supply chain

1. The agricultural market,
value chain and key actors

2. Overview
• Agricultural marketing, the market and the value
chain.
• Supply and demand and the effect on the market.
• Formal and informal markets.
• Key actors in the agricultural value chain.
• Key business development service providers.
• Key regulators in the agricultural value chain.
• Food issues and standards in the agricultural
market.

3. Marketing
The process of identifying, anticipating and
satisfying customer requirements profitably; i.e.
 The right product.
 The right place.
 The right price.
 The right time.

4. Agricultural marketing
Set of business
activities that are
performed in the flow
of products from the
beginning of
agricultural
production into the
hands of consumers.

5. Agricultural marketing elements
 The customer.
 Factors that can be controlled, known as the
marketing mix, are product, price, place
(distribution) and promotion.
 Environmental factors, which cannot be
controlled, are political, economic, legal and
technological factors.
 All activities and services from the farmer to
the consumer.

6. Agricultural marketing elements
 Production planning.
 Growing and harvesting.
 Cleaning, grading and packaging.
 Storage and transport.
 Distribution.
 Advertising.
 Sales.

7. The marketing mix
A set of tactics and
strategies that a company
(or farmer organisation)
uses to promote its
product in a particular
market and that is made
up of the so-called 4Ps of
marketing: product, price,
place and promotion.

8. Agricultural marketing activities
 Production planning.
 Growing and harvesting.
 Cleaning, grading and packaging.
 Storage and transport.
 Distribution.
 Advertising.
 Sales.

9. Marketing plan
A document (plan of
action) that outlines the
current market position
of a company, as well as
the activities involved in
meeting specific
marketing objectives for
a particular period (e.g.
a year).

10. Marketing plan helps farmers to:
 Understand which products are in demand
and will provide a profit.
 Decide on:
• What to plant.
• When to plant.
• How to produce a crop.
• To whom to sell the harvested crop.

11. Market
 The group of consumers or organisations
that:
• Is interested in a particular product.
• Has the resources to buy the product.
• Is allowed by regulations and/or legislation to buy
the product.

12. Agricultural market
The group of
consumers and
organisations that:
• Is interested in a
particular agricultural
product.
• Has the resources to
buy it.
• Is legally allowed to
buy the product.

13. Components of a market
 In order for a market to exist, the following
components have to be present:
• A product that can be bought and sold.
• Buyers and sellers.
• Business relationship between buyers and sellers.
• A particular area, e.g. a region or a country.

14. Levels in a market
 Potential market.
 Available market.
 Qualified available market.
 Target market.
 Penetrated market.

15. Agricultural market vs. market of
manufactured goods
 The agricultural products are perishable.
 Agricultural products are produced and supplied
irregularly or seasonally.
 Most agricultural products are bulky: therefore,
storage and transportation are expensive.
 There is a large degree in variation in the quality of
agricultural products.
 Agricultural products require processing.

16. Agricultural value chain
The goods, services
and processes
involved in an
agricultural product
moving from the
farm to the final
customer
(consumer).

17. Activities: agricultural value chain
 Input supply.
 Farm production.
 Post-harvest handling and processing.
 Technologies of production and handling.
 Grading criteria and facilities.
 Cooling and packing technologies.
 Storage and transport.
 Industrial processing.
 Finance.
 Feedback from markets.

18. Market segmentation
The division of an
overall market into
subsets (segments)
of customers with
common
characteristics.
Market segmentation
can be based on
geographic,
demographic
(population) and
behaviouristic
characteristics.

19. Market supply
The quantity or
amount of a
product (maize,
potatoes,
tomatoes, eggs,
and so on) that
producers can offer
to the market for
sale.
The supply of a
product depends
partly on its price
and on local
conditions.

20. Local conditions and product supply
 Rainfall, drought and access to water.
 Pests and diseases.
 Availability of fertiliser and seeds.
 Poor roads and transport vehicles.
 Poor farmer health and nutrition.
 Pregnancy and child rearing: women
farmers.

21. Market demand
The amount of the
product that
customers are
willing and able to
buy, which partly
depends on the
price.
If the price is low,
more people will want
to buy and each
person may want to
buy more of the
product. If the price
goes up, fewer people
want to buy and each
person will probably
buy a smaller amount.

