market-oriented enterprises Prodct-Oriented Enterprises Focs is on prodct Strive is towards prodction maximization Planning is operational Information exchange is limited Market-Oriented Enterprises Focs is on prodct-market combinations Strive is to maximize added vale Planning is strategic Information is shared along the spply chain Whereas on the one hand there are opportnities for developing contries to benefit from increased international trade opportnities, there are also concerns that prodcers in these contries can not pgrade their prodction system to compete on the global market and that these contries do not have the reqired instittional and infrastrctral facilities to reap the benefits. For meeting increasing standards, the private sector in these contries shold invest and engage in new market arrangements. However, the private sector competitiveness may be limited becase of inadeqate spport and capacities from the pblic sector and a lack of basic social and physical infrastrctre (Farina & Reardon, 2000). Pblic sector spport (e.g. development of the instittional infrastrctre) to enhance capacity of the private sector to develop consmer oriented prodcts and to enter new markets is therefore a reqirement for sccessfl cross border trade. This paper reviews isses of development of cross-border agri-spply chains with special emphasis on challenges for developing contries. The next section introdces agri spply chain management and cross-border agri-spply chains. It reviews how cross-border agri-spply chains develop and florish in today s consmer-oriented markets. Section three indicates the importance of the involvement of the pblic sector and the role of the government in agri-spply chain development. The forth section moves on to explore three examples of agri-spply chain development - in Ghana, Soth Africa and Thailand. A final section concldes factors of risk and sccess for cross-border agri-spply chain development. Agri Spply Chain Management Three main important market driving forces rge spply chain partners to collaborate, namely market segmentation, consmers demand and low cost strategy (figre 1). Especially for chain partners in developing contries who wish to participate on the global market (far away markets), 5

6 spply chain collaboration is of tmost importance for the connection with profitable markets and consmer s demands, the flow of information, goods, technology and capital and to limit transaction costs. Figre 1: Crrent market driving forces Market segmentation Chain differentiation Prodct and Service Differentiation Vale-added demand Satisfy the need for Qality Safety Sstainability Health Animal Welfare Integral chain care Low cost strategy Chain optimisation The changing life-style of especially western consmers is driving demand for particlar prodcts sch as organic, exotic, fair trade, pre-ct, ready-to-eat prodcts, etc. This development challenges chain partners to differentiate their chain to offer vale-added prodcts and services to a particlar market segment. Consmer choices are increasingly being determined by reqirements in the area of safety and health. Care for the environment, social components and animal welfare are becoming more important. Striving to sstainability is the new goal set by society. All companies in the chain shold cooperate together in order to avoid loss of consmer confidence. Integral chain care and qality assrances are the key. The spply chain partners are being forced to minimize costs becase of the increasing worldwide competition. The collaboration of the sccessive links to tne activities and minimize costs by decreasing transaction costs optimizes chain reslts. Spply Chains We speak of a spply chain when different actors are linked from farm to fork to achieve a more effective and consmer-oriented flow of prodcts. This paper focses on agri-spply chains that incorporate actors from developing and developed contries (figre 2). Sch spply chains may inclde growers, pickers, packers, processors, storage and transport facilitators, marketers, exporters, importers, distribtors, wholesalers, and retailers. Spply chain development can ths benefit a broad spectrm of society, rral and rban, in developing contries. 6

7 Figre 2: Cross-border spply chain Consmer Retailer Indstrialized contry Food indstry Agri-indstry Farmer Developing contry Inpt Spplier Bilding Spply Chains Spply chains are not developed by itself bt reqires a lot of efforts and competencies of those involved. Before a spply chain is developed, certain steps have to be taken in order to formlate the right chain organization. Special care is reqired for the formation of cross-border spply chains as differences in bsiness and social cltre can have for instance large inflences in the performance of the chain collaboration. The first step in agri spply chain development is the analyses of the existing trade system and the trade environment (prodct flow, exchange levels, forces affecting the operation of the spply chain sch as governmental policies, etc.). From this analysis, potential spply chain players can be identified and their fnction, role and relationships in the trade system can be delineated. The sccess of a spply chain depends on a strong chain leader. The chain leader acts as the spply chain manager. The explicit acceptance of the chain leader is very important for initial chain formation and the sstainable spply chain collaboration. Inclded in the analysis, the performance of the spply chain shold be measred according to criteria set by the chain partners (sch as efficiency, flexibility, innovation, responsiveness, etc.). For international benchmarking, the present sitation in the chain organization will be compared to the desired sitation. Throgh this benchmarking, the different aspects of the spply chains can be analyzed and the critical sccess factors can be determined. A SWOT-analysis is condcted for the overall assessment to assess the strengths and weaknesses of the spply chain and the opportnities and threats of the spply chain environment. 7

