Tuesday, January 21, 2014
Supply Chain Design for Organic Produce
While reading about the problems that can be faced during the design of a supply chain of a product, I came across an article written by two Professors from the University of Kentucky - Fabien Tondel and Timothy Woods. You can reach the full article from the link below:
They examined some of the difficulties in sourcing organic produce. Their hypothesis is that, intermediaries have more difficulty in sourcing adequate supplies of quality product although derived demand is expanding. Conventional produce has moved more to year-around sourcing, drawing heavily from international production regions. However, relatively little organic produce is sourced outside of the U.S.
To them, the organic supply chain is dynamic and the actors within the supply chain have become more involved and will likely continue to do so. This would lead to more contracting with growers, intermediaries dealing with larger and more reliable suppliers, and generally more active sharing of information. Stronger vertical relationships are needed to avoid hold-up problems, reduce supply uncertainty, and meet the expected expansion of demand driven by the emergence of the natural foods stores.
Change in organic produce is connected with main line produce. The movement toward wider distribution through mass markets, however, will impact the organic supply chain specifically. Growers and distributors of organic produce expect that demand for organics increase even more, but distribution also is expected to become more challenging.
To me, the design of the supply chain is the most important step. When designing the supply chain for a product, one should take into consideration the specifics of the product. The organic supply chain has its own distinguishing characteristics. The products are highly specific and very sensitive to quality. The organic produce has to meet the national quality and marketing standards and has to address the rising concern for healthy products from consumers. With regards to the features of the organic produce, stronger vertical relationships within the supply chain, effective distribution systems would be very helpful for the supply chain execute effectively in order to meet the increasing demand.
 Vertical Coordination: The process of ensuring that each successive stage in the production, processing, and marketing of a product is appropriately managed and interrelated to the next, so that decisions about what to produce, and how much, are communicated as efficiently as possible from the consumer to the producer. Agricultural economists believe that vertical coordination of markets is particularly important in the food industry because of its complexity, the large number of firms that participate in one or more stages, and the relative perishability of the products involved. (www.webref.org/agriculture/v/vertical_coordination.htm)