22. Factors affecting demand
 Customers generally want to buy more:
• Staple foods (e.g. maize or wheat) or major
vegetables (e.g. onions and tomatoes).
• High-quality products.
• Fresh products.
• Scarce items, e.g. first fruits in the season.

23. Supply and demand
Understanding supply and demand helps
farmers to:
 Plan crops – what, when and where.
 Grow a more expensive crop variety to be
sold for more money.
 Grow a more nutritious crop.
 Determine best time to sell their crop.
 Increase crop quality for higher selling price.

24. Agricultural market types
 Informal markets
• Markets that exist
beyond the tax
system and that are
therefore, off
record.
 Formal markets:
• All the businesses,
enterprises and
economic activities
in the agricultural
and food sectors
that are structured,
monitored and
protected by
government and
internationally
recognised
standards.

25. Informal agricultural markets
 Support all types of products produced by
smallholders.
 Have no formal grades and no traceability systems.
 Rarely use standard measures.
 Set prices based on local supply and demand
conditions.
 Offer few barriers to entry.
 Are attractive to smallholder farmers, as they
generally get paid in cash on delivery and have few,
if any, rules and regulations..

26. Informal agricultural market types
 The farmgate (on the farm).
 Roadside sales.
 Village markets.
 Rural assembly markets.
 Sales within the main urban wholesale and
retail markets.

27. Mile 1 in Lagos (Nigeria)
Example of a massive informal market

28. Farmgate markets
Informal markets
in which sales
occur when
farmers sell their
products directly
from the farm to
neighbours or
traders.

29. Informal assembly markets
 Farmers and small local traders regularly
coming together to sell their goods to
larger traders.
 The buyers in assembly markets are
traders, not consumers.

30. Informal wholesale markets
 Markets where
traders (and some
farmers) deliver
produce in bulk.
 Generally found on
the outskirts of
larger towns and
cities.
 Retailers come to
these markets to
buy bulk goods.

31. Informal retail markets
 Markets where consumers and small
businesses buy their daily or weekly supplies
of food.
 It is possible for farmers to sell in bulk
directly to retail markets. To do so, they
must work out a system with the retailer.
 Wholesalers may try to prevent farmers
from selling directly to retailers.

32. Formal agricultural markets
 Offer more consistent pricing methods and
extended seasonal buying.
 Highly competitive.
 Have strict quality standards.
 Meet all levels of food safety regulations.
 Invest in information and communication technology
(ICT).
 Record and share information on prices and
volumes.
 Invest in storage systems.
 Monitor sanitation through the market system.

33. Export markets
 Export markets involve goods being
produced in one location or country and
being sold and consumed in another
country.
 Export trade traditionally included a mix of
food and fibre products, e.g.:
• Coffee Cocoa
• Tea Cotton
• Tropical fruits and nuts

34. Actors in value chain levels
 Level 1: Core value chain actors.
 Level 2: Business development services.
 Level 3: Regulatory agencies.

36. Key value chain actors
 Farmers
 Collectors
 Processors
 Wholesalers
 Retailers
 Consumers

37. Business development services
 People and organisations that support the
production, supply and marketing of goods,
without owning the product involved.
 Operate on the second level in the value
chain, and include:
• Market access support.
• Infrastructure and technology support.
• Input supplies and finance.

38. Key business development
service providers
 Input suppliers.
 Communication services.
 Training and agricultural advisory services.
 Market information services.
 Financial services.
 Research support.

39. Key regulators
The actors/role players and agencies on Level 3
in the value chain that set formal and informal
policies, standards and legal regulations that
govern the way in which the core actors and
business service providers conduct their
businesses and deliver their products or
services.

40. Food safety issues and standards
 Organisations involved in food quality,
handling, processing and distribution:
• United Nations Food and Agriculture Organization
(FAO).
• United States Department of Agriculture (USDA).
• National food laboratories.

41. Problems: food safety
 Foodborne illness.
 Food contaminants.
 Pesticide exposure.

42. Changes: food production,
handling, processing and quality
 Inspection of domestic products, imports
and exports.
 Conducting risk assessments.
 Educating the public about the importance
of food safety.

