Conventional retailers play a significant role in selling organic food, and therefore, it is important to understand how the demand - supply chain of organic food works as an element of the conventional food system. The proportion of organic food in the conventional food chains is small, and this poses a great challenge to the performance of the chain. Surveys and case specific studies on consumers and supply chain actors indicate that the changes in the conventional food system have an impact on the organic chain. The main obstacles to the optimisation of the organic food chain include poor information management, insufficient communication with consumers, and the diverging objectives and needs of the actors of the chain

Kottila, Marja-Riitta

Maijala, Adeline

Roenni, Paeivi

English

Organic Eprints

ISOFAR 2005    22.04.2005 THE ORGANIC FOOD SUPPLY CHAIN IN RELATION TO INFORMATION MANAGEMENT AND THE INTERACTION BETWEEN ACTORS Marja-Riitta Kottila (1), Adeline Maijala (2), Päivi Rönni (3)   I-00200 Helsinki, ( ment, Environmental and Quality Managemen el. +358 505 705 969, adeline.maijala@tkk.fi (3) University of Helsinki, Faculty of Agriculture and Forestry, Virpeistöntie 59, FI-12350 Turkhauta,   ds: organic, demand - supply chain, information management, communication, collaboration  is important to e conventional and this poses a ance of the chain. Surveys and case specific studies on consumers and supply chain actors indicate that the changes in the conventional food system have an impact on the ain. The main obstacles to the optimisation of the organic food chain include poor information management, insufficient communication with consumers, and the diverging objectives ich are shorter, nnected to each ent of retailing products in many tries, the market ted in Finland re indicates, but mand in terms of quality-price ratio, availability and diversity of the upply chain.   ean and Finnish eration between he chain, incompatibility of values among actors of the chain, lack of information flow, and poor supply reliability (Finfood 2003b, Hamm et al. 2002, Baecke et al. 2002, Franks 2003,  2002). These issues call for solutions that involve closer collaboration as well as more exchange of information between actors.  he organic food . The theoretical 1998), Efficient anagement, as well as stakeholder management.  Methodology The system was observed by using both quantitative and qualitative methods. The surveys were conducted during 1999 and 2003, and the number of consumers and food chain actors were 1009 ±134 and 439±130, respectively. The data was analysed during spring 2005. Explorative factor analysis and K-Means cluster analysis were used.  Several groups of actors and consumers were identified, each of them having a clearly distinguishable attitude profile in relation to organic food.  (1) University of Helsinki, Faculty of Agriculture and Forestry, Taivaanvuohentie 9 B 26, FTel. +358 40 581 9252, marja-riitta.kottila@helsinki.fi  2) Helsinki University of Technology, Department of Industrial Engineering and Managet Unit, Saimaankatu 11, FI-15140 Lahti, TTel. +358 40 563 4074, paivi.ronni@helsinki.fi Key Wor Abstract   Conventional retailers play a significant role in selling organic food, and therefore, itunderstand how the demand - supply chain of organic food works as an element of thfood system. The proportion of organic food in the conventional food chains is small, great challenge to the performorganic chand needs of the actors of the chain.   Introduction  Supply chains of organic products are often considered as alternative supply chains, whmore locally oriented, and in which the producers and consumers are more tightly coother than those in the conventional food supply chains. In spite of this, the involvemgroups into the organic supply chain has increased the market share of organic European countries (Finfood 2003a, Hamm et al. 2002).  Despite the rapid increase in the demand for organic products in many western counshares remain small (Hamm et al. 2002). According to consumer surveys conduc(Finfood 2003a), the potential demand for organic food is greater than its market shathe supply does not satisfy the deproduct assortment. Therefore, one needs to focus on the functionality of the demand-sThe main problems of the organic supply chains identified in earlier research at Europlevels are: imbalance between supply and demand, high operating costs, lack of co-opactors of tWycherleyThe objective of the research is to understand the interactions between the actors of tsupply chain when the distribution takes place among the mainstream retailing chainsbackground consists