Food value chain management

Food value chain

management

Mega-trends during the last decades

We need to understand the system in order to fix it.

higher mobility of people

Nowadays we have more choice of products, (people moving around, travelling)

international trade

and products/goods (trade). We have more and investments. That has changed the

business environment. world merchandise exports.

International travel has led to an increase of

technology improvements

On one hand are considered as change enablers (something that makes

it possible for a particular thing to happen or be done). Technologies have made information and

communication easier and quicker (internet & mobile phones). That has led to the development of tracking &

tracing systems (eg. quality assurance).

[RFID it's a new technology, an electronic chip; it's different from a bar code because it’s faster.]

better educated people

On the other hand are driving forces. The number of graduates has increased a lot

in the last decades. Thanks to that consumer awareness and concerns have increased and so the highly-

trained workers. transaction

For all these reasons (transpiration, communication and information processing) costs have

come down.

The economy has assumed a new structure. If in the past there were many big firms, nowadays thanks

to the digitalisation and communication the small firms

adopting the business system are more and more.

As business system we mean “chain”.

- Vertical, from the producer to the consumer;

- Horizontal, at the same level of the supply chain. A

company may do this via internal expansion for eg.

(production networks).

- Geographically located: in the same place.

(Conglomerates means big businesses that produce many

different products (phones, washing machines, computer etc.; Corporations means big companies that

produce a lot of different products but just in one main field eg. Nestlè food).

Supply chain

When we talk about “the good old days” it means when food was produced and consumed locally. People

used to produce their own food and spent a lot of time doing it. Now we have high specialised people who

do it for us and we don't need to worry about it anymore. With the globalisation is more unlikely to know

where the food that we’re eating is coming from.

supply chain

The involves all the different steps to move a product from the manufacturer to the consumer.

It’s a very complex system. We have more elements:

Upstream (towards the source, the producer e.g the farm);

• Downstream (towards the consumer): smart consumers because they choose among all the different

• products, they have a higher education level so they have the chance to choose sensitively (information and

sustainability).

circle economy from nature to nature:

The nowadays we speak about it because the products need to be

produced sustainably. There are issues with waste products (recycling etc.). The food waste is really high, up

to 50% so we need to find ways to change that. We can’t speak just about economy from producer to

consumer anymore, we need to consider the nature\environment as well.

Another mega-trend that we didn't mention before is that most of the people nowadays leave in the city and

not in the countryside anymore. urban non-urban distribution.

We have to distinguish between and In big cities there is a lot of

traffic, congestion (traffic jam) so the deliveries and the quality of the product might be affected by it (we can

use drone and bicycles). For the non-urban distribution the main problem is the long distance We need to find

alternative solution to it.

Theory of supply chain management (SCM)

Companies produce for the costumers so they seek to design business models that meet customer needs

better than competitors. Success depends on the ability to

Design, Make, and Deliver

innovative, high-quality, low-cost products and services that customers demand.

SCM allows companies to focus on their unique skill sets. If we're speaking about a partnership each partner

should do what they can do best.

SCM requires a common understanding of supply chain objectives and individual roles, an ability to work

together, and a willingness to adapt in order to create and deliver the best products and services possible.

→

Focal firm final product, usually in the middle of the

supply chain. From the raw material, after several steps

we get the finished product. After that there’re more steps

because the product needs to reach the consumer.

→

Tier steps, levels.

Supply chain management is the design and management of seamless, value-added processes across

organisational boundaries (involving different companies\business partner) to meet the real needs of the end

customer.

Supply Chain Integration • Internal Process Integration: increase collaboration among

the company’s functional groups.

• Backward Process Integration: collaboration with 1st-tier and

2nd-tier (leading companies) suppliers.

• Process Integration: collaboration with 1st tier and

customers.

• Complete Integration: collaboration from the “suppliers’

supplier to the customers’ customer.”

Internal Value Chain Elements

Executive Management defines company strategy and allocates resources to achieve it.

• Supply Management coordinates the upstream supply base, finding the right suppliers and building the

• right relationships with them.

Operations transforms the inputs acquired from suppliers into more highly valued products.

• Logistics moves and stores materials so they are available when and where they are needed.

• Marketing manages the downstream relationships with customers, identifying their needs and

• communicating to them how the company can meet those needs.