43. GLOBALG.A.P.
The world's leading
farm assurance
programme,
translating consumer
requirements into
good agricultural
practice in various
countries.

44. Farmer segmentation
 Bill Vorley identified the following three
farmer segments:
• Rural World 1: Globally competitive farmers.
• Rural World 2: Locally orientated farmers with
access to land and multiple enterprises.
• Rural World 3: Farmers with fragile livelihoods,
limited access to resources.

45. Types of extension agents
 National government agricultural extension
agents.
 NGO agricultural extension agents.
 Lead farmers and community based agents.
 Volunteer agents and mobilisers.
 Commission agents.
 Fee-based agents.
 Private sector field agents;
 Partnerships.

46. Market linkage methods

47. Overview
 the key skills needed to run a farming
enterprise, including:
• Changing rural communities.
• Marketing strategies used by smallholder farmers.
• Ways in which extension agents can help farmers to
understand their market options.
• Basic concepts I value chains and market linkage;
• The use of value chain methods for market linkage.

48. Modern rural communities
 Are varied and
complex in
operations.
 Have diverse
sources of income.
 Seek alternative
options for learning,
generating business
opportunities and
improving the lives
of family members.

49. Marketing strategies and approaches
 Opportunistic market sales.
 Informal sales agreements.
 Contract farming and marketing.
 Vertical integration.
 Certification schemes.
 Inclusive business models for sustainable
trading relationships.
 Shifting from production to market chain
approaches.

50. Terminology
 Market chain: A set of linkages between
actors with no binding or sought-after formal or
informal relationships.
 Supply chain: A market chain that supplies
a particular customer, meeting their particular
product specifications and procedures.
 Value chain: A specific type of supply chain
in which actors support one another, so that
they can increase their overall efficiency and
competitiveness.

52. Key steps: value chain approach
 Target products and locations for development.
 Analyse the market.
 Select partners.
 Identify and organise farmers.
 Prioritise investments along the chain.
 Provide farm level and chain actor support.
 Business development services and financial
services.
 Policy review and analysis.
 Chain wide support.

53. Importance: value chain approach
 End markets and levels in the value chain.
 Power dynamics and governance.
 Quality relationships between actors in the
value chain.

54. 54
Logistics and Supply-Chain
Management

55. 55
Learning Objectives
 To understand the escalating importance
of logistics and supply-chain management
as crucial tools for competitiveness.
 To learn about materials management and
physical distribution.
 To learn why international logistics is more
complex than domestic logistics.
 To see how the transportation infrastructure in
host countries often dictates the options open to the
manager.
 To learn why international inventory
management is crucial for success.

56. 56
International Logistics
International logistics is the
design and management of a
system that controls the forward
and reverse flow of materials,
services, and information into,
through, and out of the international
corporation.

57. 57
International Logistics
(cont.)
 Through the implementation of international
logistics, the firm can implement cost-saving
programs such as just-in-time (JIT), electronic
data interchange (EDI), and early supplier
involvement (ESI).
 The two phases of the movement of materials
include:
• materials management, or the timely movement of
materials, parts, and supplies.
• physical distribution, or the movement of the firm’s
physical product to its customers.

58. 58
Supply-Chain Management
 Supply-chain management is the
integration of business processes from
end user through original suppliers, that
provide products, services, and
information that add value for customers.
• Supply-chain management connects a company’s
supply side with its demand side.
• It opens up supplier relationships for companies
outside of the buyer’s domestic market.

59. 59
Transportation Infrastructure
 A firm’s logistics platform is determined by a
location’s ease and convenience of market reach
under favorable cost circumstances.
 The public sector’s investment priorities,
safety regulations, tax incentives, and transport
policies can have major effects on the logistics
decisions of firms.
 The logistics manager must learn about
existing and planned infrastructures abroad and
at home and factor them into the firm’s strategy.