of elements from supply chain management (Lambert et al. Consumer Response (Alvarado and Kotzab 2001), relationship mArticle     1 / 4 ISOFAR 2005    22.04.2005 To deepen the understanding of the demand - supply chain of organic food, case studout with a qualitative approach. The focus was kept particularly on the information mpresents the key to improved performance. The flow of information between the actoco-ordinates the other flows, such as the product flow (Coughlan et al. 2001), andelement of the inter-organizational relationships (Anderson and Narus 1990). In this syies were carried anagement as it rs of the chain  is an essential stem, the model of information flow is based on a preliminary literature review, and is adapted and refined according presentativeness of the Finnish esh product vs.  concept (private label vs. own brand), as well as the size of the marketing company (small processor marketing the products on its own vs. small ld by the same reasons. Firstly, roducts for the ighly committed to organic food. From that focal point, the product was followed downstream through actors involved in distributing, marketing and oducing the raw organic food is The data was gathered by interviewing the actors along the chain. The selection of the interviewees is based on their position and responsibilities in the company. Interviewees are either managers of the companies (small firms and farms) or are involved in decision making processes concerning the assortment and promotion of the products. In total, 28 interviews were conducted. The chains as well as the amount and position of interviewees are depicted in figures 1 and 2.  to the results of the case study.  Two chains were selected by taking into account the requirements of comparability, reand diversity. The products chosen for the case represented typical daily food consumers. The cases differed from each other in terms of product characteristics (frindustrial product with a long shelf-life), marketingprocessor whose products were marketed by a big company). Both products were sotwo retailers, which are the largest grocery retailers in Finland.  To describe the chains, the viewpoint of the organic processor was chosen for two processors concentrating exclusively on organic  are critical in developing organic pmarket, and secondly, it is assumed that they are hselling the organic product to consumers, but also upstream to a couple of farms prmaterial. Apart from the focal organic processor and its suppliers, the proportion of small in the chains, as in conventional food chains in general.   Organic processorSuper-marketWhole-salerSuper-marketRetail-chain 1Co-opRetailchain 2Organic product flowOrganicProcessor,MarketerIntervieweeConsumersFarmersCo-op Figure 1: Description of case 1 (Fresh product)   ConventionalArticle     2 / 4 ISOFAR 2005    22.04.2005 ConsumersOrganic product flowSuper-marketWhole-salerOrganic  processorMainsupplierWhole-salerRetail-chain 1Co-OpSuper-marketRetail-chain2IntervieweeOthersuppliersOrganic ConventionalFarmers Figure 2: Description of case 2 (Cereal product)  Each interview took one to three hours and was semi-structured. Nine specific issueactor's position in the chain, commitment to organic production or marketing, the netwinformation, the means and the content of information exchange, the efficiency of inforwell as the relationships between the actors and the performance of the chain.   s were covered: ork of organic mation flow, as ed. The interviews were conducted between November views, secondary material such as financial reports, ompanies were  and comparing the views of different actors d and finally tested in all case-chains. The . 2. The actors’ conception of the situation is inconsistent. ain, or stakeholders outside the chain, possess or have access to information mprove the performance of the whole chain.   organic to the ders outside the chain, the relationships between actors, as well as the factors affecting information sharing. Together with the existing theories, the identification of factors affecting the performance - in particular conflicting objectives - is enabled, and thus, the corresponding opportunities and means for the improvement of the system can be found.   The share of organic in the turnover of the actors varies greatly depending on the size of the company and the position in the chain (Figures 1 and 2). Because the strategic role of organic products is different for each company, there may be contradictions and difficulties to share a common goal between the decision-makers within a company or between customers and suppliers.    