Supply Base Relationships in the New Zealand Red Meat Industry

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Supply Base Relationships in the New Zealand Red
Meat Industry

• Brendan Clare, Nicola Shadbolt Janet Reid
• Masse University, New Zealand

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Introduction

• Background
• Supply chain relationships
• Perception Gaps
• Results
• Conclusions

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Background

• Red meat industry exports exceed NZ4.2 billion
  (FOB)
• 80 of production is exported
• Relationships between processors, suppliers
  (farmers) distributors, retailers, consumers are
  of great importance
• Improving supplier relationships is a key
  strategy

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Improving Supplier Relationships to

• Increase efficiency in production and processing
• Enhance product innovation and quality
• BUT a paradox exists..

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Traditionally an adversarial, commodity supply
market
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Many small, fiercely independent, suppliers and
few, large processing companies
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Geographical distance is an issue

• A third tier in the industry has evolved to
  provide local contact
• Livestock Buyers
• Farmer Suppliers Processing Company
• These buyers, often employed by the processors
  are also geographically distant from them

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Livestock Buyers
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Supply Chain Relationships

• A continuum exists from a distrustful arms
  length bid/buy system at one end to vertical
  integration at the other
• To determine where a relationship is on this
  continuum Spekman et al(2000) developed a
  framework made up of eight relationship variables

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Supply Chain Relationships Variables

• Trust
• Commitment
• Symmetry
• Interdependence
• Communication
• Joint problem solving and planning
• Cultural compatibility
• Coordination of work

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Perception Gap

• The view that supply chain relationships are
  generally positive and unproblematic in all
  situations is a far too simplistic and broad an
  assumption to make
• Perception gaps provide both barriers and
  opportunities to the development of closer supply
  chain relationships
• A difference between the actors (in each group)
  perceived level of relationship variables in
  their business dealings with each other.

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Supplier/buyer/company

• Suppliers perceived levels of ALL relationships
  are significantly higher with the buyer than the
  company.
• All parties believe they are giving a better deal
  than they are getting
• Buyers the company perceive they have a better
  relationship with suppliers than is the case
• Suppliers perceive they can easily switch from
  both buyer and company buyers the company do
  not perceive switching to be easy

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Supplier/buyer/company

• suppliers and buyers perceive a closer
  relationship with each other than with the
  company
• the relationships between suppliers and the
  company reside at the lower end of the
  relationship continuum
• Suppliers perceive the quality of information
  information sharing they are getting from both
  the buyer and the company is higher than either
  party perceive they are providing

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Perception Gaps

• Interdependence - the ability to switch to other
  suppliers/buyers/companies the need to maintain
  a relationship to achieve their goals
• Information quality, quantity, depth
  intensity
• Symmetry respect and equity

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Effect of Farm size

• Suppliers from larger farms perceive they are
  closer to their buyers (8 out of 17) than those
  from smaller farms
• There is, however, no difference between their
  ability to switch despite larger farms stating it
  would be hard to establish a similar relationship
  with another buyer
• There was no farm size effect on relationships
  with the company except
• Large farms perceive they could switch company
  more easily than the smaller farms do

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Effect of Length of Time supplied

• Length of time supplied had no effect on the
  suppliers relationship with the buyers except
• The long term (21yrs) suppliers felt they were
  getting a worse deal from their buyers!
• In contrast supplier relationships (12 out of 17)
  with the company improved with time supplied BUT
  it did not effect their ease of switching

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Effect of Type of Stock Supplied

• Sheep beef suppliers had higher perceived buyer
  relationships in most variables than Dairy Beef
  (by-product) suppliers
• In contrast neither group of suppliers had
  closer relationships with the company

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Summary

• there are some perception gaps in all 3 of the
  dyadic relationships in the supply base that may
  be hindering the development, or can assist in
  the improvement, of closer supplier-company
  relationships
• opportunities exist for the company to improve
  the relationship by understanding and resolving
  these perception gaps, despite the structure and
  nature of the industry