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Microsoft PowerPoint - Supply of quality and safe tropical ...

  1. 1. Supply of Quality and Safe Tropical Fruits Through Efficient Supply Chain TFNet Azizi Meor Ngah Chief Executive Officer Malaysian Agrifood Corporation (MAFC), Malaysia 1
  2. 2. Global trends Push from EU • Market liberalization • Freshness • Trade restructuring • Better quality • Safety assurance • New shopping “lifestyles” • Traceability • Transparency • Increasing power of retailers • “Value for money” • Streamlined supply chains ASEAN countries to follow?
  3. 3. MAFC and Its Mission • A Supply Chain Management Company established in June 2006 with immediate focus at Malaysia’s middle chain (midstream activities) • Catalyzing production by reorganizing and rationalizing the supply side and midstream activities that includes post harvest, value addition and cold chain logistics management, distribution and marketing Mission : “ to shape Malaysia’s food supply chain management, distribution and marketing system towards global standards in safety, quality and sustainability ” In short: MAFC is a commercial outfit trying to realize social outcomes in the pursuit of economic, environmental and social goals 3
  4. 4. Current Value and Trade Flow of FFV in Malaysia and the Channels of Distribution (US 1 billion / year est.)…cartel controlled WHOLESALERS (WHOLESALING ACTIVITIES ONLY) 65% Source: FAMA 2004 5
  5. 5. Status of FFV Trade in Malaysia: Imbalanced Development Trend in Restructuring the Agri Food Chain ………and its implications on the small producers Small farmers :- Quality, cost, services (grading, packaging) & scale imports Small farmers :- Logistics, marketing risks, services and complaints Upstream Midstream Downstream SLOW RESTRUCTURING BASIC KNOWLEDGE IN POST PRESSURE ON OF FARMING CULTURE HARVEST TECHNOLOGY AND RESTRUCTURING OF MANAGEMENT • Slow to adopt GAP DEMAND SIDE requirements • No leadership in PH skills • Market liberalization (WTO) • Delayed in the • Less developed marketing • Changing dynamics in consumer development of national infrastructure for consolidation taste and preferences GAP to protect local and value adding producers and consumers • Enforcement of food safety and • Cold chain integrity and shelf life traceability • Government intervention in management is still undeveloped the food chain is largely • Modernization of food • Very few logistics operators in focused on upstream processing and retailing FFV with HACCP & GMP • Few success stories in certification • The new lifestyle shopping at creating a new breed of MNC food companies and the modern farmers supermarkets 6
  6. 6. Risk Management Profile at MAFC Costs of Purchasing of Delayed technical Risks in farmgate prices land & Viability settlement barriers or with ex-CPPC or retail of CEF by Retailers market access prices Seeds and Fertilizers/ Farmgate Post harvest Delivery Retailers Exporters seedlings Chemicals Losses losses defects standards discount Seed costs, supply & viability percentage Suitability of Contract Shrinkage & Branding seeds and farming risks pilferage at Risks of reneging Exchange CCs & R&D cost Marketing of produce CPPCs Cost vs with cash – Contract Benefits Contract risks Farms
  7. 7. The new Malaysian supply chain Large variety of Small variety of agriculture agriculture produce, in small produce, in large volume volume / farms Fresh produce PRODUCTION Fresh produce are are processed processed into into limited variety of product product types in PRODUCTS types in smaller large volume volume (more value added Products are products from raw distributed in materials) DISTRIBUTION small volume at various Products are different distributed in large channels of the volume at fewer but market larger channels of the market TRADITIONAL FRAMEWORK NEW FRAMEWORK TRANSFORMATION Source: FAMA / Innovation Assoc. 2004
  8. 8. SUPPLY CHAIN NETWORK DESIGN – HYPERMARKETS & SUPERMARKETS • Sources of supply to be closest to where the markets are – major Alor Setar / Sg. Petani - 3 towns are in West Coast. Penang & Prai - 9 K.Terengganu - 2 • Deliver direct from farms to customer, if possible. CPPC may need bigger storage space instead Ipoh - 4 of storing at DC • Sourcing & supply strategy – Major Kuantan - 4 Clustering to maximise lorry load & markets reduce SC cost • Get contract farmers to plant what Klang Valley - 67 the market requires Other Johore • Produce can be sourced from towns - 5 Seremban - 6 places far away from the market only if the margin is good Malacca - 4 • At major towns, Cross Dock Points (CDP) with cold rooms can be set- Johor Bahru - 10 up & use for temporary storage
