Collaborative firms managing perishable products in a complex supply network: an empirical analysis of performance

Abstract

Purpose – This purpose of this study is to provide empirical evidence of how cooperation is related to suppliers’ performance, a relationship that is thought to be affected by the type of customer and the extent to which the market is diversified. It analyzes horticultural exporting firms in southeastern Spain, which are the main suppliers of European markets. Together with their primary customers (large-scale retail companies such as Carrefour, Tesco and Aldi), these firms constitute a complex supply network composed of a variety of agents and sales channels. This network will be studied from the perspective of the supplier–supplier relationship that is critical to their survival. Design/methodology/approach – Starting with a detailed description of Europe’s vegetable supply chain, a hierarchical regression is used with an index of cooperation intensity, moderated by retail sales and market concentration. The authors test the hypotheses using panel data on a set of 118 horticultural marketing firms in southeast Spain for the period 2009-2011. Findings – Cooperation strategies are shown to have positive effects on performance (market creation, promotion, quality, training, joint supply purchases and research ventures). Moreover, the retail channel and market diversification are observed to have a positive effect on the relationship between cooperation and the supplier’s performance. They demonstrate that active cooperation strategies have a greater bearing on performance in those firms whose primary customers are retailers. This circumstance provides evidence of the synergies and benefits that may arise when the supplier integrates the retailer in the supply chain, but which do not arise with other types of customers. Research limitations/implications – Although this study refers to a specific sector (fruits and vegetables) and the statistical results are limited, they provide insights that may assist in understanding how other perishable produce-related industries work: such industries share many common features. Practical implications – A more stable relationship between suppliers and retailers in the perishable produce market will render the supply firm more cooperative, competitive and profitable. Increased performance does not arise from the better conditions and improved sales power offered by the customer but instead from the adaptability of the supplier. Likewise, market diversification drives the supply firm toward a cooperative strategy, making it more profitable and competitive. As a practical norm, market diversification alone will not have positive results on performance unless the firm proves capable of enhancing its capacity for cooperation. Social implications – Proper management of the agricultural produce supply chain has repercussions on all of the members of that chain, although special emphasis should be placed on producers and consumers. The availability of food, its quality and its safety depend on management during the production phase. Along these lines, and more specifically for the consumer, this work is relevant because the sector analyzed accounts for 40 per cent of the vegetables consumed in Europe. Originality/value – This article defends the supplier–supplier relationship as the starting point for the analysis of a supply network. In certain sectors, the suppliers’ ability both to solve their clients’ problems and to be profitable is conditioned on maintaining the network and, therefore, the basic focus must center on analyzing their relationships, always including the customer, who has a direct or indirect influence on those relationships. Previous research has not comprehensively addressed this issue, let alone that of a sector with agile and perishable products in which, due to its nature, decision-making about market destinations and sales channels is the order of the day.

Response of Fresh Food Suppliers to Sustainable Supply Chain Management of Large European Retailers

“…In terms of agricultural products, the chain must make maintaining quality and food safety standards of merchandise a top priority throughout the entire process from seed to fork [19]. With respect to perishables, consumers prefer products that are the freshest and have a reasonable price, which requires careful "fine-tuning" of SCM in terms of production planning and scheduling [13], in addition to coordination-collaboration-communication among companies [7,20]. Kumar et al [21] found that coordination strategies are positively correlated with performance.…”

“…The distribution of agri-food products in Europe is currently undergoing a restructuring process, which affects retailers [6,7]. One of the most prominent changes is the growth of large-scale distribution.…”

“…The modern supply chain of horticultural products has well-defined phases that have been simplified in recent years (Figure 1) [7,13]. In the first phase, consideration should be given to the companies that sell horticultural supplies to growers, given the importance they have acquired in terms of marketing and their dominant presence (e.g., ChemChina, Syngenta and Bayer, and Montsanto).…”

Cooperative Longevity and Sustainable Development in a Family Farming System

“…This situation combined with high debt and low liquidity may raise doubts about the potential resilience of these organizations during prolonged periods of crisis. However, within the fruit and vegetable sector it is quite common for revenues to fall, a fact which constantly exerts stress on companies' results while also increasing competition [36]. This panorama could change as cooperatives start uniting or consolidating more, which has been taking place in recent years, as several second-tier cooperatives now exist which are currently market leaders [37,38].…”

Product-country image and crises in the Spanish horticultural sector: Classification and impact on the market

“…Figure 1 shows the importance of the Spanish horticultural export sector, representing the percentage of the Spanish vegetables exportation to each European country, where Germany is the main destination market (32 %). Consumers purchase these products, 70 % at least (Pérez-Mesa and Galdeano-Gómez, 2015), in commercial establishments from huge distribution chains (e.g., Aldi, Carrefour, Edeka, Tesco). These retailers demand high production quality standards from their producers including, among other things, environmentally sustainable practices, high product quality technical standards, and socially sustainable strategies.…”