Farming is only one part of the process which gets food onto people’s plates. Agricultural production leads on to packaging, transporting and marketing/selling. There are many places for inefficiencies and wastage. Supply chain management takes a look at all the links in this process.
Dr Tobias Doyer makes the case for co-operation and co-ordination as a way to increase benefits:
- reduced cost through specialisation
- improved synergistic performance
- increased information to support joint planning
- enhanced customer service
- reduced risk and uncertainty
- shared creativity
- improved competitive advantage
Vertical integration is another name given to extending the business to include upstream and downstream activities. Having various assets under one umbrella maximises value in the supply chain.
Certain aspects require advice from legal professionals to avoid what could be seen as uncompetitive behaviour potentially leading to trouble with the Competition Commission.
South Africa is still a net exporter of agricultural products, although a trend is clearly developing that that this agricultural trade surplus is slowly but surely declining. A challenge is going to be to stimulate additional agricultural production, specifically also by smallholder farmers, and to develop models that will include smallholders in modern integrated food chains in a sustainable way.
Source: Dr John Purchase
The farmer’s share of the consumer rand is shrinking. Primary production is the least profitable of all sectors in a value chain. Farmers can share in the profits made upstream through their own farmer-owned businesses. We should do this before we lose more farmers and the total production lands in the hands of a few large companies.
Source: Dr Koos Coetzee
In the past, agriculture has been fragmented, with input suppliers, farmers, beneficiators, marketers, financiers, off takers, and consumers all seeing themselves as separate role players without responsibility for any other element of the value chain.
There is every argument to be made for small scale farmers to form buying and marketing groups.
- They can optimise their input costs and negotiate contracts with off takers. Such groups could operate at a regional rather than national level, and don’t need to be limited to one specific industry.
- South Africa’s geographic diversity means that many regions have a range of climatic conditions that would enable a variety of crops to be produced and then sold collectively to local retailers. In other words, grain, livestock, fruit, and vegetable farmers could work together to negotiate one contract to which they would all be suppliers. The retailers would get the product variety they need to attract consumers, and each farmer within a farming group would benefit from a stable supply contract.
- It may also be easier for the government to grant subsidies to collective farming structures instead of individuals.
- Banks prefer to fund small scale farmers through an umbrella organisation that takes responsibility for the group meeting its contract obligations.
- Having a retailer ring-fencing the bank’s risk by contracting to put the group’s products on its shelves makes such groups even more attractive.
Local retailers, like Walmart and Pick ‘n Pay, are paving the way through sourcing goods locally, directly from farmers. The onus now falls on these small scale farmers to make collaboration at their end of the value chain a success. This means upholding a consistent supply of quality products to retailers.
Source: adapted from the article “Small scale farmers must join forces to cash in on new trend toward local supply, processing and distribution” by Magna Carta Public Relations for Standard Bank.
There is a hotline to speed up government payments to Small Medium and Micro Enterprises (SMMEs). Business enterprises experiencing late payments of more than 30 days can call the hotline number on 0860 766 3729 or fax their details to 012 452 0458 for assistance.
Building a sustainable value chain has to involve all role players within the chain and any interventions at one level will have implications for the other stakeholders in the chain. Therefore, for any strategic interventions or investment to stimulate growth and speed up the transformation of the industry, for example the agri-parks, economic realities have to be taken into consideration with a clear understanding where in the chain the incentives and the investments need to be made.
BFAP Baseline Agricultural Outlook 2016-2025, page 12.
Some agricultural products such as flowers, meat, fruit and vegetables are vulnerable to supply chain disruptions. For contacts, refer to the relevant chapter. Similarly, other chapters which apply include “Risk management and insurance” , “Exporting”, “Marketing” and “Infrastructure and Agro-logistics” chapters.
- Agbiz www.agbiz.co.za
- Agri Inspec www.mpo.co.za/agriinspec Agri Inspec is an investigation agency that renders monitoring services to agricultural and corporate industries, mainly to put a stop to import irregularities.
- Bureau for Food and Agricultural Policy (BFAP) www.bfap.co.za BFAP is “virtual network linking individuals with multi-disciplinary backgrounds to a coordinated research system that informs decision making within the Food System”. Find contact details for the different team members on the website.