All interviews were recorded and transcrib2004 and March 2005. In addition to intermarketing research done by the actors, annual reports and internet pages of the cevaluated. Transcriptions were analysed by summarisingin the same chain. Preliminary propositions are revisepreliminary propositions are: 1. The information flow is inadequate and inefficient3. Some actors of the chwhich could be used to i4. Actors know little about the needs of the other actors of the chain. 5. Communication between the actors of the chain is insufficient. 6. Commitment to organic would improve the performance. 7. Experience of organic presents a key to proper performance.   Results and brief discussion  Interviews with the actors along the studied chains shed light on the significance ofactor, the type of information actors exchange and/or need, the significance of stakeholArticle     3 / 4 ISOFAR 2005    22.04.2005 Article     4 / 4 anaged by the duct categories. s is a negligible oduct category. This complicates the management of the information and  the chain actors le for delivering on to consumers. Due to the limited resources and conflicting needs of the brand owner and  information to consumers, the cal value of the organic product is not flowing among the chain actors. However, the information system coordinating the logistics of organic s similar to that of the conventional products, and therefore, the information could flow just , research at the f the chain. Due  flow by the chain actors, the performance of the organic food chain could be improved with the involvement of the stakeholders outside the chain. The role of the actor from outside the chain would be to support the organic chain by managing and delivering cerning the ethical, ecological as well as societal value of organic food. Interesting  and outside the  edgments nformation and time give try of Agriculture and Forestry, SOK and Finnish Cultural  Refketing.    nd Manufacturer Firm Working Partnerships. nversion to organic  104 (3/4/5), 163-174. s. Prentice Hall; New Jersey. Finf arometer]. mun ketjubarometri 1999-2003 [Organic chain barometer]. Franks, J.  (2003) Current issues in marketing organic milk in the UK. British Food Journal  105, 6, 350-363. Hamm, U., Gronefeld, F.& Halpin, D. (2002) Analysis of the European market for organic food. Organic marketing initiatives and rural development, Volume one. Aberystwyth, The University of Wales; Wales, United Kingdom. Lambert, D, M., Cooper, M, C., Pagh, J, D. (1998) Supply Chain Management: Implementation Issues and Research Opportunities. International Journal of Logistics Management 9, 2, 1-18.  Wycherley, I. (2002) Managing Relationships in the UK Organic Food Sector. Journal of Marketing Management 18, 673-692. The preliminary results indicate that the information concerning organic is poorly mactors in the chain. Management of the conventional food chain is based on proBecause organic products exist in various categories, information of organic productpart of each conventional prthe marketing of organic products.  In the first analysis of the data, it was found that information flow to consumers fromis deficient. The mutual view of the chain actors is that the brand owner is responsibinformatiits stakeholders, the package of each product is the only significant means of providingconsumers.   Due to the poor information management and the information delivery to the information concerning the environmental and ethiproducts ias efficiently for organic products as for conventional products.  Conclusions  In order to understand the needs and possibilities for system improvements or changeschain level is necessary to complement the studies concentrated on one actor group oto the deficiencies of the informationinformation conquestions for further discussion are the role definition between the stakeholders insidechain as well as the interaction between them.  AcknowlThe authors wish to thank the interviewees in the participating companies for the in for this project and the Finnish MinisFoundation for funding this project.  erences  Alvarado, U.Y., Kotzab, H. (2001) Supply Chain Management. The Integration of Logistics in MarIndustrial Marketing Management 30, 183-198.   Anderson, J.C.,  Narus, J.A. (1990) A Model for Distributor Firm aJournal of Marketing 54, 1 January, 42 -58 Baecke E., Rogiers G., Cock L. de, Huylenbroeck G. Van. (2002) The supply chain and cofarming in Belgium or the story of the egg and the chicken. British Food JournalCoughlan, A.T., Anderson, E., Stern, L.W. & El-Ansary, A. I. (2001) Marketing Channelood, (2003a) Luomun kuluttajabarometri 1998-2003 [Organic consumer bFinfood, (2003b) Luo

