Sustainability Standards and the Reorganization of Private Label Supply Chains: A Transaction Cost Perspective

Abstract

Private standards are among the main measures that can be implemented to differentiate food production. Retailers have been particularly active in setting food safety and quality systems for the development of their private labels. The purpose of this paper is to identify the effects of introducing measures that guarantee the environmental sustainability of food production on vertical dyadic relations. We focus our attention on the adoption of integrated pest management (IPM) systems that are designed by retailers to support private label products, with the aim of studying how these systems affect the governance structure of transactions between retailer and farmer/processor. Transaction cost analysis is used as theoretical framework to assess changes in vertical coordination after the adoption of an IPM system. Four case studies related to food retailers in Italy were analyzed to identify changes in transaction characteristics, costs, and governance that are related to the adoption of this system. The results show that the introduction of an IPM system leads to an increase of transaction asset specificity (i.e., especially of human and material asset specificity) among the agents of the supply chain, and a decrease of the degree of transaction uncertainty. The variations in transaction characteristics determine changes in transaction costs. These changes lead to new hybrid forms of transaction governance, namely dyadic contracts, and a centralized organization of vertical relationships.

The complexity of collaboration in supply chain networks

“…China) of the world have on the global economy. Although the automotive industry sector has been a typical context to study complex supply chain collaborative relationships particularly for sectors emphasizing incentives such as market access, knowledge transfer, and technology innovation, an investigation on other industry sectors (e.g., food) may add further insight into the complexity (e.g., traceability) of supply chain networks (see, for example, Banterle and Stranieri, 2013;Stranieri et al, 2017). The development of more industry-or region-specific approaches in this research field will allow researchers to identify similarities and discrepancies that might be applicable in a wider industrial or geographical context.…”

Trust to Go Green: An Exploration of Consumer Intentions for Eco-friendly Convenience Food

“…An increase in the eco-friendly voluntary standards adopted by food firms has also become noticeable (Del Giudice, 2018). For some attributes, firms are able to follow specific public standards (for example, for organic produce); for others, they refer mainly to private ones (for example, integrated pest management, where there is no unified and commonly agreed on standard defining what is and what is not integrated agriculture) (Banterle and Stranieri, 2013).…”

Voluntary traceability standards and the role of economic incentives

“…Also individual firm standards are often used by food firms and retailers. In Italy, some big meat processors and food retailers have established their own standards (Banterle and Stranieri, 2013). Retailers apply individual traceability standards especially to their private label supply chains.…”

“…The second group of incentives deals with those motivations related to an efficient management of supply chain in terms of better liabilities distribution, supply chain transparency and better information management (Banterle and Stranieri, 2013;Donnelly et al, 2013;Hu et al, 2013;Resende-Filho and Hurley, 2012;Hall., 2010;Fritz and Schiefer, 2009;Banterle and Stranieri, 2008;Hobbs, 2004). Such incentives, which are internally motivated, occur when firms want to lower transaction costs associated to vertical exchanges.…”