Human Resources designs the systems used to hire, train, and develop the company’s employees.

• Accounting maintains business records that provide information needed to control operations.

• Finance acquires and controls the capital required to operate the business.

• Information Technology builds and maintains the systems needed to capture and communicate information

• among decision makers.

Research and Development (R&D) is responsible for new product design.

•

Local value chain: all the departments are working together in the same country.

All the different departments should work together. The main aim is to satisfy the costumer.

Global value chain: the globalisation has led to it. The different departments of a company are located in

different countries and that’s even more complex.

(eg. Barbie: Clothing in China, Body material in Taiwan, Nylon hair in Japan etc.).

Problems

The goal of supply chain management is to use technology and teamwork (people management) to build

efficient and effective processes that create value for the end customer. The goal is compromised when

processes, value chain elements, and/or companies work toward a local rather than global optimum.

This only works when all the parts want to work together towards the same goal.

Supply Chain Strategy

How the capabilities of other chain members can be used to create value for the end customer.

• How their own strategy and actions impact the ability of the supply chain to create value for the end

• customer.

Rather than “What is our business?” the SC strategist inquires:

What is the overall supply chain’s value proposition?

• How does our company uniquely help the chain deliver on its value proposition?

•

Rather than “How can we do it better than anyone else?” the SC strategist asks:

What valued capabilities do other members of the chain possess?

• How can we bring these complementary competencies together in a way customers value?

• What type of relationships should we maintain with other members of the supply chain?

• Are any customer-valued competencies missing? If so, who is best positioned to develop them?

• How much of the value-added process should we control?

•

Supply chain vs Value chain

The term value chain refers to the process in which businesses receive raw materials, add value to them

through production, manufacturing, and other processes to create a finished product, and then sell the

finished product to consumers. A supply chain represents the steps it takes to get the product or service to

the customer.

While a supply chain involves all parties in fulfilling a customer request and leading to customer satisfaction, a

value chain is a set of interrelated activities a company uses to create a competitive advantage. It focus on

the finance but also innovation and sustainability, to create value together.

Traditional supply chain - supply push

A Push-model Supply Chain is one where projected demand determines what enters the process (for eg.

umbrellas get pushed to retailers a month before the raining season starts). The main purpose of the supply

push chain is to create products and push them through the channel, from the producer to the consumer.

Sustainable value chain - consumer demand pull

In a sustainable world the supply chain needs to be designed from the customer backwards (demand pull)

instead of from the factory outwards (supply push), making it responsive to customer demands while

reducing waste and returns. Customers are the key to success, and businesses should therefore focus on

maximising the value created for their customers. Flow of information and products.

Consumer behaviour

Consumer behaviour is the study of the processes involved when individuals or groups select (institutional

consumer = canteen, restaurants etc.), purchase, use or dispose of products, services, ideas or experiences

to satisfy needs and desires.

When we try to understand consumer behaviour we need to consider:

pre-shopping process (eg. if one of my friend recommend me a product);

• during the shopping behaviour (eg. what catches my attention, my mood);

• post-shopping behaviour the satisfaction of the consumer is very important for your future behaviour (if you

• don’t like a product you won’t buy it never again) but also for people you might tell about it.

Consumption behaviour has consequences on societies (smoking has health consequences, consumption of

meat, plastic, pollution).

We need to consider different perspectives: the consumer’s perspective (individual person), society’s

perspective (how behaviour affect the society) but also the company’s one. social sciences

We want to understand individual behaviour from a neutral point of view, we have different

that study the consumer behaviour from a social focus (society) to an individual focus.

Market segmentation is an important aspect of consumer behaviour.

We have different segments in the market, this means that members are similar to one another in one or more

characteristics and different from members of other segments (age, gender, religion etc.)

There are many tools that help marketers to become more attuned to their consumers:

Relationship marketing – building lifetime relationships and bonds between brands and consumers (Apple:

• phones, computers, watches).

Database marketing – tracking consumers' buying habits by computer and crafting products and

• information tailored specifically to people’s wants and needs.

We need to understand consumer behaviour because we need to understand consumers needs in order to

sell them products.

Consumer behaviour has larger social implications in particular regarding public health, public safety, mobility

and the environmental consequences of consumption.

