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The perishable supply chain management: The clients’

expectation factors at the chicken supply chain

Annibal Scavarda (annibal@esp.puc-rio.br)


Federal University of the State of Rio de Janeiro- Brazil

Gustavo Schiavo (gustavo.schiavo@bol.com.br)


University of Vale do Rio dos Sinos

Andre Korzenowski (akorzenowski@unisinos.br)


University of Vale do Rio dos Sinos

Abstract
This research develops a model for the implementation of the perishable supply chain
management based on the clients’ expectation factors of the products. This study analyzes in
special the processes of the chicken supply chain.

Keywords: perishables, supply chain management, expectation

Introduction
Companies are going through a revolution of new strategies and operational technologies
implementation as an answer of the demand of the 21st century. In this way, companies have to
overcome the clients’ satisfaction challenges that were waiting for high quality products with low
prices. In this way, companies must be responsive to the clients’ demands. To deal with these
demands, according to Gunasekaran et al (2008), companies are exploring the management
supply chain concepts as a solution to improve their profits, providing high quality low prices
items. Supply chain management consists of all activities associated with items flow and
transformation, since the raw-material until the costumer (Handfield and Nichols, 1999; Shepherd
and Günter, 2005).
Customer’s orientation emphases are regularly cited as catalysts for the high interest in
supply chain management (Gunasekaran et al., 2001; Webster, 2002). The supply chain efficient
management is treated as a key to build a sustainable competitive advantage trough the
improvement of the inter and intra relationships of the companies (Ellinger, 2000).
The literature highlights the challenge of the perishable supply chain management where
the product value deteriorates over time in the supply chain. The decrease of product prices due
decrease of quality levels over time makes conventional supply chain management strategies
inappropriate (Blackburn and Scudder, 2009). The food industry, in overall, and the beef
industry, in particular, have observed great changes in their structures. Some examples are the
market globalization, the technology improvement, smaller lifetime of products, and
diversification of costumer demand (Lindgreen and Hingley, 2003; Fattahiet al., 2013).

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On the chicken industry, as the best knowledge of the authors, there is not a study that
points out a strategy for de supply chain management, even for products with more complex
value time profile (Blackburn and Scudder, 2009). The contribution of this paper is to present the
characteristics of this industry and related it with the traditional supply chain management
strategies applied to the manufacturing industries. Results of the discussion highlight that the best
strategy to be adopted for perishable industry is a mix of lean and agile strategies, as defined
conceptually by Bruce et al. (2004).

Supply chain management applied on manufacturing

Supply chain management can improve the delivery of goods, services, and related information
from supplier to customer. This type of management is concerned with the effectiveness of
dealing with the demands of the end customer, i.e., the parties involved in providing product as a
whole (Cooper et al., 1997). The supply chain consists of different levels of companies that
influence each other and affect the performance of the other, i.e., suppliers, manufacturers,
distributors and customers (Bigliardi and Bottani, 2010). One of the most significant changes in
the paradigm of management and business is that companies no longer compete as autonomous
entities but compete as supply chains (Lambert et al., 1998). With the increasing reduction of
vertical business model, the supply chain has become a strategic step towards the creation of
value (Gottfredson et al., 2005).
A range of benefits have been attributed to the supply chain management, including
reduced costs, increased market share and sales as well as strong relationships with customers
(Ferguson, 2000; Shepherd and Günter, 2005). The management of the supply chain is complex
and challenging due to a number of factors, such as variety of products, products with smaller life
cycles and increased use of suppliers or process steps outside national borders, for example (Lee,
2002). The choice of supply strategy depends on factors that are characteristics for the market in
which the product is inserted and the type of inputs used. A strategy in the supply chain which is
not suitable to the product characteristics, market or inputs is bound to fail. To outline a supply
chain strategy, it is necessary to understand the sources of uncertainty and explore ways to reduce
these uncertainties (Lee, 2002).
For many products, a decision on the supply chain strategy involves a choice between
responsiveness and efficiency. The appropriate choice depends on how the product value changes
over time, the time interval between production, and distribution to the client (Blackburn and
Scudder, 2009). An emerging body of literature provides a framework that identifies three types
of supply chain strategies: lean strategy, agile strategy, and leagile strategy based on in-depth
case studies.
The main objective of a lean supply chain strategy is to reduce the cost and increase
efficiency by eliminating waste in intra-organizational and inter-organizational processes. Lean
supply chains are best combined with a relatively stable environment. In contrast, the goal of an
agile supply chain strategy is to provide products to the customer quickly and with unique
characteristics into the market in order to maintain a competitive advantage in a rapidly changing
environment, based on speed, flexibility, pro-activity innovation, quality, and profitability (Qi et
al. 2009).
While most authors focus on one of these two types of supply chain strategy, Bruce et al.
(2004) identified a combination strategy called leagile. Leagile believes that lean and agile
approaches will be combined at a point of dissociation for optimal management of the supply
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chain (Bruce et al., 2004). The leagile strategy can operate profitably or in a lean way in the
supply chain and responsibly to volatility or agile as the market needs (Bruce et al., 2004).
Although authors have identified this approach and present some case studies, it is necessary to
highlight that leagile strategy is likely a challenging due to the need to mix two different styles of
management that sometimes are opposing each other (Qi et al., 2009).

