modernizing food supply chains...modernizing food supply chains session 2: food supply and demand...

MODERNIZING

FOOD SUPPLY CHAINS Session 2: Food supply and demand –

improving productivity growth and supply chains

ROLANDO T. DY, Ph.D.

Professor

School of Management

UNIVERSITY OF ASIA AND THE PACIFIC (UA&P)

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R. Dy, UA&P, 2014

OUTLINE

• Objectives

• Role of Modern Supply Chains

• Commodity Examples: rice, fruits and vegetables, meat, fish

• Factors which affect chain competitiveness

• Asian Connectivity

• Country Examples: Philippines and Indonesia

• Moving Towards Effective Supply Chains

R. Dy, UA&P, 2014

OBJECTIVES

• Discuss the food supply and

demand issues in Asia, with

focus on ASEAN

• Assess technological and policy

innovations required to meet food

security needs moving towards

2025

R. Dy, UA&P, 2014

The Role of Modern Supply Chains in

Assuring Food Availability

Quantity of product delivery

Supply reliability: speed, timeliness, tracking

Cost to final consumer

Product quality and food safety

More choices

LOGISTICS is vital

R. Dy, UA&P, 2014

COMMODITY EXAMPLES

• Rice

• Fruits and Vegetables (banana, apples, oranges and grapes, shallots and onions, garlic)

• Meat (chicken meat)

• Fish (shrimps and prawns, tunas - frozen, catfish - frozen)

RICE: Southeast Asia has huge surplus

* Average from 2011-2013,; limited data for Myanmar

Source of basic data: UN Trademap

SOURCES

TOTAL: 16.3 M tons*

DESTINATIONS

Thailand49%

Vietnam18%

Cambodia33%

Philippines7% Indonesia

11%

Malaysia5%

Singapore3%

Brunei0.3%Others

74%

SOURCES

TOTAL: 16.3 M tons*

DESTINATIONS

RICE: East Asia is a small market for SE Asia

Thailand49%

Vietnam18%

Cambodia33%

China3%

HongKong2%

Japan2%

Taiwan1%

S. Korea1%

Others92%

* Average from 2011-2013


SOURCES

TOTAL: 458,300 tons*

DESTINATIONS

RICE: East Asia is a minor trader

China92%

Japan7%

S. Korea1%

Taiwan1%

Philippines0.3%

Indonesia0.6%

Malaysia0.1%

Singapore0.2%

Brunei0.001%

Others99%



RICE SHIPMENTS TO EAST AND SE ASIA

http://www.oryza.com/news/rice-news/igc-estimates-2014-

Asian Rice Supply Chain Non-Exporter

Internal Bottlenecks

• Small production lots

• Poor road network

• Post harvest losses

• Inefficient mills

• Inefficient ports (exit and entry)

FARMS

(small) Traders/

Assemblers

Rice Mills

(small)

Wholesaler

Land L

Wholesaler Urban retailer

Sea L

L L

Port

of Exit

Port of

Entry

Asian Rice Supply Chain Exporting country to importing country

FARMS

(small) Traders/

Assemblers

Rice Mills

(small)

L

L

Exporters’ Warehouses

Port

of Exit

Port of

Entry

Importers’ Warehouses Wholesaler

Urban retailer

L

L

L


• Customs

• Stevedoring

• Port Handling

• Informal Costs

R. Dy, UA&P, 2014

RICE LOGISTICS COSTS Coast wise shipping can be higher than ocean freight

Item Luzon

(Manila)

Visayas

(Cebu)

Mindanao

(Davao)

Ocean freight, Ho Chi Minh to Manila 27.50 27.50 27.50

Local Costs

Wharfage 0.85 0.85 0.85

Arrastre 6.79 6.79 6.79

Stevedoring 5.63 5.63 5.63

Checking 0.44 0.44 0.44

Coast wise freight 0 24.19 35.58

Land transport 6.48 6.48 6.48

Handling 2.98 2.98 2.98

Total at P43:US$1 23.17 47.36 58.75

Rice Logistics Costs: Vietnam to Philippine Ports Foreign and Local logistics cost (US$/MT) in Mid-2014

Source of basic data: National Food Authority

R. Dy, UA&P, 2014

RICE: Issues facing effective transport in the

ASEAN

RDY_UAP_2014

Current Status: Trade is well-developed

Exporters: Thailand, Vietnam, Cambodia and Myanmar

Importers: Indonesia, Malaysia, Philippines, Singapore, Brunei

Issues: Tariff barriers: poor internal transport – ports, roads and inter-island, post harvest losses