The organic food supply chain in relation to information management and the interaction between actors

Conventional retailers play a significant role in selling organic food, and therefore, it is important to understand how the demand-supply chain of organic food works as an element of the conventional food system. The proportion of organic food in the conventional food chains is small, and this poses a great challenge to the performance of the chain. Surveys and case specific studies on consumers and supply chain actors indicate that the changes in the conventional food system have an impact on the organic chain. The main obstacles to the optimisation of the organic food chain include poor information management, insufficient communication with consumers, and the diverging objectives and needs of the actors of the chain

Rönni, Päivi

www.isofar.org  page 1 THE ORGANIC FOOD SUPPLY CHAIN IN RELATION TO INFORMATION MANAGEMENT AND THE INTERACTION BETWEEN ACTORS Marja-Riitta Kottila (1), Adeline Maijala (2), Päivi Rönni (3)    (1) University of Helsinki, Faculty of Agriculture and Forestry, Taivaanvuohentie 9 B 26, FI-00200 Helsinki, Tel. +358 40 581 9252, marja-riitta.kottila@helsinki.fi  (2) Helsinki University of Technology, Department of Industrial Engineering and Management, Environmental and Quality Management Unit, Saimaankatu 11, FI-15140 Lahti, Tel. +358 505 705 969, adeline.maijala@tkk.fi (3) University of Helsinki, Faculty of Agriculture and Forestry, Virpeistöntie 59, FI-12350 Turkhauta,  Tel. +358 40 563 4074, paivi.ronni@helsinki.fi Key Words: organic, demand - supply chain, information management, communication, collaboration Abstract   Conventional retailers play a significant role in selling organic food, and therefore, it is important to understand how the demand - supply chain of organic food works as an element of the conventional food system. The proportion of organic food in the conventional food chains is small, and this poses a great challenge to the performance of the chain. Surveys and case specific studies on consumers and supply chain actors indicate that the changes in the conventional food system have an impact on the organic chain. The main obstacles to the optimisation of the organic food chain include poor information management, insufficient communication with consumers, and the diverging objectives and needs of the actors of the chain.  Introduction  Supply chains of organic products are often considered as alternative supply chains, which are shorter, more locally oriented, and in which the producers and consumers are more tightly connected to each other than those in the conventional food supply chains. In spite of this, the involvement of retailing groups into the organic supply chain has increased the market share of organic products in many European countries (Finfood 2003a, Hamm et al. 2002).  Despite the rapid increase in the demand for organic products in many western countries, the market shares remain small (Hamm et al. 2002). According to consumer surveys conducted in Finland (Finfood 2003a), the potential demand for organic food is greater than its market share indicates, but the supply does not satisfy the demand in terms of quality-price ratio, availability and diversity of the product assortment. Therefore, one needs to focus on the functionality of the demand-supply chain.   The main problems of the organic supply chains identified in earlier research at European and Finnish levels are: imbalance between supply and demand, high operating costs, lack of co-operation between actors of the chain, incompatibility of values among actors of the chain, lack of information flow, and poor supply reliability (Finfood 2003b, Hamm et al. 2002, Baecke et al. 2002, Franks 2003, Wycherley 2002). These issues call for solutions that involve closer collaboration as well as more exchange of information between actors.  The objective of the research is to understand the interactions between the actors of the organic food supply chain when the distribution takes place among the mainstream retailing chains. The theoretical background consists of elements from supply chain management (Lambert et al. 1998), Efficient Consumer Response (Alvarado and Kotzab 2001), relationship management, as well as stakeholder management. Methodology The system was observed by using both quantitative and qualitative methods. The surveys were conducted during 1999 and 2003, and the number of consumers and food chain actors were 1009 ±134 and 439±130, respectively. The data was analysed during spring 2005. Explorative factor analysis and K-Means cluster analysis were used.  Several groups of actors and consumers were identified, each of them having a clearly distinguishable attitude profile in relation to organic food. www.isofar.org  page 2 To deepen the understanding of the demand - supply chain of organic food, case studies were carried out with a qualitative approach. The focus was kept particularly on the information management as it presents the key to improved performance. The flow of information between the actors of the chain co-ordinates the other flows, such as the product flow (Coughlan et al. 2001), and is an essential element of the inter-organizational relationships (Anderson and Narus 1990). In this system, the model of information flow is based on a preliminary literature review, and is adapted and refined according to the results of the case study. Two chains were selected by taking into account the requirements of comparability, representativeness and diversity. The products chosen for the case represented typical daily food of the Finnish consumers. The cases differed from each other in terms of product characteristics (fresh product vs. industrial product with a long shelf-life), marketing concept (private label vs. own brand), as well as the size of the marketing company (small processor marketing the products on its own vs. small processor whose products were marketed by a big company). Both products were sold by the same two retailers, which are the largest grocery retailers in Finland. To describe the chains, the viewpoint of the organic processor was chosen for two reasons. Firstly, processors concentrating exclusively on organic  are critical in developing organic products for the market, and secondly, it is assumed that they are highly committed to organic food. From that focal point, the product was followed downstream through actors involved in distributing, marketing and selling the organic product to consumers, but also upstream to a couple of farms producing the raw material. Apart from the focal organic processor and its suppliers, the proportion of organic food is small in the chains, as in conventional food chains in general.  The data was gathered by interviewing the actors along the chain. The selection of the interviewees is based on their position and responsibilities in the company. Interviewees are either managers of the companies (small firms and farms) or are involved in decision making processes concerning the assortment and promotion of the products. In total, 28 interviews were conducted. The chains as well as the amount and position of interviewees are depicted in figures 1 and 2.  