Information structure and coordination in vegetable supply chains

Abstract

The purpose of this study on Nepalese fresh vegetable supply chains is to identify factors that impact on the environment external to these chains, information flows along them, and relationships between actors within them. It identifies the role that information structure plays in chain coordination, and so contributes to the emerging literature on this, while also providing policy insights for the Nepalese government. A theoretical framework was developed by incorporating principles of coordination theory, transaction cost economics and network theory, to postulate relationships between information structure and coordination in a supply chain. Empirical research on four Nepalese vegetable supply chains was conducted using an embedded multiple case study approach. It was found that the environment external to the chains had little influence on information structure and chain coordination. Instead, factors internal to the chain were shown to be more important. The results showed that the four chains could be collapsed into two models. The first model exhibited a relatively complete information structure and strong vertical and horizontal coordination. The second model had a relatively asymmetric information structure, along with weak horizontal and vertical coordination. Hence, the completeness of information structure was positively associated with the degree of coordination, both horizontal and vertical. It was observed that strong horizontal coordination accompanied by complete information structure at the farmers’ level aligns producers in the production and supply of vegetables according to market requirements, assembles vegetables to attract buyers, and disseminates knowledge and experience to increase the efficiency of all members. Similarly, strong vertical coordination in association with a complete information structure from input suppliers to retailers aligns activities and incentives, leads actors towards achieving the chain goal, and increases efficiency in the delivery of produce. One insight to emerge is that the observed relationship between information structure and chain coordination result from an underlying factor. This factor was identified as the benefits that chain actors receive or expect to receive from the information they share and the transactions they conduct with other actors. Profits, assurance in buying and selling and strong buyer-supplier relationships are such benefits, which then drive both the completeness of information structure and the degree of coordination, leading to an association between complete information structures and strong coordination and conversely, less complete information structures and weak coordination. Another insight to emerge is that the completeness of information structure and the degree of coordination in these chains also depends on the role that cooperatives play in sharing information and performing business activities. In particular, the greater is the role of cooperatives in information sharing and in performing business activities, the stronger is the coordination in the chain, and vice versa.