SOURCES

TOTAL: 2.7 M tons*

DESTINATIONS

FRUITS-BANANAS: Philippines dominates

Philippines98%

Malaysia1%

Thailand1%

Japan39%

China16%S. Korea

11%

Singapore6%

Indonesia0.1%

Vietnam0.1%

Others28%



CHINA

TOTAL: 1.2 M tons*

DESTINATIONS

APPLES, ORANGES AND GRAPES:

China game

Apples83%

Grapes9%

Oranges8.3%

Vietnam12%

Indonesia12%

Thailand11%

Philippines7%

Malaysia5%

HongKong3%

Singapore1%

Brunei0.002%

Japan0.0001%

Others49%



SOURCES


DESTINATIONS

VEG - SHALLOTS AND ONIONS: China is dominant

China99%

Philippines1%

Japan39%

Vietnam18%

Malaysia9%

Thailand6%

S. Korea5%Philippines

3%

Indonesia2%

HongKong1%

Singapore1%

Brunei0.01%

Others16%



TOTAL: 1.6 M tons*

DESTINATIONS

GARLIC: China is dominant

Indonesia27%

Vietnam9%

Malaysia6%

Thailand4%

Philippines4%

S. Korea2%

Japan1%

Singapore1%

Brunei0.1%

HongKong0.0%

Others46%



Asian Fruit and Vegetable Supply Chain Non-Exporter




• Post harvest losses

• Inefficient cold chains

• Inefficient ports (exit & entry)

• Bio security

FARMS

(small) Small Traders/

Assemblers

Wholesaler

Land L


Sea L

L L

Port

of Exit

Port of

Entry

Asian Fruit and Vegetable Supply Chain Exporting country to importing country

FARMS

(small) Assemblers

Packing Houses

L

L


Port

of

Exit

Port of

Entry

Importers’ Warehouses

Wholesaler

Urban retailer

L

L

L


• Customs

• Stevedoring

• Port Handling

• Informal Charges

• Cold Chain supply and cost

• Bio security

R. Dy, UA&P, 2014

FRUITS AND VEGETABLES: Issues facing

effective transport in the ASEAN

Current Status: China is dominant in fruits

and vegetables

Banana: Philippines is dominant

Issues: Cold chain development, post harvest

losses, high transport cost, food safety, non-

tariff barrier?

SOURCES

TOTAL: 1.6 M tons*

DESTINATIONS

POULTRY (CHICKEN): Southeast Asia

US 6%

Brazil94%

Canada0.2%

Singapore1%

Malaysia0.2%

Philippines0.1%

Brunei0.03%

Indonesia0.003%

Others98.7%

* Average from 2011-2013, chilled or frozen


SOURCES

TOTAL: 1.6 M tons*

DESTINATIONS

US 6%

Brazil94%

Canada0.2%

Japan1%

HongKong0.2%

Taiwan0.05%

S. Korea0.01%

China0.006%

Others99%

POULTRY (CHICKEN): East Asia



Asian Meat Supply Chain Non-Exporter






• Bio security (FMD)

• Food safety

FARMS


Assemblers

Wholesaler

Land L

Wholesaler

Urban retailer

Sea L

L L

Port of Exit

Port of

Entry

Asian Meat Supply Chain Exporting country to importing country

FARMS

(small) Slaughter Houses/

Dressing Plants

L

L


Port

of

Exit

Port of

Entry


Wholesaler

Urban retailer

L

L

L

Assemblers


• Customs

• Stevedoring

• Port Handling

• Informal costs


• Bio security (FMD and Avian Flu)

R. Dy, UA&P, 2014

MEAT: Issues facing effective transport

Current Status:

• Most supply to Asia originates from the Americas

• Thailand is a global of processed chicken exporter to

Japan and EU

• Small processed chicken exports by Malaysia and the

Philippines to Japan

• Most meat comes from USA, Brazil, Australia

Issues:

