The industrial agricultural sector is one of those that, with greater refinement, needs to generate high capacities for integrating its supply chains, due to the very health and safety characteristics required by its consumers. Its chain extends from genetic processes, through crops, producers, processors, distributors to the final consumer. Understanding the critical characteristics of integrating an agro-industrial supply chain will help us understand the implications of this new way of organizing food production and its distribution system.
The analysis of the roles that each actor of these chains has and how integration should change them, is one of the most important challenges when trying to synchronize the productive chains of this sector, because they are the chains where the greatest cultural differences and technology throughout its journey. Look closely at the way of dimensioning the basic flows in the traditional agro-industrial chain and compare it against an integrated one and try to deduce the differences and the characteristics that would have to be had to go from the traditional to the Integrated one.
Definitely the change is great, the Cultural and technological characteristics change radically, let's briefly see some of the most relevant:
Information flow
The flow of information through a traditional agricultural chain revolves around availability and demand that are reflected in the price offered and that are communicated discreetly, in a one-to-one relationship. Collectively, these are used as signs that hopefully simulate other sectors to provide the products that are needed. With the integrated chains approach, the real demand for the product and the processes must be shared, preferably online, with all the links in the chain, so that they can proactively be able to influence improvement in future performance. and everyone can collaborate when it comes to negative eventualities in the supply.
Important elements of the information flow:
- Accuracy in the messages Strength in the messages that is to say that they are capable of generating action Cost of these messages Guarantee that confidential or very careful information is exposed only to those who need to improve the functionality of the chain
Technological developments that could activate the increased flow of information are possibly some of the most important drivers of change in agricultural supply chains. These include functional advancements and cost reductions for computing technology, remote access, and enhanced network capabilities.
Online weather forecast information is a key tool in crop planning.
Product flow
These characteristics should include:
- Transportation and logistics of the highest quality, necessary to move products within the processes Details of the schedule of this flow to ensure that the product is available at various stages of the process without accumulating excessive inventory and being able to anticipate resources for its orderly and clean handling Link and maintenance of various quality attributes Complete utilization of plant and equipment at all stages of the chain to reduce bottlenecks
At the same time, a major problem in managing product flow in a chain is managing flexibility to accommodate unexpected interruptions or unexpected events. The concepts of statistical process control, inventory management and clean logistics management are critical factors in understanding this dimension of the chain.
It is very important that the flow of the product is always accompanied by the flow of information, you must print the same speed to these two.
Value-creating activities
It is the way in which each link contributes to generate value to the total process of the chain. New relationships in the value chain provide new opportunities for value creation. In the past, it was sufficient to measure added value in terms of physical metrics and efficiency in individual processes. Now, by integrating the chains, there are chain measures and contribution measures that will need to be expanded to assess how much the chain is generating value to its final consumers and to each link. The service / cost relationship of the chain is permanently evaluated and collective corrections are taken to improve performance. An integrated measurement system must be implemented for agro-industrial chains that includes universally accepted metrics, to be able to compare the sector globally.Special emphasis should be given to analyzing the speed of the chain and the cost of using its assets.
Financial flow
In terms of Integration it must be seen as the flow of money through the participants and processes. The recent development of technology for electronic funds transfer has improved the efficiency of money flow. An additional element of this feature is the communication of financial information through the stages or processes and the participants in the chain. Such information is usually proprietary in nature, but must be opened to being shared by all participants. This can be critical to optimize the physical and financial performance of such a chain. The chains as such need to permanently know their financial liquidity for investment planning and unexpected adjustments that always appear in this type of chain. This is where you have to do very strong cultural work.
Incentive systems
These are used to reward development and share risks across the chain. Such systems should include price awards, profit sharing, minimum price arrangements, quality vendor recognition programs, cost sharing arrangements, long-term commitments, and market access. New incentive mechanisms will evolve as chain participants begin to adopt and use new information technology and build new relationships throughout the chain. Many conflicts can be found by using incentive systems that do not adjust to market conditions and result in the inevitable loss of earnings. This will lead chain participants to develop more flexible incentive systems.
Regulation
The integration of the chain requires a regulation / coordination system. Alternative coordination systems should include open market access and various forms of contracting, strategic alliance, joint ventures, franchise arrangements, networks, cooperatives, and direct owners. The decision to use the regulation / coordination system will have a significant impact on who has power and control in the chain and how the risks and rewards are shared.
In the following table I present the level of influence (A = High, M = Medium, B = Low), which each participant in this chain must have in defining the characteristics of its integration.
