food chain management for sustainable food system development
TRANSCRIPT
Food Chain Management for Sustainable Food System Development
Abstract. Food Chain Management is a rather new research domain. As a consequence, the
domain and the research challenges within the domain are not yet clearly defined. This
corresponds with the variety in the definition of food chains and networks that might focus on
either closely cooperating enterprises along the value chain with an executive coordination
element or, alternatively, on a network of enterprises in dynamically evolving business
relationships. Management challenges in closely cooperating enterprises are closely linked to
challenges in enterprise management and can draw on research in this domain. However,
management activities in and for networks involve additional challenges, that require focused
research engagement. The dependency of all participants in the chain on consumers as the
ultimate customers and the dependency of the quality of final products on the engagement of all
participants in the production and distribution of products require new managerial activities
and, in turn, support by research. This paper discusses the background of future research needs
and formulates priority challenges for managerial improvements towards an increased
sustainability of the food sector.
Key words: Supply Chain Management, research, agribusiness
JEL: Q010, Q130, D290, L140
1. Introduction
The food sector as a whole is faced with major challenges that arise from changes in the sector’s
economic and non-economic environments, from changes in lifestyles, from global increases in
food consumption, from a diminishing production base due to, e.g. the loss of arable land or its
divergence for non-food production alternatives (see, a.o., CIAA, 2007), and, not the least, by
changing attitudes of society towards the consequences of the food system’s activities for
environmental, social and economic issues, captured in the term of ‘sustainability’.
The challenges cannot be met by any individual enterprise but require concerted actions and
coordination of initiatives. 'Food Chain Management' (FCM) aims at providing support for the
identification and realization of 'best' concepts for such actions and coordination needs. This
support, in turn, provides enterprises with the means for improving their own and the sector’s
competitiveness, sustainability and responsibility towards the expectations of its customers and
the society. The complexity is apparent in the variety of indicators that are discussed regarding
the sustainability of the sector and its actors involving a broad spectrum of economic,
environmental, and social indicators (Ondersteijn et al., 2006).
In meeting its challenges, the sector needs to innovate in organizational relationships that reach
beyond innovations in process improvement by building on the innovation potential inherent in
enterprise networks and their flexibility in responding to customers' and consumers' demands
(Pittaway et al., 2004). There is an urgent need to adjust the trend towards increased process
integration along the value chain to the organization of a flexible and responsive network
approach by utilizing the potential of technological change, of information and communication
systems, and of institutional change (Murdoch, 2000; Ritter & Gemuenden, 2003).
There have been extensive discussions in literature on food chain management opportunities
(e.g., Bourlakis, 2001; Eastham et al., 2001; New & Westbrook, 2004). However, discussions
have primarily focused on
a) management in and for chains of closely cooperating enterprises but not on network
environments with dynamically evolving trade relationships and on
b) narrowly defined performance indicators but not on the broad array of indicators that are
linked to today’s understanding of long-term ‘sustainability’ of the sector.
Furthermore, the dynamics in scenario developments (Ingram & Brklacich., 2006) and the
continuous emergence of new managerial activity potentials as, e.g. in information and
communication systems (e.g., Hill & Scudder, 2002) requires new efforts for focused research
engagement (Omta et al., 2001) towards Food Chain Management concepts and their
implementation for the delivery of chain support in dealing with the challenges ahead.
Food Chain Management support is towards the actors that represent the food value chain,
suppliers, primary producers, processors, manufactures, and retailers which have consumers as
the final customers. Its support can focus on operational improvements or on strategic
development perspectives that involve major investments and long-term commitments. A specific
strategic development perspective concerns the investment in sector-wide infrastructures like
electronic networks for tracking and tracing in food safety control. Such infrastructures could
serve and benefit the sector as a whole but are beyond the investment capability of any single
group, especially if their benefit depends on participation of a majority of enterprises, including
small and medium sized enterprises (SMEs) which might take time to materialize. For the
infrastructures to become feasible and to deliver the envisaged benefits not just for enterprises
and the industry but for society as a whole the investment in conceptual design, organizational
agreements, and financial responsibilities requires complimentary engagement of groups from
outside the value chain including research and policy, i.e., a Food Chain Management view that
integrates policy and management initiatives alike.
