Connectivity in the Food Supply Chain: Cooperative Partnerships and Long-Term Approaches Improve Connectivity within Supply Chains

By Hoyos, Juan | International Trade Forum, April-June 2011 | Go to article overview

Connectivity in the Food Supply Chain: Cooperative Partnerships and Long-Term Approaches Improve Connectivity within Supply Chains


Hoyos, Juan, International Trade Forum


JUAN HOYOS Adviser on Supply Chain and Value Chain Management Training Capacity Development, Division of Business and Institutional Support/Export Competitiveness

ITC

Connectivity within supply chains is not easy to achieve, especially as competitiveness in developing and least developed countries may be weak. This constraint also affects food chains in these countries. Farmers face many challenges in improving their competitiveness and developing mutually beneficial linkages to buyers in food chains. Understanding the requirements of all players and taking a longer term approach to creating and nurturing strong partnerships can provide the key to unlocking these challenges.

What prevents food producers, especially small farmers, from selling their products to large consumers, such as hotels, restaurants and caterers? Why are these large consumers not interested in buying from small farmers if doing so helps their regions become more productive and competitive?

For large consumers the reasons for not considering small suppliers are multiple: they range from a lack of standard quality, to the limited range of products, to unreliable delivery and unexpected price variations.

On the side of small farmers the issues can include failure to honour agreements to pay fair and agreed prices, higher than expected delivery costs and unrealistic terms of payment given a farmer's situation.

The importance of commitment and how it can be achieved

Developing better connections between suppliers and buyers can be achieved by strengthening supplier commitment. Stronger commitment could improve trading conditions and the level of transactions between local suppliers and consumers. Import levels would significantly decrease, which would result in important benefits for the regions where such initiatives are developed. However, attaining commitment between partners does not solve some of the basic problems, such as inadequate infrastructure, environmental requirements and economic and safety conditions.

What needs to be improved to construct a competitive supply chain? Most importantly, all actors involved in the process need to implement medium- and long-term strategies. For example, a big hotel chain cannot afford to change their fruit and vegetable supplier every two months. For the buyer, apart from an increase in administrative costs, such situations present additional costs associated with the introduction of new products and new delivery processes, and can be perceived as a lack of loyalty from the supplier's side. Additionally, price increases do not necessarily reflect market realities.

Supplier development programmes

Large buyers should focus on strategies for long-term supply including a supplier-development component. This involves certain risks that make success problematic because such projects can last between three and five years, and buyers normally have only short-term

CHAIN ACTORS & THEIR INTERACTIONS

In a connectivity strategy among members of the food supply chain strategies. Thus a strategic change will require a mindset change that encompasses efforts at supplier development on a long-term basis that can take into account market conditions as they evolve. However, the benefits obtained from the successful execution of the project can deliver constant and high-quality products to the enterprise, contributing to its competitiveness. …

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Connectivity in the Food Supply Chain: Cooperative Partnerships and Long-Term Approaches Improve Connectivity within Supply Chains
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