Supply chain management applied on perishables

The challenge for companies in managing the supply chain of perishable foods is that the value of
the product deteriorates significantly over time at rates that are highly dependent on the
environment (Blackburn and Scudder, 2009). According to these authors, temperature and
humidity are key factors in this process.
An additional latent concern about food production and distribution systems around the
world is that they must to be more reliable than manufactory traditional systems. Supply chain of
perishables is more susceptible to economic chocks, environmental changes, or even to
management errors supported by lack of knowledge (Evans, 2009). The literature had indicated
that in the future food system will have to joint four major characteristics: resilience,
sustainability, competitiveness, and ability to manage and meet customer expectations (Leat,
2013). Due to diseases related to food ingestion and food production globalization (Nepstad et
al., 2006), costumers had become more conscious of origin and nutritional contents of their own
foods. As a consequence of that, an increase of interest on traceability, freshness, and high quality
patterns of food is demanded. At the same time, productors have expanded products choice in
order to attend costumers’ wishes. The combination of these factors results in more complicated
batch size decisions and increase of transportation costs (Soysal et al., 2012).
Another major concern is that the population is getting continuously older in a not
structured way. This will certainly impact in food security and food availability. According to
Soysal et al. (2012), this is one of the reason of supply chain management becomes an important
issue in the public and corporate diaries. In this view, fresh products as alive seafood, fresh fruits
and vegetables, and also flowers become a difficult operation at high risk levels. Both, producer
and distributor may suffer substantial losses.
Ketzenberg and Ferguson (2006) noted that grocery stores in developed Western
economies may incur losses of up to 15 percent due to damage and deterioration of perishable
products. In less developed countries that lack sophisticated means of products transportation, the
transport of fresh products can cause even greater losses (Cai et al., 2010). Changes in food
retailing over the past four decades have produced a quiet revolution in the status of certain foods
in the diet of Western consumers. In this context, application of the supply chain management
principles for the delivery of a variety of standardized low cost perishable food products for mass
markets is a big deal. One of the most dramatic examples is found in the supply chains of
chicken. Food retailers support the change to high quality white meat, ensuring food and then
positioning it as a central offer. The change in consumption was witnessed in most Western
economies. Chicken was the main meat consumed in the U.S. at 37 kg per person in 2003
according to American Meat Institute (2005). Australia, with less than a tenth of the U.S.
population, reported similar consumption per person (35 kg in 2002-2003) according to ABARE
(2004). Chicken meat began to gain prominence in Western diets in the mid of 70s as the real
price fell quickly and, also, access to this kind of food on the retail stores were expanded.
Although the increase in consumption of chicken meat is well documented, there is not enough
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knowledge about the process by which the agri-food supply chains were configured to create
value in the form of meat products (Insch , 2008).

Manufactory versus Perishables: Challenges on supply chain management

Supply chain management on manufacturing has concerns about which strategy may be best used
on deliveries, services, and information. Now, applications of these concepts in the perishable
food industry are still a challenge. The management of the supply chain in manufacturing
addresses the importance of choosing a strategy focused on the characteristics of the market in
which the product is inserted, as well as characteristics of the product. The way the product
changes value over time and the time interval between production and customer delivery are
relevant factors for the choice of strategy. On supply chain applied to perishable food, products
deteriorate themselves over time in rates highly dependent on temperature and humidity and its
situation might be similar in some aspects in comparison with applications on manufacturing.
Considering the strategies of the supply chain management (lean, agile, and leagile),
decision of which one will be adopted depends on the kind of market, type of product, or
costumer quality demand. The lean strategy is best applied to relatively stable markets and aims
to reduce costs and increase efficiency by eliminating waste in the intra-and inter-organizational
process. The strategy of agile supply chain best meets the most dynamic markets through
flexibility, speed, proactive innovation, quality, and profitability. Although it is challenging to
dominate different strategies and sometimes even conflicting as lean and agile, a combination of
styles is discussed in the literature as possible to operate at a point of dissociation that provides
optimal management of the supply chain.
Resilience, sustainability, competitiveness, and ability to understand and manage
consumers’ expectations are characteristics that guide the food market. To meet the needs of
consumers, the food market shows an expansion in product assortment, which makes the
production design and lot sizes definition more complex. Concern over food security, the
growing interest in traceability, freshness, and quality combined with highly perishable nature of
these products are characteristics that require attention when choosing a strategy for the supply
chain. Comparing the reality of supply chain management in manufacturing and perishable foods,
both lean and agile manufacturing strategies have fundamental characteristics for proper manage
the supply chain in this type of industry.
The industry of slaughtering pigs, chickens, and other small animals, according to data
from the Brazil Ministry of Labor and Employment, has 417 companies only in Southern Brazil
and it is responsible for 123,581 direct jobs. These data, coupled with consumption information
presented in section 3, show that this is an important segment within the Brazilian industry of
food production. Brazilian government also has established rules for these products market.
These rules do not just attempt about lifetime or production specifications, but also conditions of
transportation, origin, and nutritional contents.
Companies in the food industry have to deal with the government requirements, customer
demands, and shareholders interests. Reduce costs and avoid losses in all processes are
fundamental for the success. On the other hand, perishable food companies need to provide
products as fast as they can to maintain their competitive edge advantages, since products are
very susceptible to environmental changes. Note that, as in the leagile strategy for manufactory,
interests must conflict. The particular characteristics of this type of industry make it challenging
to establish a unique way of managing the supply chain in this context.
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Final Remarks

In the context of supply chain management, the main strategies adopted within the framework of
the manufacturing industry were presented. Considering the perishable food industry, the goal is
to identify the main characteristics of both the market and product types. These factors are
generally used when choosing the supply chain management strategy. It was found that increase
in the variety of products and perishable foods characteristics lead supply chain management to
adopting a lean strategy. However, the food market generally requires features overhanging the
interest of managing the supply chain for agile strategy. With the characteristics of the product
and market requirements facing in opposite strategies, the combination of both should be
considered when choosing the strategy.

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