Specific issues the food sector and its individual actors need to deal with for timely and
appropriate response to the sector's challenges involve (CIAA, 2007)
1. To adapt rapidly to changing scenarios (markets, policy, resource availability etc.) and their
requirements (ESF-COST, 2007) through changes in resource use, products, processes,
services, and governance structures within a sector organization that is difficult to coordinate
as its enterprises are rarely confined to well-structured chain relationships with established
communication and coordination mechanisms but are usually part of an open enterprise
network where enterprises may change their suppliers and customers at will.
2. To overcome the sector’s structural problem with its large number of SMEs (McCorriston,
2002; O’Reilly et al., 2003). Their ability to innovate and interact successfully with the large
and multinational enterprises, especially in agricultural supply industry and retail, depends on
cooperation initiatives and the provision of external coordination support.
3. To focus on changing consumer needs. This depends on a continuous adaptation of new
developments in technology, production, management, communication, organization or
cooperation and on the establishment of trust between all stakeholders along the food value
chain including the consumer (Fritz et al., 2006; Kjaernes et al., 2007).
The challenge for Food Chain Management is to integrate and balance the interests of all
stakeholders, including enterprises, consumers, and the society as a whole considering all of the
relevant factors for successful integration including economic efficiency, environmental control,
social responsibility, fitting process organization, food safety, marketing or transaction rules, etc.
Four interrelated strategic research initiatives have been identified (CIAA, 2007) as decisive for
the sector’s ability to meet its future challenges and to overcome its inherent development
problems. They focus on serving the:
- Sector as a whole through better understanding of the dynamics in those critical success factors
that will improve competitive performance and sustainability in times of globalization and
change,
- Consumers through innovations in production, logistics, and communication processes for
advancements in the sustainable provision of quality and diversity in food, consumers can
afford and trust,
- Food chains and networks through better transparency, interaction and organization for
advancements in governance, trust, efficiency, and innovation dynamics towards long-term
sustainability,
- Network dynamics through better integration of SMEs into the global and regional value
chains for advancements in the utilization of SMEs innovation potential.
Because of the sector's complex enterprise infrastructure and the difficulties in reaching sector
agreements, pilot and demonstration activities are required to facilitate acceptance and
implementation.
2. Dynamics in critical success factors for performance and sustainability: the sector view
In times of globalization and change, the understanding of the dynamics in critical success factors
for competitive performance and sustainability (Bisp et al., 1998) is of crucial importance in
strategic management decision activities. It is the basis for any further discussion of research
needs and challenges .
In principle, successful competitiveness and long-term sustainability depend on benefits
exceeding costs where, in this context, benefits and costs represent general terms representing
advantegous and disadvantegous effects of activities or developments. The indicators for their
determination can vary in times of change as can the critical success factors for performance and
sustainability. This reduces the competitive advantage of the established production and
distribution organization. A current example is the emergence of competitive bio-energy
production.
Any improvements in food chain activities build on the perceived anticipation of improvements
in the balance of benefits over costs. However, there are different perceptions and priorities for
society (policy) and for enterprises (Fritz & Schiefer, 2008). From a society’s point of view,
benefits may involve monetary and non-monetary elements. From an enterprise view the
monetary profitability must be evident. This has consequences for sector developments and
enterprise activities. In principle, enterprises have to focus on those critical success factors that
improve their profitability. However, they cannot neglect the society’s view on benefits and costs
and the dynamics in society’s performance indicators to remain sustainable in order to avoid
regulations and other limitations on an enterprises’ decision flexibility. The consideration of
society’s views is, therefore, one of the critical success factors for the sector’s sustainability in a
competitive environment (Krieger et al., 2007). New developments in sustainability
communication between the retail sector and consumers like ‘food miles’ (Pretty et al., 2005),
‘fair miles’ (MacGregor & Vorley, 2006) and similar indicators reflect some of these
developments . They may have wide-reaching effects on the sector’s development direction in
trade relationships, organization, etc. Furthermore, potential changes in the future scenarios
(SCAR, 2007) due to environmental effects (climate change, depletion of resources, etc.),
demographics, changes in diets or lifestyles, etc. but also due to unexpected events may ask the
sector to develop flexible solutions in production, organization, sourcing or distribution to be able
to easily adapt to changes in scenarios and to remain sustainable in the long run.
In determining their long term development paths, enterprises and chains need to find a balance
between improvements in their monetary benefit-cost balance to assure general competitiveness
in their markets, and the society's consideration of the benefit-cost balance to assure acceptance
and sustainability. It will be essential to understand the relevance and dynamic developments in
those critical success factors and indicators that determine performance from the view point of
enterprises, chains and the society (Aramyan et al., 2007; Gerbens-Leenes et al., 2003;
Gunasekaran et al., 2001, 2004).
