UNLOCKING THE COMMERCIAL BENEFITS OF INTEGRATION
Integration an increasing trend
A widely observed feature of the UK food industry over the past decade has been a trend towards more integrated supply chains. This is not to suggest there has been a comprehensive shift away from supply chain relationships based on pure market transactions or that the perceived inequality in UK food chain relationships have faded away. Instead, our view is that the key driver for greater supply chain integration is the building of greater trust between supply chain partners based on generating commercial benefits shared by all those involved.
A range of models and relationships
Food chains examined at the level of individual businesses or products display a wide range of degrees of integration up to highly integrated, collaborative, long lasting partnership relationships. While in many cases pure market transactions still hold sway, most notably upstream at the farmer-first hand processor stage, an increasing number of food companies are taking steps to develop a more collaborative approach to supply chain relationships.
Growing rationale for integration
The rapid increase in global commodity prices in 2007/8 meant that food companies operating in other sectors also began to fret more about the sustainability of their raw material supplies and a number of dedicated supply chains have begun to emerge in other sectors. This includes even the cereal sector which many have traditionally characterised as a classic commodity based market with products best procured through a simple transactional process.
A framework for integration
This article sets out a rationale to explain why food companies are adopting a more integrated approach in the development of their supply chain strategies. It then goes on to outline a framework developed by EFFP that is designed to bring together the three elements we believe control the depth, speed and success of achieving sustainable competitive advantage from buyer-seller relationships of farm products.
Figure 4: An integrating framework
Figure 5: Actions for integration
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