8 Figre 3: Spply Chain Analyses Farmer Food indstry Consmer pstream downstream Description of chain system(s) Players: - fnction - role - relationships Chain leadership Measring performances Sccess factors Chain Competence The development of spply chains reqires knowledge and expertise abot chains and within chains (figre 4). Knowledge abot chains concerns the fnctioning of chains as a whole. The spply chain strategy is of tmost important for the competitive position of all chain partners. To determine the chain strategy, it is crcial to nderstand the consmer and the competitive environment. Chain partners still focs mainly on internal strategies sch as back-to-core and cost-ctting strategies aiming to respond to severe competition and low margins. Anticipating on consmer s demand is becoming more and more important (Rabobank International, 2002). At the developing stage of a spply chain, representatives of the chain partners formlate the strategy of their chain. Knowledge on chain formation prevents these chain partners from pitfalls in the process of chain formation. Chain organization knowledge assists to find the appropriate partners that complement each other. Knowledge abot chains is essential to developing a workable architectre bt knowledge within chains is essential for assring sstainability. Knowledge within chains concerns the exection of specific fnctions within a chain, like chain marketing, logistics, information flow, etc. It is going to be crcial to all chain partners to be actively involved and to respond as fast as possible to market changes. Key factors of sccess for spply chain development are partnerships and integration. 8

9 Figre 4: Knowledge abot chains and within chains Knowledge abot chains Chain strategy Chain formation Chain organisation Chain design Chain management Knowledge within chains Chain marketing Chain logistics Qality assrance Information flows Added vale Technology Partnerships Integration Cross-Border Chains Cross-border chains, and especially chains that inclde partners from developing and developed contries, are rather complex since many differences in social and commercial aspects exist between these partners that inflences the sccess of a spply chain. Trst and commitment are crcial elements to achieve partnerships and chain integration. Becase of the different trade environments in which cross-border spply chains operate, chain partners have to deal with several trade reglations and laws (national and international), a large logistic network, different levels of technologies, etc. Awareness of each other sitation (for instance access to IT tools, transport facilities, etc.) is a very important. Three cases of cross-border spply chain development are presented in section 4 of this paper. These cases show how these particlar spply chains were developed in a pilot project context, which obstacles had to be taken and what the common goal of the chain project was. Althogh the prodcts in the spply chain of the third case (Fresh food spply chains in Thailand) does not cross borders physically, this case can srely be seen as a cross-border spply chain becase many of the project participants are international companies, organizations and research instittes 1. The reason to inclde these international parties in the project was to pgrade the spply chain to an international level (food qality and safety measrements) in order to increase the competitiveness of the chain on the local market and to create international opportnities for the national chain partners involved. The social and commercial differences between the different 1 Royal Ahold, Societé Général de Srveillance (SGS), Syngenta, Rabobank International, Agricltre Economics Research Institte (LEI), Wageningen School of Management. 9

