Retail chains did not have long-term written commitment at
retailer/processor or processor/producer (with one exception) level,
but some foodservice and public sector chains did have written
contracts. Lack of contracts was cited in many chains as a barrier to
collaboration and improvement due to the imbalance in risk, and the
perception that participants could switch at short notice.
In one of the chains, there was sudden retailer switching resulting in
plant closure. Although this may have been a very legitimate
business decision, its suddenness is an indication of the level of
uncertainty underpinning many relationships.
In another case there was a contract in place between the distributor
and the customer, but the short length of the contract became an
impediment given the capital investment required to make really
larger scale improvements. The retail participant feared a long-term
commitment on the grounds that a retail competitor might resort to
cheaper overseas sourcing in future.
Farmers, in particular, cite lack of contracts as a barrier to investment
and collaborative improvement effort. Processors typically claim
that ëindependent farmers are all too ready to play the market.í
Several participants cited examples of farmers defecting from
vertical chain contracts or horizontal producer group contracts.
What is required is for a processor and / or supermarket to make the
first moves to break this lack of trust. In turn this will need not just
contracts, but commitment to help producers improve as a group.
There is also a need for producers to move away from seeing their
neighbouring farmers as competitors and towards seeing them as
collaborators in fighting off foreign competition.
As a rule of thumb we believe that around 20% of costs within red
meat supply chains add no value. Clearly this is a generalisation.
All red meat chains are different and there is no such thing as a
waste free chain. However, we believe that with the sustained
application of lean thinking along the lines of our pilots that
significant savings are achievable and that these are of a magnitude
to have a major impact on the sectors profitability and international
competitiveness.
Food Chain Centre at IGD Grange Lane Letchmore Heath Watford Herts WD25 8GD
Tel: 01923 857141 Fax: 01923 852531 Email: foodchaincentre@igd.com www.foodchaincentre.com
PO Box 44 Winterhill House Snowdon Drive Milton Keynes MK6 1AX
Tel: 01908 844710 Fax: 01908 671722 Email: info@rmif.org.uk www.redmeatindustryforum.org.uk
RMIF
We have identified the following steps the red meat industry could
take to implement lean and realise potential benefits. In all of the
value chains studied, the process of mapping uncovered many
opportunities for reduction of waste and improvement of efficiency.
Many of the issues identified could be addressed by operational
improvements achievable through existing structures and
relationships, requiring only a modest increase in cooperation
between supply chain partners. Others would require a more
fundamental adjustment in thinking.