• Farm competitiveness and scale

• Internal cold chains


DESTINATIONS

SHRIMPS AND PRAWNS: East and Southeast Asia

Japan27%

Vietnam3%

China 2%

HongKong1%Singapore

1%

Malaysia1%

Taiwan1%

Thailand1%

S. Korea0.4%

Philippines0.1%

Brunei0.01%

Others63%



TOTAL: 84,600 tons*

DESTINATIONS

TUNAS, frozen: East and Southeast Asia

Thailand39%

Japan26%

China 4%

Vietnam3%

S. Korea2%

Singapore1%

Philippines1%

Malaysia0.4%

Taiwan0.3%

HongKong0.2%

Others24%



TOTAL: US$1.6 B*

DESTINATIONS

CATFISH, frozen: East and Southeast Asia

HongKong2%

Singapore2%

Philippines2%

China 2%

Thailand1%Malaysia

1%

Taiwan1%

S. Korea0.2%

Japan0.2%

Indonesia0.1%

Others89%




• Small production lots (small fishers and small fish ponds)




Asian Fish Supply Chain Non-Exporter

FARMS


Assemblers

Wholesaler

Land L


Sea L

L L

Port of

Exit

Port of

Entry

Fish processing

plants

Asian Fish Supply Chain Exporting country to importing country

FARMS

(small) Assemblers

L

L


Port

of Exit

Port of

Entry


Wholesaler

Urban retailer

L

L

L

Fish processing

plants


• Customs

• Stevedoring

• Port Handling

• Informal costs


R. Dy, UA&P, 2014

FISH: Issues facing effective transport in the

ASEAN region

Current Status:

Shrimps are major exports

Foreign fleets supply tuna to processing plants

Vietnam export of pangasius catfish to ASEAN is growing

Issue: Internal cold chains needs upgrading

Flood safety (traceability)

R. Dy, UA&P, 2014

Issues Facing Effective Transport of Key Commodities

(Rice, Fruits and Vegetables, Fish, Meat) in the ASEAN Region

Internal transport efficiency and

service quality for most countries

Emerging non-tariff barriers?

Cross Cutting

R. Dy, UA&P, 2014

Factors which affect chain competitiveness

• Border management

• Logistics costs

Fuel costs

Port costs

Road network

• Power costs

R. Dy, UA&P, 2014

The World Bank on Border Logistics

Efficient border

management is

critical for

eliminating

avoidable delays

and enhancing

predictability in

border clearance.

If service delivery

is poor, good

physical

connectivity is

not enough

Increased

complexity, no

more low-hanging

fruits

Trade facilitation

and border

reforms matter

The LPI shows that

quality of services is

driving logistics

performance in

emerging and richer

economies

The World Bank

LOGISTICS METRICS

Supply chain

service

delivery

Service delivery

performance

outcomes

Time, cost,

reliability

Customs

Infrastructure

Services

quality

Timeliness

International

shipments

Areas for

policy

regulations

(inputs)

Tracking and

tracing

Source: World Bank (2014 ). Connecting to Compete. Trade Logistics in the Global

Economy

R. Dy, UA&P, 2014

Logistics Performance Index (LPI)

Rankings of Asian Countries, 2014

• Global Top 10: Singapore (5), Japan (10)

• Top 10 Upper Middle Income Performers: Malaysia

(25), China(28), Thailand (35)

• Top 10 Lower Middle Income Performers: Vietnam

(48), Indonesia (53), India (54), Philippines (57),

Pakistan (72).

• Top 10 Low Income Performers: Cambodia (83),

Nepal (105), Bangladesh(108)

R. Dy, UA&P, 2014

LPI Rankings, 2014 Ranks among 160 countries

Bru Cambo Lao Malay Myan Indon Phil Sing Thai Viet

LPI Rank - 83 131 25 145 53 57 5 35 48

Customs - 71 100 27 150 55 47 3 36 61

Infrastructure - 79 128 26 137 56 75 2 30 44

International

Shipments

- 78 120 10 151 74 35 6 39 42

Logistics quality

and competence

- 89 129 32 156 41 61 8 38 49

Tracking - 71 146 23 130 58 54 11 33 48

Timeliness - 129 137 31 117 50 90 9 29 56

Source: World Bank (2014 ). Connecting to Compete. Trade Logistics in the Global Economy

R. Dy, UA&P, 2014

Fuel Costs in Asia, June 2014 Brunei, Indonesia and Malaysia have high subsidies

Unleaded Gas

US Dollar /liter

Diesel

USD/liter

Brunei 0.44 0.27

Cambodia 1.37 1.29

Indonesia 0.98 1.09

Malaysia 0.59 0.56

Philippines 1.28 1.01

Singapore 1.83 1.37

Thailand 1.51 0.92

Vietnam 1.20 1.07

China 1.34 1.25

Source: Mytravel cost.com Lao PDR and Myanmar data are not available

R. Dy, UA&P, 2014

Benchmarking Port Costs in Asia, 2006

Source: Port Benchmarking for Assessing Hong Kong’s Maritime Services and Associated Costs with other Major International