Comparative benchmarking studies within the food sector, as well as across sectors, are required
to understand the complex interdependencies between chain organization alternatives and their
performance in economic and non-economic (e.g. quality, environmental consequences, etc.)
aspects. Benchmarking research does focus on the basic functions chain organization alternatives
build on and identify ‘best practice’ reference models, the critical success factors for success in
different dimensions of interest (quality, environment, etc.) and the related performance
indicators for their evaluation (e.g., Hunkeler et al., 2003). Cross-sector benchmarking studies
attempt to identify so-called ‘best of class’ examples for organizational functions irrespective of
the products under consideration (Bisp et al., 1998; Gilmour, 1999; Togar et al., 2004).
Approaches derived from Life Cycle Assessment (LCA) and involving economic and social
elements (e.g., SLCA, Social Life Cycle Analysis), from chain encompassing ‘hot-spot-analysis’
or from Balanced Scorecard (BSC) concepts (e.g., BSSC, Balanced Sustainability Scorecard) and
others are being discussed for the necessary multi-dimensional analysis needs (Guinée, 1992;
Hendrickson et al., 1998; Graedel, 1996; Heijungs, 1996; Hagelaar & Vorst, 2002; Schiefer,
2002; Mourad et al., 2007).
Results from benchmarking studies can be combined with modelling results and linked to
performance indicators to produce performance maps, which support evaluation of alternatives
and the decisions required for their realization.
3. The market focus: consumer needs for affordable food of quality and diversity
The food sector faces three strategic developments regarding its production base that put pressure
on its capacity to deliver the necessary food supply. They are: a) increasing demand for bio-
energy, b) limits in the availability of water and c) diminishing production resources (e.g. land for
agricultural use) (SCAR, 2007). Furthermore, food production will be affected by pressure from a
growing world population and the desire for an increased consumption of meat (Pingali, 2007).
Possible changes in climate might aggravate the consequences. Without innovations, consumers'
need for affordable food without compromises in quality, and which continues to retain their
trust, cannot be served in the long run.
Consumers’ perception of food quality is a dynamic variable. It might focus on products,
processes, process management or on management issues like fairness in trade, working
conditions, environmental consciousness, or the origin of products. Its understanding depends on
lifestyles, cultures, etc. (Lobb et. al., 2007; Grunert & Wills, 2007; Gronhoj & Thogersen, 2008;
Hughner et al., 2007; Ozcaglar-Toulouse et al., 2006; Jaffry et al., 2004). New types of efficient
and responsive coordinated production, distribution, and communication networks (logistics
networks) must emerge that can support these changing demands, taking into account varying
quality parameters, organizational conditions and different requirements of market segments
(Bakker & Nijhof, 2002; Lindgreen, 2003; Taylor & Fearne, 2006; Webster et al., 2006). This
may include, e.g. new organizational structures for flexible chain-encompassing distribution and
logistics systems that utilize advanced technologies for communication, control, or tracking and
tracing, developments in quality preservation, new packaging and processing technologies or
organizational innovations like parallel chains that could provide opportunities to better serve the
needs of consumers.
Diversity in food is a strength of today’s food system. It is the basis for a further diversification in
the production of tailor-made foods that specifically relate to people’s age, health status, activity,
or any other criteria (Thiele & Weiss, 2003). New business-to-business relationships are required
that are highly responsive to dynamic consumer and market demands and at the same time cost-
effective (Matopoulos et al., 2007; Zanquetto-Filho et al., 2003; Storer & Taylor, 2006; Vachona
& Klassen, 2006). This poses challenges for innovations in chain encompassing production,
distribution and communication networks that can efficiently compete with classical systems in
commodity markets.
The continuous provision of affordable quality food from a decreasing production base can be
supported through process improvements involving, e.g. reductions in losses which may amount
to 25-50% of total production depending on source (Fehr et al., 2002; Hagelaar & Vorst, 2002;
Vorst & Beulens, 2002), delivery on demand (just-in-time) to avoid over-supply, the efficient
integration of new technological developments (in, e.g. production, analytical methods, logistics,
or communication) and through an institutional environment that supports successful adoption of
different principal technological developments. The analysis of ‘best practice’ experiences can
serve as a basis for suitable process reorganizations and institutional infrastructures on which
innovations in technology, manufacturing, organization, and management can build.