60. 60
Considerations for Selecting
a Mode of Transport
Predictability
Transit Time
Cost Non-economic
Factors

61. 61
International Inventory
Issues
 Inventories tie up a major portion of
corporate funds, therefore proper inventory
policies should be a major concern to the
international logistician.
 Just-in-time inventory policies minimize the
volume of inventory by making it available only
when needed.
 The purpose of establishing inventory systems
are:
• to maintain product movement in the delivery
pipeline
• to have a cushion to absorb demand fluctuations

62. 62
Three Factors that Decide the
Level of Inventory
Order Cycle Time
Desired Customer
Service Levels
Use of Inventories as
a Strategic Tool

63. 63
International Packaging
Issues
 Packaging is instrumental in getting the merchandise
to the destination in a safe, presentable condition.
 Because of the added stress of international
shipping, packaging that is adequate for domestic
shipping may be inadequate for international shipping.
 Packaging considerations that should be taken into
account are environmental conditions and weight.
 One solution to the packaging problem has been the
development of inter-modal containers.
 Cost attention must be paid to international
packaging.

64. 64
Storage Facilities
 A stationary period is involved when merchandise
becomes inventory stored in warehouses.
 The location decision addresses how many
distribution centers to have and where to locate them.
 Storage facilities abroad can differ in availability
and quality.
 The logistician should analyze international product
sales and then rank order products according to
warehousing needs.

65. 65
Special Trade Zones
 Foreign trade zones are areas
where foreign goods may be held or
processed and then re-exported without
incurring duties.
 Trade zones can be useful as
transshipment points to reduce logistics
cost and redesign marketing
approaches.
 Governments and firms benefit from
foreign trade zones.

66. 66
Export Processing Zones and
Economic Zones
 In export processing zones, special rules apply
that are different in other regions of the country.
 These zones usually provide tax-free and duty-free
treatment for production facilities whose output is
destined abroad.
 The maquiladoras of Mexico are one example of a
program that permits firms to take advantage of sharp
differentials in labor costs.
 Through the creation of special economic zones,
the Chinese government has attracted many foreign
investors bringing in millions of dollars.

67. 67
Centralized Logistics
Management
 In international logistics, the existence of a
headquarters staff that retains decision-making
power over logistics is important.
 To avoid internal problems, both
headquarters staff and local management
should report to one person.
 This individual can contribute an objective
view when inevitable conflicts arise in
international logistics coordination.

68. 68
Decentralized Logistics
Management
 When a firm serves many diverse
international markets, total centralization might
leave the firm unresponsive to local adaptation
needs.
 If each subsidiary is made a profit center in
itself, each one carries the full responsibility for
its performance.
 Once products are within a specific market,
increased input from local logistics operations
should be expected and encouraged.

69. 69
Outsourcing Logistics
Services
 The systematic outsourcing of
logistics capabilities is a third option.
 By collaborating with transportation
firms, private warehouses, or other
specialists, corporate resources can be
concentrated on the firm’s core
product.
 One-stop logistics allows shippers
to buy all the transportation modes
and functional services from a single
carrier.

70. 70
The Supply Chain and the
Internet
 Because of the internet, firms are able to
conduct many more global comparisons among
suppliers and select from a wider variety of
choices.
 When customers have the ability to access a
company through the internet, the company
must be prepared for 24-hour order-taking and
customer service.
 For all countries, but particularly in
developing nations, the issue of universal access
to the internet is crucial.

71. 71
Logistics and Security
 After the terrorist attacks of 2001, companies
have to deal with the fact that the pace of
international transactions has slowed down and
that formerly routine steps will now take longer.
 Logistics systems and modern transportation
systems are often the targets of attacks.
 The need to institute new safeguards for
international shipments will affect the ability of
firms to efficiently plan their international
shipments.

72. 72
Logistics and the
Environment
 Since environmental laws and regulations
differ across the globe, the firm’s efforts need to
be responsive to a wide variety of requirements.
 Reverse distribution systems are
instrumental in ensuring that the firm not only
delivers the product to the market, but also can
retrieve it from the market for subsequent use,
recycling, or disposal.
 Companies need to learn how to
simultaneously achieve environmental and
economic goals.

73. Nigeria exports
 Levels
 Destinations
 Products
 Export Potential Map
 Search for by country Nigeria