Ports. Marine Department Planning, Development and Port Security Branch, December 2006

Road Network Across SE Asia, c.2010

Country Road Length

km

Paved Roads

km

Percentage

Paved

Land area

Sq km

Paved roads

(Km/10

sq.km)

Vehicles per

1000 pop

Brunei D 3,127 2,883 92.2 5,770 5.0 38

Cambodia 44,900 3,881 8.6 181,040 0.2 17

Indonesia 476,300 313,500 65.8 1,904,569 1.6 296

Lao PDR 41,030 5,703 1.4 236,800 0.11 171

Malaysia 157,167 127,517 81.1 329,750 3.9 672

Myanmar 150,800 33,014 21.9 678,500 0.5 39

Philippines 31,359 24,834 79.2 300,000 0.8 74

Singapore 3,412 3,412 100 693 49.0 185

Thailand 114,437 108,158 94.6 514,000 2.0 432

Vietnam 301,000 198,000 65.8 329,560 6.0 17

Source: ASEAN as cited by ADB Report on Cross-Subregional Economic Ties (2012)

Road Density and Quality

Country Road km per

km2

Road km per

capita

% of roads

paved

% of roads in

good

condition

% of roads in

good or fair

condition

Philippines 671 2.45 20 18 50

China 201 1.44 81 na na

India 1138 1.49 47 na na

Indonesia 203 0.98 58 na 54

Japan 3230 9.21 78 na na

Korea 1016 2.09 87 87 100

Malaysia 300 3.97 81 78 98

Pakistan 335 1.70 65 88 100

Thailand 112 0.90 98 98 100

Vietnam 287 2.70 19 na na

Source: World Bank Road Network Databank, World Bank Database on Infrastructure (Policy Research Paper 3643), June 2005

R. Dy, UA&P, 2014

Power Cost affects Cold Chain Costs

http://www.investphilippines.info/arangkada/climate/business-costs/ (2010)

A factory in the Philippines pays more than twice as much for power

than factories in Indonesia, Malaysia, Thailand and Vietnam

In US cents/kwh, circa 2010

R. Dy, UA&P, 2014

Power cost in Asia

Power cost with and without consumer subsidy, 2010

Many ASEAN countries subsidize consumers

R. Dy, UA&P, 2014

Asian Connectivity

• The Asian Highway network is a regional transport

initiative aimed at enhancing the efficiency and development

of the road infrastructure, supporting the development of Euro-Asia

transport linkages and improving connectivity for landlocked countries.

• The Highway network now comprises over 141,000 km

of roads passing through 32 member countries. The

network extends from Tokyo in the east to Turkey in the west and from Russian

Federation, in the north, to Indonesia in the south.

http://www.unescap.org/our-work/transport/asian-highway/about

R. Dy, UA&P, 2014

Asian Connectivity

Forms of cooperation

• Concrete achievements of subregional programs such as the Central Asia Regional Economic Cooperation (CAREC) program, Greater Mekong

Subregion (GMS) regional economic cooperation program, and the Bay of Bengal Initiative

on Multi-Sectoral Technical and Economic Cooperation (BIMSTEC).

• Needed now: a second generation of cooperative

initiatives, which focus on greater connectivity between existing subregions and

subregional programs.

• the opening up of Myanmar provides us with a golden

opportunity to connect South Asia with Southeast Asia and the GMS region. There

are also possibilities to boost connectivity between South Asia and Central Asia.

Source: Gross (2013), ADB

R. Dy, UA&P, 2014

Asian Connectivity

An integrated transport approach - linking roads,

rail, and sea routes to cover the vast distances as well as

diverse geography within Asia is absolutely critical.

At the same time, resource requirements for regional connectivity are large,

and immediate cost recovery may not always be feasible, calling for a judicious

combination of various sources of financing.

Source: Gross (2013), ADB

R. Dy, UA&P, 2014

Greater Mekong Subregion Transport

Connectivity

http://media.economist.com/images/

R. Dy, UA&P, 2014

Pushing for the Roll-on, Roll-off (RORO) routes

• Davao, General Santos City, and Bitung in Indonesia

• Brooke's Point, Palawan and Kudat, Sabah.

