Understanding the supply chain and how it works, so you can optimise every “link”, is the key to successful fresh produce marketing.
The process of moving fresh produce from farm to retail shelf is called the fresh produce supply chain, the cold chain (in some cases), or the logistics chain.
Understanding the supply chain is not only for commercial farmers – it applies to anybody who is picking, packing and supplying fruit and vegetables to a market or any other customer.
These two factors are important:
1. The purpose of the supply chain is to get the product from the farm to the final consumer in the shortest time, at the lowest cost and in the best possible condition. Marketing fresh produce is about addressing the challenges of time, handling and temperature. The supply chain does this.
2. Every link in the supply chain will add value to the product, but it will also add a cost. The secret is to make sure that the value is always greater than the cost.
Let’s look at the various “links” in the supply chain and how each adds a value as well as a cost:
- Fresh produce may look good on the tree or in the field, but it has no real value.
- Somebody must pick it to start the value-adding process.
- The picker adds value by careful picking and handling.
- That person has to be paid, and that is the cost.
- Good handling maintains quality, which eventually gets good prices.
- The value, therefore, is more than the cost.
- Bad handling at this point would increase costs and reduce value.
TRANSPORT TO PACK HOUSE
Farm roads are usually bumpy and rough. The tractor and trailer, or bakkie, taking the fruit from field to pack house should travel carefully (handling), but as quickly (time) as possible, to keep bruising or other damage to a minimum, and to get the produce out of the sun (temperature) and under a roof.
The cost is the vehicle and driver. The value comes from quick delivery and careful handling. Slow delivery and bad handling will mean the cost is more than the value.
A pack house could mean anything from packing in the shade of a large tree to a sophisticated facility with all the equipment of a modern pack house.
The principle, however, remains the same: products have to be sorted, cleaned, graded, packed, cooled and stored.
All these processes add a cost and a value to the product, but each is essential to successful marketing and selling of the crop.
- If there are any cold stores on the farm, they will definitely add value because this is where the cooling process starts that will extend shelf life.
- We cannot stop fresh produce decaying, but we can slow down the process through correct cooling.
- This will add more value than cost; bad cooling will add more cost than value.
TRANSPORT TO MARKET (CUSTOMER)
- The most critical element here is time taken, followed by temperature and handling.
- Efficient, fast transport to market is essential.
- Maintaining the correct temperature from the cold stores is essential and so is handling produce carefully during loading and unloading.
The farmer might be using his open bakkie to deliver the produce. It makes no difference – this should be done quickly and carefully and the produce should be kept out of the sun.
The cost of transport is always a critical factor, but if handled properly the value will definitely exceed the cost.
ON THE MARKET
- The facilities and services of the market owners (authority) also add value and cost to the produce.
- If the market offers facilities such as covered parking, good security, easy access, cleanliness and safe handling of the farmer’s money, they all add value collectively.
- The cost is the market dues paid by the farmer.
THE MARKET AGENT
The market agent’s services to the farmer (speedy unloading, careful handling, attractive displays and skillful negotiating skills to get the best price possible) all add value. His cost is the commission the farmer pays, which could be up to 7,5% of the gross value of the sale.
- His agreement to take the produce at a certain price determines its value.
- His capacity to take in quantity helps the market agent to move stock.
- The more stock sold, the better, because the farmer can provide more.
- This cycle of events adds value; the cost is determined by the quantities the buyer can take.
TRANSPORT TO BUYER’S PREMISES
The same principles apply here as for transporting from farm to market.
IN THE SHOP (ON THE RETAIL SHELF)
The fresh produce is being presented to the final consumer for the first time, so value will be added by attractive displays, good promotions, careful handling, good service and maintaining correct temperatures.
These factors all add value, which will be higher than the cost if done correctly.
- Finally, we come to the last, but most important link in the supply chain.
- The consumer adds value simply by buying the product, and so creating demand.
- And if the consumer doesn’t buy, a cost is added through lower sales and more wastage.
Good farmers understand these links in the supply chain and manage their operations in such a way that they capitalise on every single one. They know that quality sells, and this can only be achieved if the supply chain is managed (and used) correctly.
- This article was written by Michael Cordes and first appeared in Farming SA.