Efficiency and flexibility are at the core of quality assurance in scenarios with changing
consumer demands (Zokaei & Hines, 2007; Henningsson et al., 2004; Fritz & Hausen, 2008).
Research on the identification of separable functions in production and trade and on the
standardization of interactions could allow the identification of new flexible organizational
alternatives (as, e.g., flexibility in sourcing through new technologies that allow to transfer
different initial raw materials into unified raw material for standardized manufacturing processes
(Vorst et al., 2001)) and the formulation of new organizational generic simulation and
optimization models that support flexible adjustments of global production and logistics networks
in case of changing customer and consumer demands or in case of disruptions in deliveries. The
focus is on new types of efficient, flexible, and responsive logistics networks that could reduce
current inefficiencies, lower costs and increase the creation of value and product differentiation
(Landeghem & Vanmaele, 2002). New flexible enterprise relationships are required that support
the re-bundling of functions across enterprise borders for better serving changing consumer
needs.
4. Transparency, interaction, and organization for advancements in governance, efficiency,
innovation dynamics, and trust
Strategic advancements in the competitive strength of food value chains and their adherence to
society’s values build on a number of critical success factors, of which 'appropriate' transparency
i.e. transparency that fits the different needs of the various stakeholders stands out as decisive.
Focused information and communication concepts that serve the different transparency needs are
the key for the dissemination of knowledge, for innovation, for risk containment, for appropriate
cooperation and coordination within the value chain, for appropriate integration of SMEs in chain
activities, and for the establishment of trusted relationships between enterprises, consumers and
the society (Lamming et al., 2001, 2004; Deimel et al., 2008; Beulens et al., 2005; Theuvsen,
2004).
Transparency follows the production and distribution paths along the value chain. As such, it
builds (and depends) on information infrastructures that monitor process activities and allow the
tracking and tracing of products and services throughout the value chain. Transparency has a
backward and a forward perspective depending on the stage of the value chain from where the
value chain is looked at (Schiefer, 2006). For the consumer, transparency is based on a backward
perspective. However, for enterprises it might have both, a backward and a forward perspective.
In its risk containment strategies it might not only want to know the production history of its
products (backward perspective) but the distributional activities of its enterprise customers
(forward perspective) to understand its potential risk in recall situations (Huirne et al., 2006),
especially if consumers are involved.
The ability for tracking and tracing is a pre-condition for the identification of many other food
quality issues. Its implementation requires a consistent system approach that in order to be
effective requires a broad acceptance by the food sector, including its SMEs. It involves sector
agreements on many different issues, including content and format of communication, data
ownership, management organization, system organization, technology, access, rules, decision
authority, etc. While systems for tracking and tracing are the basis for any further development of
quality-based communication networks, the dynamics of these innovations need to be supported
by complementary quality communication that allows the efficient exchange of information on
quality innovations within the food value chain and, eventually, with the consumer (Verbecke,
2005; Lobb & Mazzocchi, 2007; Grunert, 2005).
Transparency may be served through an institutional environment that finds its expression in
business norms, technology standards, communication agreements, information networks, codes
of practice, legislative frameworks and societal rules (Menard & Valceschini, 2005; Hendrikse,
2003; Fritz et al., 2008). To take food safety and quality as an example, its understanding has
many dimensions and might differ between cultures, regions, or products or along the value
chain. It might focus on products, processes, process management or on management issues like
fairness in trade, working conditions, environmental consciousness, or the origin of products.
This makes coordination of trade relationships and harmonisation of policies, quality systems,
standards, information networks and communication agreements a prerequisite for transparency
and balanced development.
Transparency along the value chain of enterprise relationships and process activities needs to
support the objectives of the different actors in a variety of ways. This support includes e.g.
improvements in efficiency or flexibility, the ability to deliver guarantees of various kinds,
including guarantees for food quality, for food safety or for continuing deliveries in case of
failures in food safety or quality, in risk control, and for the sustainable generation of trust. This
wide array of transparency needs shows the complexity and variability of transparency needs
which need to be understood and integrated into transparency maps which could serve as a basis
for the development of appropriate transparency schemes and systems.
Limitations in actual implementations of sector transparency together with dynamically changing
needs require the design and delivery of reference models for the establishment of flexible
transparency systems that match current transparency needs. They must be flexible to adapt to
changing requirements and sector infrastructures.