Source: Annual BIMP-EAGA Strategic Planning Meeting, February 2014, Davao City

Brunei Darussalam-Indonesia-Malaysia-Philippines

East ASEAN Growth Area (BIMP-EAGA)

BIMP EAGA RO-RO Network

Source: Mindanao Development Authority, Davao City

R. Dy, UA&P, 2014

PHILIPPINES: Traffic congestion

Fix traffic or the Philippines can lose US$140 million daily by

2030 from US$55 million in 2012 – JICA

www.rappler.com/business/economy-watch/

R. Dy, UA&P, 2014

PHILIPPINES: High cost of domestic shipping

• The Philippine Institute of Development Studies, a government think

tank, recommends a serious review of lifting cabotage

restrictions.

• Joint Foreign Chambers of Commerce in the Philippines: “It is

cheaper to send a container from Manila to Cagayan de

Oro via Hong Kong or Kaohsiung than to simply transport the

cargo directly from Manila to Cagayan de Oro.”

• A 40-footer container shipping from Manila to Cagayan de Oro costs

$1,860, more expensive than foreign transshipment via Hong Kong at $1,144

and via Kaohsiung at $1,044. A local trader could save approximately 43

percent in shipping costs via transshipment.

R. Dy, UA&P, 2014

PHILIPPINES: Transport Infrastructure

Road density is on par with comparable

countries in the region but road quality compares less

well. The result is that the Philippines suffers from higher

land transportation costs and a higher rate of accidents

compared to other parts of the East Asia region

Poor road quality results in intercity freight rates that

are 50 percent higher than in Thailand or Vietnam. The

poor road surface translates into higher vehicle operating

costs per kilometer.

Source: Philippines. Transport for Growth: An Institutional Assessment of Transport Infrastructure. Report No. 47281-PH. World Bank. February 24, 2009

R. Dy, UA&P, 2014

• Assessments of the overall transport infrastructure

network indicate that the quality is low and

cost is high compared to other

countries. The Philippines ranks low in logistics

index

Source: Philippines. Transport for Growth: An Institutional Assessment of Transport Infrastructure. Report No. 47281-PH. World Bank. February 24, 2009

PHILIPPINES: Transport Infrastructure

R. Dy, UA&P, 2014

INDONESIA: Transport Costs

• Unreliable and expensive road transportation is a constraint.

• Regulatory red-tape and high domestic

transportation costs hampers Indonesia’s trade

competitiveness (Carana, 2004).

• The discrepancy between national and local

regulatory practices. In particular, local governments often

issue permits and licenses and impose user charges that act as barriers to

the transport of goods throughout the country.

Source: The Asia Foundation ( 2008 ). The Cost of Moving Goods: Road Transportation, Regulations and Charges in Indonesia.

R. Dy, UA&P, 2014

INDONESIA: Transport Costs

• Vehicle operating costs in Indonesia are higher than in

other Asian countries, due in part to poor road infrastructure and

mountainous terrain.

• Drivers are liable for various kinds of payments, including:

local user charges; legal and illegal payments at weigh bridges; and

payments to police or preman (criminal organizations).

• User charges are fees set by local governments for

transporting goods and make up almost 50% of total payments along some

routes. Many user charges are in fact illegal and redundant.

Source: The Asia Foundation ( 2008 ). The Cost of Moving Goods: Road Transportation, Regulations and Charges in Indonesia.

R. Dy, UA&P, 2014

Moving Towards Effective Supply Chains

1. Address in-country costs

(a) Port handling

(b) Border controls

(c) Transport –land, air, water

(d) Review legislations (e.g. Cabotage Law)

2. Address cold chain costs

(a) Cost of vehicle fuel

(b) cost of electricity

R. Dy, UA&P, 2014


3. Address infrastructure deficiencies and quality

(a) Sound planning and resource allocation

(b) PPP

(c) Central and local government coordination

4. Promote greater transparency and collaboration among players of the chain

R. Dy, UA&P, 2014

5. Enhance Asian Connectivity

(a) Asia /Greater Mekong/EAGA land connectivity

(b) Bitung-General Santos RO-RO

(c) Brooke's Point, Palawan and Kudat, Sabah RO-RO

6. Tighten food safety and bio security

measures


R. Dy, UA&P, 2014

Conclusions

Logistics efficiency is strongly associated

with supply chain reliability and the predictability of

service delivery for producers and exporters.

Supply chains are only as strong as their

weakest links. They are becoming more and more

complex, often spanning countries while remaining critical to

national competitiveness.

Comprehensive reforms and long-term

commitments from policymakers and private

stakeholders will be essential.

R. Dy, UA&P, 2014

THANK YOU!

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