Supply-chain Management: Understanding the Concept and Its Implications in Developing Countries

Abstract

During the 1990s, academic and commercial interest in supply-chain management (SCM) in agribusiness rose in Europe and the USA. The driving forces included the trend towards consolidation of organisations (at farm input, farms, processor and supermarket levels), along with government deregulation of agribusiness markets.
Interest was also rising in quality-management systems and food safety, and competition in markets was increasing, associated with global trade in agribusiness products. SCM as a field of study draws contributions from several disciplines including transaction-cost economics, relationship marketing, agency theory and systems studies. This paper analyses the role of SCM in the context of concepts of operational effectiveness and strategy put forward by M. Porter in 1996.
SCM implies managing the relationships between the businesses responsible for the efficient production and supply of agribusiness products from farm level to consumers, to reliably meet consumers’ requirements in terms of quantity, quality and price. In practice, this often includes the management of both horizontal and vertical alliances. Meeting customers’ requirements involves integrated management of the transactions and relationships between firms as well as processes within firms. Managing these relationships provides an opportunity for overtly negotiating the shares between chain members of the value produced within the chain. More importantly, joint planning of collaborative strategies is possible, to grow the shared value. The latter contrasts with the usual conflict between agribusiness suppliers and buyers about their relative shares of the value generated.
Traditional supply chains in developing countries typically involve many players, and are tightly linked with long-standing social structures. As developing countries enter into World Trade Organization arrangements their agricultural industries will be subject to increasing competition in their domestic markets, and have greater incentives to meet global standards in export markets. SCM provides one approach to planning the improvements needed in the management of their agricultural production and marketing systems to meet future challenges.