Guest post by Dr. David Bek, Dr. Stella Despoudi, Nora Lanari, Centre for Business in Society
UK shoppers will lavish more than £20 billion on food and drink (Ridler 2016) over the 2017 Festive season. Christmas and New Year is therefore a crucial period for retailers who need to be able to offer a full range of attractively priced commodities that will appeal to their consumers. Unbeknownst to shoppers an incredible amount of work will have been undertaken by retail strategists over the past 12 months to make sure that consumer needs can be met during this frenzied period of activity. Managing seasonal shifts in demand is a core part of modern retail management. Upsurges in demand are not confined to the Christmas period – one of the UK’s largest suppliers of flowers to retailers does twenty-five percent of its business in only 3 individual weeks of the year – prior to each of Valentine’s Day, Mother’s Day and Easter.
So, what are the secrets to the retailers’ success in giving us what we want, when we want it and at a price we will pay?
Meticulous organisation of supply chains is critical in order to meet variable demand in a timely, cost effective way whilst maintaining the highest quality standards. The journey from ‘field to shelf’ is hazardous, there is much scope for things to go wrong – crops can be affected by pests, disease or unseasonal weather conditions, harvesting and processing can be affected by labour shortages at critical times, or there may be delays or mishandling in transit. Retailers want these risks to be minimalised as much as possible and rely on their immediate suppliers to develop effective management systems within their supply chains. One of the strategies deployed by these suppliers is to maintain as much control as possible within their supply chains often via direct ownership or strategic partnership arrangements with growers and other intermediaries. They also seek to do as much business as possible with larger growers. For example, only ten producers from across the world supply 80% of the grapes sold in one of the UK’s leading retailers.
Doing business with a small number of large producers makes good business sense in a number of ways. Time can be invested in developing close relationships and trust. Thus, buyers can clearly communicate their customer’s expectations in terms of quality and growers can share information about projected yields and harvesting times. Such knowledge sharing is crucial for smooth management of supply, which does not just mean that consumers can be kept happy but also that waste can be kept to a minimum – a factor of increasing importance in our increasingly environmentally aware society. Furthermore, growers can be given access to new crop varieties with qualities such a longer shelf-life. Firms, such as the Munoz Group who supply flowers, grapes and citrus into several UK retailers, invest considerable amounts into product innovation.
Interestingly the drive for more integration and consolidation in supply chains is linked to the growing profile of sustainability. Larger producers and suppliers are able to invest in better practices such as integrated pest management, more efficient irrigation systems, use of renewable energies and new crop varieties which are more resource efficient. They are also able to pay for international standards and certifications such as Global G.A.P. (2017) or SMETA (2017), which re-assure retailers that sustainability claims are real. Retailers are increasingly supportive of sustainable practices as they are aware that risks, such as climate change, need to be mitigated otherwise they will struggle to source products in the future.
Marks and Spencer (2017) recently announced the second phase of their sustainability strategy – Plan A 2025 – which sets a range of ambitious targets aiming to tackle social, economic and environmental problems head on. For example: aiming to be ‘a circular business generating zero waste by 2025’ and ensuring that ‘fifty key raw materials (such as tea and fish) come from a sustainable source’. These goals can be more easily achieved in tightly controlled transparent supply chains with smaller numbers of larger production units. Therefore close and interdependent relationships are developing between large producers, UK based suppliers and retailers.
However, the majority of agricultural production across the world is undertaken by smallholders, who are often excluded from involvement in export supply chains as they are unable to meet the high volumes or exacting standards required by many retailers. Some smallholders, such as thousands of Kenyan flower growers (Mwangi 2016) act as flexible ‘out growers’ for bigger producers, helping the latter to meet their orders. However, these small producers are forced to operate in uncertain markets, usually having to accept low prices and lack the capital to invest in their enterprises.
Achieving high levels of sustainability within large retailer supply chains is clearly highly desirable. However, sustainable practices need to be mainstreamed within all agricultural supply systems, regardless of size. So, a significant governance challenge within retailer supply chains is to find ways of drawing in smallholders. Interestingly, Marks and Spencer have declared in Plan A 2025 that by 2019 ‘they will ‘launch a strategy to support growing artisan and smallholder producers in the M&S Food supply chain’. M&S have proven to be pioneers in the sustainability field, so it will be fascinating to see how will draw smaller producers into their supply chains whilst continuing to meet their core business objectives.
GlobalG.A.P. (2017) ‘Putting Food safety and Sustainability on the map’.
Marks and Spencer Group Ltd (2017) ‘Plan A 2025 Commitments’.
Mwangi, N. (2016) ‘Propertied Proletarians: The Kenyan Cut-Flower Industry’.
Ridler, J. (2016) ‘Food sales to reach £20.6 billion over Christmas: IGD’.
SEDEX (2017) ‘SEDEX Members Ethical Trade Audit (SEMTA): Measurement Criteria’.
This blog is part of a short series of Blogs by members of the Sustainable Production and Consumption Cluster in the Centre for Business in Society. These Blogs were inspired by a visit to the Munoz Group facility near Huntingdon, UK. Munoz supply flowers, grapes, citrus, ice cream and juices into a range of UK retailers. Thanks are due to the Munoz team for the insights they provided into the management of retailer supply chains for fresh produce.
Other related blogs (to be published in 2018) include:
- Lisa Ruetgers and Jordan Lazell 2017 Cutting down waste in the journey from field to shelf: questions of sustainability in retailer supply chains.
- Nandu Devi and Stella Despoudi 2017 Keeping it Lean: efficient supply chain management
- Nora Lanari, Stella Despoudi and David Bek 2017 The future of standards and certifications in retailer supply chains.
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