10 international project participants were obvios in this project and had to be dealt with to assre a trst relation between the parties. This has proven not to be easy bt trned ot to be possible becase the spply chain partners were willing to. We therefore define cross-border spply chains as chains that inclde international partner relationships and ths operate in an international context. Spply Chain Management and its Benefits Managing spply chains reqires an integral approach in which chain partners jointly plan and control the flow of goods, information, technology and capital from farm to fork, meaning from the sppliers of raw materials to the final consmers and vice versa. In order to react effectively and qick to consmer s demand, spply chain management is consmer-oriented. It aims at coordination of prodction processes (Lambert and Cooper 2000, Handfield and Nichols 1999). Spply chain management reslts in lower transaction costs and increased margins. Becase of the many activities and aspects involved it demands a mltidisciplinary approach and sstainable trade relations. Spply chain partnerships are based on interdependence, trst, open commnication and mtal benefits. The advantages of the spply chain management approach are nmeros. Some important advantages are: Redction of prodct losses in transportation and storage. Increasing of sales. Dissemination of technology, advanced techniqes, capital and knowledge among the chain partners. Better information abot the flow of prodcts, markets and technologies. Transparency of the spply chain. Tracking & tracing to the sorce. Better control of prodct safety and qality. Large investments and risks are shared among partners in the chain. Spply Chain Management Tools A range of new spply chain management tools have been developed over the past decade. Efficient consmer response (ECR) has been developed to increase the consmer orientation and cost-effectiveness of spply chains (Krt Salmon Associates, 1993). New management systems have been implemented to improve logistics, increase the se of information and commnications technologies and boost qality management (Lambert and Cooper, 2000). Newgeneration cooperatives are emerging, strengthening the position of farmers grops (Cook et al., 2001) and strategic partnering and vertical alliances are cementing sstainable partnerships throghot the spply chain (Zylbersztajn & Farina, 1999). Food safety concerns have led to the development of integral chain-care tools sch as social accontability, good agricltral practice (GAP), total qality management, and HACCP (hazard analysis at critical control points). Implementation of sch tools throghot a cross-border spply chain enables chain partners to ensre the qality and safety of their prodcts and garantees acceptable social chain performance. Spermarkets in Brazil and Thailand, for example, have 10

11 initiated total qality management programs and HACCP rles for perishables like fresh fish and meat. Retailers (e.g., Walmart, Carrefor, Royal Ahold, Tesco and Sainsbry) have increasingly established their own qality standards (e.g., EUREP-GAP and BRC 2 ) which sppliers mst meet. Tracking and tracing systems are sed to certify the qality of prodcts and ensre transparency in the flow of goods throghot the spply chain. Implementing sch standards and systems impacts not only the organization of spply chains, bt also financial aspects of chain cooperation (Cook et al., 2001). These standards and systems are now being sed in the agricltral sector and have proven their vale in cross-border projects, as we will see in the examples described in section 4 below. Sharpened reqirements for standards have prompted pblic and private actors to establish a variety of initiatives to bild or strengthen agri-spply chains. Figre 5 locates a nmber of these. Box 2 (page 13) describes one of these initiatives, the Netherlands-based Agri Chain Competence Center (ACC). Figre 5: Initiatives to bild or strengthen agri-spply chains LAM, ACP and EU Concerted Action The Netherlands: ACC Denmark: MAPP EU: ECR Canada: AVAC Japan: Tie-p food chain USA: ECR Thailand: Spply Chain Fresh Prodce Brasil: PENSA Soth-Africa: Integrated Spply Chain Management System Astralia: Spermarket to Asia ACC: Agri Chain Competence Center LAM: Latin American, Mediterranean; ACP: African, Caribbean, Pacific; EU: Eropean Union MAPP: Center for Market Srveillance, Research and Strategy for the Food Sector AVAC: Center for Development of Agri Chains Added Vale PENSA: Agri Chain Development Program 2 See Web sites at and 11