Nowadays we have special policies that assure that the consumer feels safe, the rights that the consumer

has etc. principles of consumer protection.

In the UE we have ten

consumer society.

Today we live in a It’s a society mostly oriented towards consumption.

Our main concerns and thoughts are oriented towards consumption (what do I need to buy for dinner? What

colour should I buy that pair of shoes?).

Consumer consumption it’s all about ourself, it’s an egoistic point if view. The core of consumer culture is

that consumption goes far beyond solving practical and utilitarian problems. It’s about lifestyle as well.

Consumer society has become a reality when consumption becomes more a matter of cultural meaning and

less a matter of utility. It matters to people what they consume.

Consumption is first and foremost a way of creating meaningful lives in the context of personal identity and

social relationships.

Consumption branding and marketing have become some of the prime reflectors of current cultural values,

norms and social roles.

Economy and cultures of consumption are thus closely intertwined.

Postmodernism involves a process of social change (no more religion or political parties now they’ve been

replaced by social media etc.).

That ha led to social issues because people have to many choices and they can’t make up their mind about

things.

Politics, politicians make politics meanwhile policy makers are in charge to make policies.

The difference between them is that policy is the application of politics through laws. Policies are decisions

that are made and that are already implemented. It’s a result of a political process and we’re sure that they’ve

been implemented well.

The politics of consumption (shopping basket)

The increasing political and moral significance of consumption has given birth to the political consumer, who

‘votes with their shopping baskets in an attempt to influence companies to care for the natural as well as the

human environment, adding issues such as human rights to the set of dimensions that influence purchases.

Eg. We speak about consumer patriotism if we only buy Italian products. When we decide not to buy a

certain product because we have certain ideas and we want to influence politicians (boycott) so that they can

make policies about it.

Purchase issues are all the factors operating at the time of purchase can dramatically influence the

consumer decision-making process. Many factors over and above the quality of the product or service

influence the outcome of an actual transaction.

act of purchase consumer's antecedent state

The is affected by many factors. These include the (e.g. their

mood, time pressure, or disposition towards shopping).

Time is an important resource that often determines how much effort and search will go into a decision.

moods

Our are influenced by the degree of pleasure and arousal a store environment creates. Different

moods ( relaxing, sleepy , exciting etc.) or emotional states that can have an effect on our consumer

behaviour.

Context

The usage context of a product can be a basis for segmentation: consumers look for different product

presence absence of

attributes, depending on the use to which they intend to put their purchase. The or

other people (co-consumers) – and the types of people they are – can also affect a consumer’s decisions.

“The occasion” if I buy something for myself or for someone else.

Time (temporal factors)

Time can influence the shopping process.

- Economic time: time is a resource that must be divided among activities. Consumers try to maximise

satisfaction by allocating time to the appropriate combination of tasks.

- Social time is dependant on culture for eg. (during holidays, special festivities we tend to buy the same

things etc.).

- Psychological time: people likely to be in a consuming mood at some times rather than others (eg. rainy

days).

Shopping orientation

The shopping experience is a spear time activity. The retail areas are made as a place where you go to have

fun and meet people. The shopping might be perceived as a fun experience rather than a task, if you enjoy

the experience the chance for you to get back is higher.

We have different things that make the experience more enjoyable: music, children playgrounds, nice smells,

interior design, car parkings.

Other factor that plays a role for eg. for luxury shops: competent people (wines, cheeses) that give you some

advice.

With increasing competition from non-store alternatives, creating a positive shopping experience has never

Online competition

been more important. may be seen as additional competition for physical shops. Shops

have changed in order to compete with online’s one. In order to compete with online shops, physical shops

have shopping assistant (competence) and they’ve tangible products and products samples.

Types of shoppers (market segmentation)

People are different and they also differ in the way they do\like shopping.

- Economic shopper is a shopper who buy only what he/she needs and write lists before doing it. Rational

and goal-oriented shopper.

- Personalised shoppers get easily influenced and they like getting advice.

- Ethical shopper try to do some good for the society, environment etc. when buying something.

- Recreational shopper is a person who goes shopping for fun.

- Apathetic shopper does not like shopping and sees it as a necessary chore.

- Hate-to-shop shopper.

Shopping mall: retailing as theatre

A retail culture comes from America, indeed in the EU we used to have shops but not so near to ea