  9. 9. MAFC’s Integrated support services to fill the Knowledge Gaps and Marketing Intelligence for inclusive market development Investments Upstream: Investments Midstream: Investments Own production: • Hard infrastructure • 3- compartment 40 • Breeding programme development – CPPCs, footer reefer trucks • Fertigation technology ROs, DCs • Peninsular-wide • POC on greenhouse • Soft Infrastructure – logistics backbone farming / CEF processes, procedures • Dedicated FFV and SOPs, HACCP ‘pipelines’ Upstream Midstream Downstream (POC) (better value capture) (product differentiation) Services: Services: Value Adding Services: • Unbroken cool and cold chain • Extension services & Training • Cold chain logistics services • Feasibility studies for funding/ • One touch system for MNC • Low inventory management financing Retailers • Branding – brand behind • Buy-back arrangement (B2B) • Cross docking facilities brands and own brand • Increase productivity and • Nationwide Warehouse • Market access - local & export income and cold room services • Market intelligence and • First mile transport to CPPC • Consolidation, sorting, Mission Control Room • Good Agriculture practices grading, packaging and services for forward and (GAP) & Food Safety labeling backward linkages 10
  10. 10. MAFC’S VALUE CHAIN MANAGEMENT UPSTREAM MIDSTREAM DOWNSTREAM MAFC FARM • Post-Harvest Management • Branding OUTPUT • Aggregating, Grading, • Product Differentiation Packing, Packaging • Product & Service CONTRACT FARMING • Value-adding Branding • Cold Chain Integrity • Quality & Safe Food OPEN SOURCING FROM CERTIFIED FARMS • Marketing – Local & Int’l • ENABLERS • Collaboration with Chain • Controlled Environment Partners (MNC-Retailers] Farming (CEF) • Contract Farming (CF) • ENABLERS • Corporate Contract • Collection Centres [CC] • ENABLERS Farming (CCF) • Consolidation Packaging & • Hypermarkets/ • Processing Centres [CPPC] • Supermarkets • GAP, SALM Compliance • Distribution Centre [ DC] • Food Service Sector • Cold Chain Logistics • Collaboration with Chain • Institutional Markets Partners (DOA-TKPMs, • HACCP, GlobalGAP • Exports FAMA-Contract Farms • Compliance Food Safety, Traceability, ICT, R&D
  11. 11. MAFC’s role in sourcing, value adding, distribution through the building of alliances as in inclusive market development 1. MAFC’s own farms and out grower crops to retailers and food Companies B2B Model 2. MAFC’s anchor tenant to Government cluster farms to Retail gate B2B Model 3. MAFC sourcing from private farms and plantation houses to retail gate B2B Model 4. MAFC’s own flagship crop - new breed papaya ISE B2C Model 12
  12. 12. Finally, a snapshot of a typical MAFC’s Dedicated Crop Commodities ‘Pipeline’ with focus at middle chain control or the ‘Yellow Box’ R&D Inputs, land, production Inputs, farmers, technology, capital, fertigation equipments & machinery GAP Middle Chain Management’ Retailers The Yellow Box Dedicated commodity pipelines CPPC serviced by unbroken cold / cool MAFC Institutional trucks Own Production CPPC 4 Regional Office 2 Central Food companies CPPC & Sourcing Centers Distribution Contract farms Centers CPPC Food service CPPC – Consolidation, Sourcing Packaging & Processing Center Exporters 14 Source; Azizi MAFC (2008)
  13. 13. Fruit & Vegetable Pipelines BUILDING THE PIPELINES SKUs Fruits : Pineapple, Melons, Starfruit, Ambient Pipeline 1 Papaya – Local market Cucumber, Tomato, Long Brinjal 10 - 15 °C Pipeline 2 Iconic ISE Papaya 7 - 13 °C Pipeline 3 Chillies, Long Beans, French 4 - 10 °C Pipeline 4 Beans, Capsicum Cabbage, Lettuce, Leafy 0°C Pipeline 5 Vegetables, Cut Salads CC P TYPE OF Reta M di P P e Bra Dist T r Mi ost rod rodued Ist. arke ng & ACTIVITIES ansple B2B tion & CP S n ribu i– Harv ucti l ting ctio B2C ort PC o e n n st
  14. 14. MAFC’s papaya: end-to-end involvement UPSTREAM MIDSTREAM DOWNSTREAM MAFC Model Farm (anchor tenant) domestic MAFC’s own BRAND • Seedlings supplied by MAFC CPPC • Standard operating procedures • Pre-cooling Supply • Certification (SALM/GlobalGAP) • Cleaning chain • Buy-back arrangement • Sorting • First-mile transport • Packaging internationalMAFC’s own BRAND First mile transport • Temperature management Retailer brand Contract farmers • Unbroken cool chain (cooperative r’ship) • HACCP-certification TKPM TPM International access aided by SALM / GlobalGAP certification
  15. 15. The ultimate objectives of MAFC In Conclusion :- • MAFC as a Government policy instrument will ensure that all the chain partners comply with the global food safety standards • Through value chain management, the efficient cost of production, delivery inclusive of quality and safety will benefit the consumers at large • MAFC will realise its role to enhance the chain partners economic returns especially the small producers and in the process satisfies its own commercial objectives
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