12 Role of Government in Agri-Chain Development As shown in the previos section, spply chain development does not occr by itself. It reqires effort and commitment from all chain partners. Spply chain development not only benefits the private sector bt also creates spin-offs that stimlate social, environmental and economical sstainable development within the region (employment generation, added vale, decreases of prodct losses, etc.). Pblic spport plays an important role in the development of spply chains to create an enabling environment for private sector development. However, in developing contries and emerging economies, spply-chain development is often hampered de to lack of government spport for commnication and transport infrastrctre (e.g., roads and ports), agricltral research and extension services, and financial instittions. Indeed, developing contry governments rarely actively encorage cross-border spply chain development with policy incentives. Agricltral trade may instead be frstrated by price controls, disrptive fiscal and monetary policies and inward-oriented development strategies. The integration of agricltral trade into the World Trade Organization (WTO) commitments is also far from complete. In the meantime, sanitary and phytosanitary (SPS) measres, depressed global prices de to export sbsidies and tariffs, and qotas and strict safety and qality reglations imposed by importing contries contine to exclde poor contries that do not or cannot adapt. In fact, governments can improve the environment for agri-chain development by: - Organizing platforms for pblic and private actors to exchange information on bottlenecks in cross-border agricltral trade. The ltimate goal here is to formlate and implement policies (e.g., prodct and prodction standards, codes of condct) to stimlate cross-border agrichain development. - Investing in transportation, commnication and electricity. - Offering incentives for sstainable se of prodction resorces. - Offering sbsidies or co-financing spply for high-risk investments. - Establishing and enforcing a commercial code that incldes property rights and fair and expeditios jdicial processes for resolving contract disptes. - Ensre the availability of (prodction, price, indstry) information and statistics to facilitate market activity and to monitor market progress. - Assembling a body of knowledge on spply chains throgh spported research instittions or programs. This knowledge inventory cold then be sed to develop a set of tools and lessons learned for firms at the start of spply chain development. Pblic-Private Partnerships Government spport might take the form of a pblic private partnership in a spply chain. Pblicprivate partnerships aim at win-win sitations and is ths beneficial for the society at large and for private sector entities (van der Meer, 2000). Pblic-private alliances are generally defined in contractal relationships in which the partners agree to cooperate in prsit of a common goal. Contribtions are made on both sides and risks are shared (as in the cases of Soth Africa and Thailand described in section 4). The pblic research institte might contribte by developing and testing new technologies, tools, models, and instrments to improve the performance of the spply chain, sally financially spported by government. The private firms can access this knowledge. As sch, pblic research is driven by private-sector demand; it facilitates the private sector s access to knowledge and, in 12

13 tandem, fosters private-sector development. Government s role in pblic-private partnerships can be as co-financier of a spply chain project (Astralia, Canada, the Netherlands, Thailand and Soth Africa, see figre 5 and Box 2), as creator of an enabling environment (e.g., throgh provision of research and physical infrastrctre) and as mediator in trade negotiations (Newton, 2000). Box 2: The Agri Chain Competence Center ACC spports pblic-private partnership in spply chain projects. ACC s goal is to improve the competitive position of agro-indstry by stimlating the development and tilization of spply chain knowledge. ACC initiates pilot projects in which private companies collaborate with research instittes to develop and implement innovative chain concepts. ACC activities fall into five categories: Raising awareness abot the spply-chain approach and abot the importance of pblicprivate partnerships Connecting chain partners to develop pilot projects related to spply chains linking private and pblic parties to jointly tackle specific chain problems Co-financing or seeking fnds to develop pilot projects Disseminating experience and knowledge gained in pilot projects throgh the Internet and pblications ACC assists the private sector, governments, and research instittes in jointly creating an enabling environment for cross-border trade opportnities, linking these partners to redce bottlenecks. In many areas, sch as food safety and applied technology, varios forms of pblicprivate cooperation are fond to be necessary and co-fnding is sally desirable. International organizations International organizations sch as the World Bank, World Trade Organization, Food & Agricltral Organization, international research instittes, etc. can assist national governments of developing contries and emerging economies with special and sstainable pblic interventions to pgrade cross-border trade. These interventions can inclde national strategy for the development of the private sector, implementation of trade policies, instittional capacity bilding, analysis of particlar agro-systems, spply chain analysis of particlar prodcts, training corses in spply chain development. The international organizations can also stimlate pblic-private partnerships by linking national and international research instittes, governments and the private sector to jointly tackle obstacles for cross-border trade and to benefit from opportnities. Developing cross-border chains As has been indicated, different stakeholders play an important role with the developing of crossborder spply chains (private companies, government, research instittes, international organizations and pblic-private initiatives). Figre 6 portrays the for types of activities that can be ndertaken to foster spply chain development by these stakeholders: awareness raising to gain stakeholder involvement in the (emerging) chain instittion bilding, encompassing both pblic and private partners pilot projects, to provide insights and expertise tools, by which experience and knowledge are disseminated to stakeholders 13