www.isofar.org  page 3 Organic processorSuper-marketWhole-salerSuper-marketRetail-chain 1Co-opRetailchain 2Organic product flowOrganicProcessor,MarketerIntervieweeConventionalConsumersFarmersCo-op Figure 1: Description of case 1 (Fresh product)   www.isofar.org  page 4 ConsumersOrganic product flowSuper-marketWhole-salerOrganic  processorMainsupplierWhole-salerRetail-chain 1Co-OpSuper-marketRetail-chain2IntervieweeOthersuppliersOrganic ConventionalFarmers Figure 2: Description of case 2 (Cereal product)  Each interview took one to three hours and was semi-structured. Nine specific issues were covered: actor's position in the chain, commitment to organic production or marketing, the network of organic information, the means and the content of information exchange, the efficiency of information flow, as well as the relationships between the actors and the performance of the chain.  All interviews were recorded and transcribed. The interviews were conducted between November 2004 and March 2005. In addition to interviews, secondary material such as financial reports, marketing research done by the actors, annual reports and internet pages of the companies were evaluated. Transcriptions were analysed by summarising and comparing the views of different actors in the same chain. Preliminary propositions are revised and finally tested in all case-chains. The preliminary propositions are: 1. The information flow is inadequate and inefficient. 2. The actors’ conception of the situation is inconsistent. 3. Some actors of the chain, or stakeholders outside the chain, possess or have access to information which could be used to improve the performance of the whole chain.  4. Actors know little about the needs of the other actors of the chain. 5. Communication between the actors of the chain is insufficient. 6. Commitment to organic would improve the performance. 7. Experience of organic presents a key to proper performance.  Results and brief discussion  Interviews with the actors along the studied chains shed light on the significance of organic to the actor, the type of information actors exchange and/or need, the significance of stakeholders outside the chain, the relationships between actors, as well as the factors affecting information sharing. Together with the existing theories, the identification of factors affecting the performance - in particular conflicting objectives - is www.isofar.org  page 5 enabled, and thus, the corresponding opportunities and means for the improvement of the system can be found.  The share of organic in the turnover of the actors varies greatly depending on the size of the company and the position in the chain (Figures 1 and 2). Because the strategic role of organic products is different for each company, there may be contradictions and difficulties to share a common goal between the decision-makers within a company or between customers and suppliers.   The preliminary results indicate that the information concerning organic is poorly managed by the actors in the chain. Management of the conventional food chain is based on product categories. Because organic products exist in various categories, information of organic products is a negligible part of each conventional product category. This complicates the management of the information and the marketing of organic products. In the first analysis of the data, it was found that information flow to consumers from the chain actors is deficient. The mutual view of the chain actors is that the brand owner is responsible for delivering information to consumers. Due to the limited resources and conflicting needs of the brand owner and its stakeholders, the package of each product is the only significant means of providing information to consumers.  Due to the poor information management and the information delivery to the consumers, the information concerning the environmental and ethical value of the organic product is not flowing among the chain actors. However, the information system coordinating the logistics of organic products is similar to that of the conventional products, and therefore, the information could flow just as efficiently for organic products as for conventional products. Conclusions  In order to understand the needs and possibilities for system improvements or changes, research at the chain level is necessary to complement the studies concentrated on one actor group of the chain. Due to the deficiencies of the information flow by the chain actors, the performance of the organic food chain could be improved with the involvement of the stakeholders outside the chain. The role of the actor from outside the chain would be to support the organic chain by managing and delivering information concerning the ethical, ecological as well as societal value of organic food. Interesting questions for further discussion are the role definition between the stakeholders inside and outside the chain as well as the interaction between them.  Acknowledgments The authors wish to thank the interviewees in the participating companies for the information and time given for this project and the Finnish Ministry of Agriculture and Forestry, SOK and Finnish Cultural Foundation for funding this project.  References  Alvarado, U.Y., Kotzab, H. (2001) Supply Chain Management. The Integration of Logistics in Marketing.    Industrial Marketing Management 30, 183-198.   Anderson, J.C.,  Narus, J.A. (1990) A Model for Distributor Firm and Manufacturer Firm Working Partnerships. Journal of Marketing 54, 1 January, 42 -58 Baecke E., Rogiers G., Cock L. de, Huylenbroeck G. Van. (2002) The supply chain and conversion to organic farming in Belgium or the story of the egg and the chicken. British Food Journal 104 (3/4/5), 163-174. Coughlan, A.T., Anderson, E., Stern, L.W. & El-Ansary, A. I. (2001) Marketing Channels. Prentice Hall;  New Jersey. Finfood, (2003a) Luomun kuluttajabarometri 1998-2003 [Organic consumer barometer]. Finfood, (2003b) Luomun ketjubarometri 1999-2003 [Organic chain barometer]. Franks, J.  (2003) Current issues in marketing organic milk in the UK. British Food Journal  105, 6, 350-363. www.isofar.org  page 6 Hamm, U., Gronefeld, F.& Halpin, D. (2002) Analysis of the European market for organic food. Organic marketing  initiatives and rural development, Volume one. Aberystwyth, The University of Wales; Wales, United Kingdom. Lambert, D, M., Cooper, M, C., Pagh, J, D. (1998) Supply Chain Management: Implementation Issues and Research Opportunities. International Journal of Logistics Management 9, 2, 1-18.  Wycherley, I. (2002) Managing Relationships in the UK Organic Food Sector. Journal of Marketing Management 18, 673-692.  

The organic food supply chain in relation to information management and the interaction between actors

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