5. Network diversity for innovation dynamics: Integrating SMEs into value chain
relationships
Network communication and network diversity are supportive elements of innovation dynamics
(see, e.g., Castells, 2000; Ritter & Gemuenden, 2003). Innovation builds on knowledge,
knowledge generation, and knowledge exchange. Innovation results from the combination of
knowledge, the identification of suitable comprehensive utilization concepts (technology,
information, management, logistics, marketing, etc.) and their realization in the respective sector
environment (Naim et al., 2004).
The challenge for research is the design of knowledge concepts that support the generation of
innovation and builds on knowledge about discoveries, new product developments, patents, new
managerial concepts, new technologies, new communication potentials, etc. with potential
relevance for food production and distribution (Sporleder & Peterson, 2003). However, the
utilization of knowledge builds on operational cooperation concepts that may involve many
detailed issues such as the organization of internal information and communication systems,
coordination procedures for resource utilization, integrated logistics designs for vertical
relationships, collaborative planning approaches, risk management procedures, etc. (Lefebvre et
al., 2003; Sivadasan et al., 2004).
These challenges are especially relevant for SMEs which, with their diversity and flexibility, may
contribute substantially to the innovation potential of networks (Gellynck et al., 2006). For
SMEs, the integration into horizontal cooperation schemes and networks is usually the base on
which an efficient integration into the vertical trade relationships of food value chains can build.
However, while horizontal cooperation could strengthen the ability of SMEs to become
successful partners in vertical trade relationships that require mutual agreements, as, e.g. on
quality improvement initiatives, the ability of SMEs to cope with the challenges of integration
into value chain relationships may still differ. As a consequence, the food sector will need to
develop different levels of integration, resulting in a segmentation of markets with different
levels of excellence and regionalization, local, national, or global (Raynolds, 2004; Jayasinghe-
Mudalige & Henson, 2006; Garcia & Poole, 2004). SMEs with lower levels of management
excellence might remain outside the emerging global food chain developments and remain
restricted to local or regional markets with different needs and barriers related to horizontal
cooperation or value chain integration but also different needs for support.
However, little is known about the cooperation and integration needs that relate to different
scenarios, value chain organizations, regions, cultures, etc. Cooperation and integration could
focus on many different functions such as planning, quality management, research, logistics,
knowledge, sales, procurement, information management, marketing, packaging, production, etc.
It requires information on what are the cooperation and integration needs in various functions,
their importance for different food chain scenarios, the possible levels of cooperation and
integration, and the consequences for performance and innovation support. However, cooperation
and integration needs usually have to face barriers, which prevented SME cooperation and
integration initiatives in the past. There is a need to understand these barriers and how they might
be overcome. This knowledge allowed the development of reference models for the utilization of
cooperation and integration opportunities and the identification of development paths for their
realization.
Food Chain Management support builds on the identification of cooperation and integration
needs and barriers, and the initiation and management of initiatives and SME networks that allow
SMEs to participate in the food sector’s innovation dynamics, and become an integral part of
future food value chain developments on a regional and global level. Research needs to identify
and analyze economically feasible SME cooperation options, which could support the most
common integration needs. An evaluation of possible performance gains, and of the innovation
potential of cooperation alternatives, should allow realistic proposals to be formulated.
6. Conclusion
Food Chain Management is, as a scientific domain, still rather new and its focus of research is not
yet clearly defined. This paper identifies the domain as a management domain that deals with the
coordination and support of networks of enterprises in changing business relationships. Research
challenges develop dynamically out of changes in future scenarios the food sector might have to
deal with, changes in technical and organizational support opportunities, and changes in the
sector’s infrastructure. Based on the present knowledge, the paper has developed four focus areas
for research challenges that need to be dealt with. They include the need for advancements in
a) the understanding of dynamics in critical success factors that will improve competitive
performance and sustainability in times of globalization and change,
b) innovations in production, logistics, and communication processes for advancements in the
provision of quality and diversity in food, consumers can afford and trust,
c) chain transparency, interaction and organization for advancements in governance, trust,
efficiency, and innovation dynamics, and
d) the integration of SMEs into the global and regional value chains for advancements in the
utilization of SMEs innovation potential.
These focus areas cover the interests of the different stakeholders in the food chain including
consumers, enterprises, policy, and the sector as a virtual unit as well. Some of the focus areas
(as, e.g., the need for transparency) might not immediately appear to ask for front end research.
However, a system analysis of the individual research areas and the many interrelated issues
involving technological, political, organizational, managerial or behavioural aspects that have
scarcely looked upon in a system’s approach demonstrate the challenging needs for the
engagement of research.
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