14 Figre 6: Cycle for spply chain development. Awareness Raising Activities Tool & Case Descriptions Instittion Bilding Chain Pilot Projects Raising Awareness Experience shows that seminars or workshops are effective ways of bringing agencies of the pblic sector together to learn abot the opportnities and isses involved in spply chain development. These agencies meet to identify and discss trade opportnities for their contry in the global market, as well as potential benefits to society, sch as generation of employment and income for the rral poor. Awareness raising seminars like these have been organized for government employees in Thailand and for policymakers in eastern Erope. Awareness raising can also be ndertaken among partners who have decided to collaborate in a spply chain. Seminars, for instance, provide opportnities for the partners to get acqainted and bild p relationships. Chain partners discss bottlenecks, opportnities and their ftre roles in the spply chain as they exchange information abot their own sitations. Research instittes and governmental agencies take part in these discssions and cooperate in a search for the best spply chain soltions. Instittion Bilding Instittions that stimlate spply chain development are essential since the development of spply chains is complex and reqires knowledge abot chains and within chains. In many contries, these instittions do not exist or are very weak. Strengthen existing pblic instittions or creating new ones may enhance pblic and private parties ability to solve spply chain problems jointly. The instittions act as intermediaries and recognizes the common interest of an entire sector of the economy and that is familiar with the areas of competence of research instittions and 14

15 niversities in this field. This intermediary plays an important role in the establishment of pblicprivate partnerships. It stimlates demand for knowledge, assist in formlating research qestions, match demand and spply for knowledge, disseminate lessons learned and fnd (part of) chain pilot projects and programs (see also box 2, page 13). Pilot Projects In pilot projects, partners collaborate to identify and solve problems in their spply chain. Section 4 of this paper describes three sch pilot projects. Learning by doing and learning from best practices are common methodologies in sch projects. Chain partners discss and analyze their operations looking for practical ways to, for example, redce costs and improve food qality and safety. Information is also disseminated, for example, on new technology and know-how and on means to improve collaboration among chain partners. Best practices from other regions and agri-chains can provide insight into best approaches for solving particlar problems or to ways of benefiting from new opportnities. Best practices derived from pilot projects have shown partners how they might improve qality, certification, logistics (redction of lead-time and storage), information exchange, consmer responsiveness and innovation. The pilot-project approach shold preferably be bottom-p. Initiatives for improving vertical chain coordination shold come from the (potential) partners in the chain, to increase the chance of their being implemented in practice. A typical pilot project lasts one to three years and consists of a for-phase cycle of orientation/analysis, definition, implementation, and monitoring and evalation. Toolkit Pilot projects are market-oriented, to ensre that spply chain activities are adapted to consmer demands. By execting projects systematically, experience gained can be compared and tools developed for application in other spply chains 3. Experiences and knowledge can be translated into case descriptions (as in section 4) and into tools and materials for training corses and seminars (appendixes 1 and 2). Best practices can be distilled into lists of dos and don ts for projects to improve the workings of spply chains. By collecting different tools into a toolkit, knowledge abot specific isses in chain development can be made available in far-off markets. The pilot project in Thailand (detailed below) developed for sch tools; namely, a certification system for food safety assrance, a vale-chain analysis model, a model for lead-time redction and a preferred spplier development tool. A training corse was also developed for professionals and operators working in agri-spply chains (annex 2). 3 The set-p and exection of spply chain projects is described in the World Bank s gide to developing agricltral markets and agro-enterprises, Bilding Agri-spply Chains: Isses and Gidelines, pblished in