- CIPS – The Chartered Institute of Purchasing and Supply www.cips.org/en-ZA
- Consumer Goods Council of South Africa (CGCSA) www.cgcsa.co.za
- Council for Scientific and Industrial Research (CSIR) Tel: 021 888 2614 fevandyk [at] csir.co.za www.csir.co.za
- Industrial Logistic Systems www.ils.co.za
- Marketing Surveys and Statistical Analysis (MSSA) www.mssa-research.co.za
- Stellenbosch University Centre for Supply Chain Management Tel: 021 808 3981 Department of Agricultural Economics Tel: 021 808 4758 http://academic.sun.ac.za/agric_econ/
- Unilever Institute of Strategic Marketing www.unileverinstitute.co.za
- University of Pretoria Department of Agricultural Economics, Extension and Rural Development Tel: 012 420 3251 www.up.ac.za
- University of South Africa (UNISA) Centre for Business Management Tel: 012 352 4170 / 4383 www.unisa.ac.za/cbm BCom in supply chain and operations management. Short courses in supply chain management are also offered.
Websites and publications
- Find “Promoting agricultural global (regional) value chains in Africa” and other discussions on www.tralac.org, website of the Trade Law Centre (tralac).
- Neves, M.F. 2017. Future of The Food Business: The FACTS The IMPACTS The ACTS. 2nd Edition. New Jersey: World Scientific. Visit www.favaneves.org.
- World Bank. 2018. The Future of Food: Maximizing Finance for Development in Agricultural Value Chains. Available at www.worldbank.org/en/topic/agriculture/publication/the-future-of-food-maximizing-finance-for-development-in-agricultural-value-chains
- International Food Policy Research Institute (IFPRI). 2018. Global Food Policy Report 2018.Available at http://ebrary.ifpri.org/utils/getfile/collection/p15738coll2/id/132273/filename/132488.pdf
- The Industrial Policy Action Plans (IPAPs) by the Department of Trade & Industry usually identify aspects of the agri-food value chain for its interventions. Refer to the document which can be found at www.thedti.gov.za.
- Willoughby R & Gore T. 2018, June 21. “Ripe for Change: Ending human suffering in supermarket supply chains”. Oxfam. Available at www.oxfam.org/en/research/ripe-change
- A number of studies into supply chains can be found at www.namc.co.za, website of the National Agricultural Marketing Council (NAMC).
- The Agricultural Commodity Value Profiles series on the Department of Agriculture, Forestry and Fisheries website, www.daff.gov.za, explores the value chains of several agricultural commodities. Find these annual publications under the Directorate Marketing pages. The IPAPs cousin, the Agricultural Policy Action Plan (APAP) also looks at agricultural value chains as a way to effect interventions and improve agriculture’s performance.
- Systems improvements and value-addition is identified as a priority area in the National Agricultural Research and Development Strategy document. This too can be found at www.daff.gov.za.
- Various presentations are given at Agbiz events. Often these can be accessed for months afterwards at www.agbiz.co.za.
- Find the many options at www.bizcommunity.com. These include categories like agriculture and retail. A retail newsletter (which often covers agricultural products) is available too. Write to retailnews [at] bizcommunity.com.
- Commodity associations usually have material and studies relating to their chain.
- Visit www.smartprocurement.co.za which focuses on procurement and supply management.
- Supply Chain Management Research blog – http://scmresearch.org
- Mulligan, G. 2018, July 25. “The husband and wife team streamlining the agri supply chain”. Bizcommunity. Available at http://www.bizcommunity.africa/Article/410/741/179872.html
- Chambers, D. 2018, January 11. “Stanford team lauds Woolworths Farming for the Future programme”. Bizcommunity. Available at www.bizcommunity.com/Article/196/358/172122.html [About evaluating a retailer’s supply chain]
- Purchase, J. 2018, January 12. “Five major trends in South Africa’s agro-food system”. Bizcommunity. Available at www.bizcommunity.com/Article/196/718/172164.html
- Masojada, M. 2018, January 11. “#BizTrends2018: What is shaping grocery retail in South Africa – Part 1”. Bizcommunity. Available at www.bizcommunity.com/Article/196/731/172117.html
- Masojada, M. 2018, January 25. “#BizTrends2018: What is shaping grocery retail in South Africa – Part 2”. Bizcommunity. Available at www.bizcommunity.com/Article/196/731/172706.html
- Mare, F. 2018, February 15. “Food trends could drive production decisions”. BizCommunity. Available at www.bizcommunity.com/Article/196/358/173629.html