Supply chain performance not profitability at heart of food firms’ voluntary sign-up

By Will Chu

- Last updated on GMT

The BSE scandal, the avian flu, and the recent horsemeat scandal has emphasised the importance of full traceability of the meat supply chain. ©iStock/
The BSE scandal, the avian flu, and the recent horsemeat scandal has emphasised the importance of full traceability of the meat supply chain. ©iStock/

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Motivations for voluntarily implementing food traceability schemes stem not from the need to maximise profits but enhance information, safety and quality management within the supply chain.

A survey of 131 European food firms reveals that if sustainability certification is the outcome firms will actively reorganise relationships and activities to achieve a more integrated supply chain.

On the other hand, firms adopting quality certifications to increase financial performance, means traceability efforts will have a low level of complexity, producing small supply chain reorganisation.

“The results show that most of the motivations related to the adoption of sustainability certifications are statistically linked to the level of traceability complexity implemented,”​ the papers authors claim.

“More precisely, confidence-related and supply chain motivations are positively related to the level of traceability complexity, whereas profitability-related motivations are negatively associated.”

Two angles of implementation

vulnerable supply chain
While certifications are costly, firms tended to adopt them to increase their adaptability to the changing business environment. ©iStock

The authors, based at the University of Milan, suggest two firm strategies when implementing voluntary traceability. They did not state any advantages of one over the other.

“A simple traceability will allow the firm to adapt to changing market conditions and to modify firm marketing objectives to maintain firm profitability.”

“Firms implementing complex traceability implies a reorganisation of supply chain relationships and activities.

“In this case, firms will implement traceability capable of enhancing the information, safety and quality management within the food supply chain.”

The paper's practical implications sheds some much-needed light on the assortment of traceability schemes.

In the EU, food traceability is mandatory. Regulation 178/2002 demands firms trace suppliers, customers and assess the quantity of product.

For meat products, regulations 1760/2000 and 1337/2013 are more detailed. The unique identification of goods makes it possible to determine the complete history of meat products.

Complementing these mandatory laws, a wide range of voluntary traceability schemes exist that firms adopt to guarantee safety and/or quality characteristics of food products.

These schemes differ in their levels of complexity depending on firm motivation, finances and sector requirements.

Study methods

The team conducted a survey through an ad hoc questionnaire during January to June of 2015, questioning 131 food firms based in Italy.  

From the sample survey, 88% represented seven sectors: fruit and vegetable (28%), wine (18%), confectionery (12%), backed products (11%), processed seafood (9%), processed meat (5%) and dairy (5%). 

The questionnaire focused on the RSPO certification (Roundtable on Sustainable Palm Oil), Fair Trade, Friend of the Sea, BRC (British Retailing Consortium), and FSSC22000 (Food Safety System Certification Scheme).

Questions related to the environmental and social food-related aspects of certification, including the management of natural resources, effective energy use in food processing, the reduction of food waste, and the minimisation of environmental costs linked to the transport of agri-food products.

Other issues included the maintenance of food safety and quality, the provision of equal opportunities for workers, and the adoption of supply chain practices that safeguard the conditions of small producers and their survival in the market.

Small firm agility

Results found that the higher the probability is of adopting sustainability certifications for the enhancement of stakeholder confidence, the higher the probability was of implementing a higher level of traceability complexity.

A negative and significant relationship between profitability-related motivations and the level of traceability complexity implemented was also noted.

Further results demonstrated a positive relationship between supply chain motivations and the level of traceability complexity implemented.

“Indeed, when firms want to reduce unfair practices and opportunistic behaviour of economic agents, they will adopt certifications aimed at efficiently managing these events through complex traceability rules,”​ the authors commented.

Small firms were highlighted as being more likely to implement a high level of traceability complexity.

The team put forward the idea that these firms generally had a low bargaining power within the supply chain thus adopting rules and procedures that protected them from the opportunistic behaviour of economic agents.

“Complex traceability implies a higher transparency and, thus, a higher probability of conducting transactions fairly and defending firm reputation towards retailers and consumers.”

Source: Food Control

Published online ahead of print:

“Do motivations affect different voluntary traceability schemes? An empirical analysis among food manufacturers.”

Authors: Stefanella Stranieri, Alessia Cavaliere, Alessandro Banterle

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