16 Examples of Food Spply Chains This section describes three cases of cross-border spply chain development in the food indstry. Each case highlights backgrond, objectives, approach, position of the smallholder and cooperation and the development process. Table 2 sketches the chain isses that each of the three cases addresses. The first case, Ghana s processed frit spply chain, shows that moving vale-added activities to a developing contry can benefit local private firms and commnities by providing jobs, knowhow and increased foreign export earnings. Frthermore, the case demonstrates that, contrary to conventional belief, small-scale farmers are able to implement a code of condct based on EUREP-GAP. Althogh private initiative is important in this example, the case also shows what complementary tasks remain for local pblic instittions and international donor agencies. Soth Africa s frit export sector provides insight into a process of improving the exchange of information on logistics and prodct qality. The context is trade in fresh frit between parties in Soth Africa and the Netherlands. Both pblic and private partners are involved in the project. The third case, fresh food spply chains in Thailand, shows how an international retailer controls the organization of a spply chain in order to garantee the qality and safety of the prodcts it sells. In this case, a project was set p to optimize the spply chain with a focs on integral chain care, in which qality and safety assrance is the focal points. Table 2: Chain isses addressed in three chain projects. Ghana Soth Africa Thailand Knowledge abot Chains Chain Strategy X Chain Formation X X Chain Organization X X Chain Design X Chain Management X X X Partnerships X X X Knowledge within Chains Chain Marketing X Chain Logistics X X Qality Assrance X X Information Flows X X Added Vale X Technology X Integration X X 16

17 The Ghanaian Processed Frit Spply Chain Backgrond. Imports of vegetables, frits, nts and cereals from developing contries into the Eropean Union amonted to more than 8 billion in 1999 (Brma et al., 2001). Developing contry prodcers face increasing difficlties in meeting international standards for qality and food safety. Moreover, many mltinational food chains are creating and implementing their own standards for qality and safety. Retailers created the EUREP-GAP code, for example, to ensre prodct qality. Smallholder prodcers, de to their limited resorces, are at a disadvantage in accommodating sch reqirements for qality and safety garantees and certification. Objectives. The company Ble Skies was formed in 1997 and started to prodce processed tropical frits for the international market in Ghana early Shortly thereafter, the company initiated a spply chain management project aimed at improving the qality of its processed frit. One task was to take a hard look at the organization of the processed frit spply chain. The reslt of this analysis was the company s decision to move some processing activities to Ghana, to the benefit of both the enterprise and the local commnity (in the form of jobs). The move broght more vale-added activities to the contry, and the qality of the prodct was also improved, as the processing was broght closer to the growing area. Since Ble Skies follows triple-e bsiness principles (ethics, ecology and economy), the project also implemented a code of behavior for social responsibility, protection of the environment and good agricltral practice. Approach. Ble Skies initiated and gided the project development process, translating Eropean market opportnities into a strategic bsiness model for the Ghanaian spply chain partners. Qality of processed frit and the entire prodction process is now garanteed throgh an integrated approach to spply chain management from farm to fork. Some 30 smallholders, large-scale prodcers and their ot-growers spply fresh frit to the processing factory. Noteworthy otpts of the project inclde the following: - implementation of EUREP-GAP code of practice by all chain partners within 24 months - development and implementation of a trsted third-party certification scheme by all chain partners within 24 months - added vale to raw materials in the contry of origin - sbstantial export flow to pper-end market segments in varios Eropean contries - signed agreement of frit sppliers on farm adits and approved pesticides for each crop - staff of the processing factory (250 local employees) trained to assemble, prepare and dispatch frit according to HACCP principles - development of a qality manal for certification - experience gained by Ghana s pblic-sector research instittes abot implementation of EUREP-GAP codes by smallholders Position of the smallholder. Commitment, enthsiasm and preparedness to conform to EUREP- GAP principles among Ble Skies farmer-sppliers were crcial for the Ghanaian partners to capitalize on market opportnities within the processed frit chain. Althogh the processing factory has a portfolio of sppliers, ranging from smallholders to large farms, they consider smallholders their best partners. The smallholders tend to be more committed and eager than the larger farms, which invariably have other export clients. The processing factory made major investments in the certification program and gave smallholders the opportnity to invest in their prodction system. Participants in the certification 17

