The co-ordination of agribusiness chains: a supply chain management approach

Abstract

The process of globalisation of markets has led to important changes in agribusiness, with customers demanding products with specific characteristics and quality, and firms having to adopt new ways to do business to satisfy customers and cope with increasing competition. This research aims to understand the factors that affect chain co-ordination, with particular attention to the role of the management of product specifications in the co-ordination of agricultural supply chains. Five fresh meat New Zealand chains were the focus of multiple case study research, which used a chain-level (multi-dyadic) model, integrating strategic, economic and social-political distribution channel paradigms in a broad Supply Chain Management framework. The results show that chains use different strategies and co-ordination to deliver the desired product specifications, and that the product specifications themselves influence chain coordination through the co-ordination differential that these specifications imply. In this context, the term "chain co-ordination differential" refers to the amount of effort that firms engage in to reach their goals, which may be related to the delivery of differentiated products and or low production costs. Larger co-ordination differentials (resulting from greater effort) were related to high degrees of chain co-ordination and vice-versa. Therefore, tight product specifications demanded by customers do not necessarily lead to a high degree of co-ordination, unless the achievement of these tight specifications leads to a large co-ordination differential. The coordination differential concept also revealed the co-existence of different kinds of inter-firm relationships even in the highly co-ordinated chains. The type of inter-firm relationship (i.e. the degree of inter-firm co-ordination) is related to the magnitude of the co-ordination differential at the different dyads along the chain. In summary, the research showed that the magnitude of the co-ordination differential defined the degree of co-ordination at chain and dyadic level. The co-ordination differential is influenced by a firm's goals. However, even when chain firms establish ambitious strategic goals, the magnitude of the co-ordination differential may not necessarily be large, since it also depends on chain, industry and environment factors.