18 program covered the costs of all central activities: consltancy fees, registration costs, training costs, and sbscription. Farmers borrowed money from Ble Skies to pay for investments in bildings, protective clothing and sanitary facilities. Ble Skies charged no interest on these loans and allowed reimbrsement over two years, which meant that Ble Skies actally paid half the cost of the project given exchange-rate changes. Cooperation and the development process. The food processing company has developed close links with a broad range of pblic and private partners. Each makes its own contribtions to the chain project: providing help and assistance to farmer-sppliers in the form of agricltral edcation and advice, developing a sond transport and logistics infrastrctre, developing resilient and sitable packaging processes and implementing qality management systems. The pblic partners and international centers of expertise participated in the design of the project and implementation of the code of condct on good agricltral practices with the frit sppliers and the processing factory. The Natral Resorces Institte condcted research on the ethical component of the EUREP-GAP code. Agro Eco provided assistance in the development of a qality manal to spport the certification procedre; and the Ghanaian Plant Protection and Reglatory Services provided additional training on pesticide applications, calibration of spraying eqipment and appropriate farming practices. Ble Skies motivated commitment from the private partners by offering economic incentives and creating a corporate cltre in which empathy for local vales and attitdes plays a central role. Soth Africa The Netherlands Fresh Frit Spply Chain Backgrond. Soth Africa s fresh frit indstry has experienced togh times recently de to the 1997 dereglation of the export system. Competition increased and prices dropped. These developments prompted the stakeholders of the sector to ndertake a feasibility stdy on optimization of the cold frit spply chain between Soth Africa and the Netherlands, a major trading partner. The stdy was condcted in 2000 with farmers, frit cooperatives, private companies and knowledge instittes from both contries. It fond that lack of accrate information on logistics flows and qality aspects of the frit was a problem common among all the chain partners (from farmer to retailer). To address the problem, the partners initiated an information system development project to enable them to monitor prodct flow from contry of origin to market. Objectives. The first objective was to assess the potential benefits and costs of an integrated spply chain information system. The Soth African information and commnication technology provider Paltrack had already developed a system sed by Soth African athorities to record the qantity of all frit exported from the contry. The aim of the fresh frit spply chain pilot project was to extend this information system with logistics and qality data for frit from Soth Africa destined for the Netherlands. Approach. Three existing distribtion chains for fresh frit exports from Soth Africa to the Netherlands served as models in the project. Participating research instittes gathered information from these private companies via interviews. Qestions focsed on how information on logistics and prodce qality was exchanged from farmer to retailer and on specific reqirements for additional information on these two aspects. The researchers analyzed the three distribtion chains separately to ensre confidentially of chain information. A nmber of project otpts are worthy of note: 18

19 - collection of data to extend the Agrihb information system for each of the three chains - generic modeling of a spply chain information system for frit which can be sed or adapted by other spply chains - ideas for improving information exchange between chain partners - sggestions for farmer-level improvements concerning harvest and post-harvest activities - sggestions for cooperative/exporter-level improvements regarding qality-control practices, feedback to farmers and standardization, for example, of shipping pallets - sggestions for government-level improvements sch as investments in frit sector infrastrctre (packing hoses, transport, harbor), qality control and research facilities - dissemination of reslts in workshops, conferences, pblications and Web sites Position of smallholders. Smallholders obtained access to information on logistics and qality as a reslt of this project. Prodcers were ths better able to adapt their prodction, harvesting and post-harvest plans to export activities. The smallholders also received information on how to improve the qality of their prodce. Increased information exchange among all the chain partners increased market opportnities for the partners, as improved logistical organization of the chain improved the qality of its prodce. Cooperation and the development process. Both private and pblic parties participated in the project. Some of the private companies involved were motivated to participate becase their competitor did so or to make sre that they did not miss ot on market advantages or innovations. The participants appointed the research institte that had exected the feasibility stdy as project coordinator. The coordinator, ths, already had good insight into the sector and knew the partners involved. In addition to dealing with day-to-day activities, sch as administration, the project coordinator also responded to information reqests and solved problems sch as misnderstandings and disagreements among project participants. One representative from each participating organization served on the project steering committee, which worked via a videoconference between Soth Africa and the Netherlands once every three months. The committee s task was to approve project activities, monitor project performance and act on new developments within the spply chain. The participants apparently valed these meetings, since most were present at all. The atmosphere of the meetings was open and positive and even competitors chatted amicably before and after the official bsiness. Becase participants had signed clear agreements on confidentiality, intellectal property rights and information dissemination to the otside world, no significant problems arose concerning these isses. The cost of the project was covered by the private-sector participants, who contribted cash and staff time, the research instittes, which contribted staff time, and by SANTF (the Soth Africa Netherlands Transport Form), the Dtch agricltral ministry, the Rotterdam port athority, and KLICT (a program that facilitates spply chain development for the Dtch government). Pblicsector contribtions reflected the two contries commitment to private-sector development and, therewith, to economic growth on both sides. Fresh Food Spply Chain in Thailand Backgrond. Thai consmers are spending an increasing proportion of their income on fresh frits and vegetables, the percentage having risen from 19% in 1985 to 24% in 1993 (Itharattana, 1996: 18). Most prodce is sold in traditional market otlets, in amblant street trade and in the so-called wet markets. Overall, 5% of sales are made throgh spermarkets, althogh this proportion has already reached 50% in the capital Bangkok. In recent years, international retailers 19

20 like 7-Eleven, Royal Ahold, Tesco, Makro, Carrefor and Sainsbrry have established spermarkets especially to serve Thailand s rban conglomerates. In 1996, Royal Ahold established a joint ventre with the Thai Central Retail Corporation and started to operate more than 30 TOPS spermarkets (most of which are located in Bangkok and Chiangmai). From the start, TOPS proliferated itself as the spermarket chain for qality fresh food. Objectives. In 1998, TOPS began a spply chain project aimed at providing Thai consmers high-qality, safe, fresh prodce with reliable availability at affordable prices. To achieve that goal, however, the spply chain faced a nmber of problems. For example, roghly 250 sppliers were delivering perishables directly to the backdoors of 35 stores at least three times a week. This meant high handling costs, significant post-harvest and shrinkage losses and low service levels (meaning that prodce was often ot of stock). TOPS enlisted pblic-sector assistance and started the project with for objectives: raising the level of service within the perishables spply chain; redcing lead times and post-harvest losses and shrinkage; improving qality and safety of prodce by developing preferred spplier relationships and introdcing good agricltral practices and a certification scheme; and raising the knowledge and awareness of employees and professionals in the local food indstry throgh on-the-job training (e.g., in HACCP) and a mini-mba program. Approach. The TOPS spply chain has ths far focsed on delegating vale-added activities and selecting preferred sppliers. Since at the start of the project none of the fresh-goods sppliers performed the vale-added fnctions reqired (e.g., sorting, washing, packaging), the project decided to bild a fresh distribtion center that wold also perform prodctive fnctions like qality control, washing, packaging and processing. This vale-added center was a complete green-field operation located on the edge of Bangkok. The center served as the locs for the project s work to improve spply chain performance for perishables. A nmber of noteworthy reslts were achieved: - establishment of the fresh distribtion center in Bangkok - redction of the nmber of preferred sppliers from 250 to 60 in the first half of 2001, with 40 ot of the 60 certified by the Department of Agricltre (DoA) and carrying the DoA label - provision of training to qality control managers at the TOPS distribtion center and in the stores, with the service level increasing to 98% - development of a road map in other words, a practical bleprint to achieve trsted thirdparty certification for food safety assrance in emerging fresh markets (see annex 1) - development of a vale-chain analysis model - development of a model for lead-time redction - gidelines for a mini-mba program on spply chain management (see annex 2) - redction of the lead-time from farm-to-fork from 68 hors to less than 24 hors - redction of post-harvest and shrinkage losses - dring the chain optimization process, standardized crates, pallets and crate washing facilities were introdced. The TOPS standard was accepted by most major players in the Thai retail indstry (inclding leading sppliers) Position of the smallholder. Smallholders are involved in the TOPS spplier network in two ways: first, via the network of contract farmers and byers who are preferred sppliers becase of their ability to exert backwards control on the spply chain and, second, via the recent phenomenon of informal farmers associations. In these associations, professional growers within a family or village join forces and exchange experiences and farming knowledge. These grops 20