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Logistics management coordinates and optimizes all those activities and integrates them

with marketing, sales, manufacturing, finance, and IT. Providing dependable, error-free
logistics service while controlling costs is the primary goal of logistics and agribusiness
managers.

Agri-logistics in India: Challenges and


Emerging Solutions
Team YS posted on 24th May 2013

The issue of food wastage is central to India’s efforts in combating hunger and
improving food security. While focus has been on improving production, reducing food
supply chain losses remains a relatively uuaddressed problem till very recently.

It is hard to put a figure to how much food is lost and wasted in India today due to lack
of adequate infrastructure, however, a 2011 report by a UN body, FAO, puts wastage in
fruits and vegetables as high as 45% of produce (post-harvest to distribution) for
developing Asian countries like India.

Role of government

In India, a large part of the agri supply chain ecosystem is either in the public sector, or
strongly linked to it. The Indian government attempts to insulate the cultivator from price
fluctuations by procuring their produce at Minimum Support Prices (MSPs), decided by
the Commission for Agricultural Costs and Prices after analyzing the costs of growing a
particular crop. The 7500+ Agricultural Procurement and Marketing Committee (APMC)
mandis provide a marketplace for the transaction and the Food Corporation of India
(FCI) plays the role of the buyer, storing the procured produce in the relevant
warehousing corporation’s warehouse. Ultimately, this gets distributed through the
Public Distribution System (PDS) shops and reaches the consumer. For non-MSP
crops, the producer is dependent on the traditional private channels to market her
produce.

Agriculture is a ‘state subject’ and a large part of investment as well as regulatory


progress is happening at the state level. Till very recently, regulatory barriers had
constrained the development of storage and processing infrastructure but measures like
inclusion of agri-warehousing under priority sector lending by RBI, subsidy schemes, tax
incentives and the Warehousing Act (which will promote negotiability of warehousing
receipts) have helped private players take an active interest in the same. The Private
Entrepreneur Guarantee Scheme is one such initiative to incentivize private investment
for construction of warehouses by private entrepreneurs, with an FCI guarantee to hire
them for 10 years, assuring a fair return on investment by the entrepreneur.
Gaps

 Inefficient price signals: The government has been buying almost


one-third of all rice and wheat produced in India through the PDS
system, but in other kinds of grains, fruits and vegetables (both
being highly perishable), the role of the government is limited. This
leads to MSPs being ineffective as both price signals and as
insulators from the perspective of the larger agricultural
population.

 Limited reach of mandis: Also, this procurement system has failed


to cover the entire country evenly (back of the envelope calculation
suggests that on an average, a farmer needs to travel 12 kms to
reach the nearest mandi and more than 50 kms in NE India) while
according to the recommendations by National Farmers
Commission, availability of markets should be within a 5 km
radius.

 Too many intermediaries, information asymmetry: The above


mentioned problems have led to formation of long marketing
channels, with multiple intermediaries, adding to the woes of the
producers of perishable agri goods. These intermediaries have led
to a cost inflation of ~250% (over the cost of production) and have
exacerbated the existing information asymmetries in agriculture,
especially for non-MSP crops.

 Inadequate infrastructure for storage: The Planning Commission


has recently estimated the gap between agri-warehousing supply
and demand at 35 mn MT. Currently, public sector agencies like
the FCI, Central Warehousing Corporations (CWC) and the
various State Warehousing Corporations (SWC) have a storage
capacity of 71 mn MT, while the private sector has close to 25 mn
MT. To put the scarcity in perspective, food grain stocks held only
by the government was 80 mn MT last year (peak) according to
the FCI annual report.

 Skewed distribution of capacity: Skewed distribution of this


capacity is another issue, with North India having access to 60% of
the total storage infrastructure. The Planning Commission has
recently estimated the gap between agri-warehousing supply and
demand at 35 mn MT.

 Lack of cold storage infrastructure: India’s current cold storage


capacity at 25 MT is barely sufficient for 10% of fruit and
vegetables produced in the country.
 Lack of collateral management options: Collateral management
refers to financing of agricultural goods stored at warehouses, and
is estimated to be a ~Rs 3,500 cr opportunity by industry sources.

Emerging solutions

 Comprehensive agriculture logistics solutions: Private players


like Star Agri that provide integrated post harvest management
solutions have entered the space to fill these gaps. Apart from
providing warehousing services, Star Agri, which recently raised
funding from IDFC PE, provides collateral management and other
value added services (quality testing, agri insurance, bulk
procurement and rural retailing) to its clients.

Sohan Lal Commodity Management, which raised funding from Nexus and Mayfield
and Shree Shubham Logistics are other comprehensive agri-logistics solutions players
providing services across the spectrum.

SV Agri is another player that provides end-to-end solutions for the potato supply chain.

Other major players include, National Bulk Handling Corporation and National Collateral
Management Services.

 Integrated cold chain solutions: ColdStar Logistics provides


customized solutions for cold storage and refrigerated
transportation across India for fresh and frozen commodities.
Promoted by Tuscan Ventures, a logistics focused investment firm,
their services include specialized refrigerated storage¸
warehousing¸ transportation¸ distribution and logistics.

LEAF, which raised funding from Aspada recently, is another player which works with
small holder vegetable farmers in South India. LEAF provides integrated cold chain
logistics comprising post harvest transport, cold storage, processing, and supply
through refri-trucks to the distribution center and retail store. Apart from this, LEAF is
also involved in contract farming and agro processing, working on improving income
realizations for small farmers through yield improvements, productivity increases, and
consistent produce pricing.

 Alternate marketplaces: A young innovative company, eFarm, is


providing a way to bypass the long chain of intermediaries by
directly connecting buyers and sellers of agricultural produce and
allied services, via a web and mobile based information exchange
platform. This is a B2B (Business to business) model and aims to
connect all stake holders in the supply chain: from farmers, to
buyers, to suppliers of services like labor and transportation. The
portal currently has over 5,000 kinds of produce listed.

 Reducing the information asymmetry: Riding on the high mobile


penetration in rural India, Reuters Market Light and Fasal Intuit are
working on the problem of information asymmetry for agricultural
producers, by making personalized agricultural market information
available to the farmers at minimal costs, through a mobile based
service. Since its inception in 2009, Fasal claims to have helped
close to a million people and created additional value for farmers
of over Rs 135 crs. According to a 2009 study by ICRIER, RML
has lead to an increase in incomes by 5-25% for users.

TCS’ mKRISHI platform offers personalized advisory services to farmers, via mobile
phones (SMS and IVR), enabling them to access important information on pesticides,
fertilizers, soil and water conservation, and improving access to markets for them.

 Innovative ICT tools for supply chain management: Logistimo is a


hosted web service for supply chain management, which can be
accessed via basic mobile phones and web browsers, which
makes it uniquely suitable for in rural markets. It is a configurable
service which offers customers the ability to capture and share
data in a simple, low-cost way, empowering them to make better
logistics decisions.

Although it’s still early days, these solutions should lead to better supply chain
management in Indian agriculture, reducing inefficiencies and increasing farmer
realizations, as well as curbing food waste.

6 APO News ● May–June 2012 L ogistics management for agrifood products is about how organizations
fulfill market demand by getting the right product, in the right quantity and quality, at the right time and
place as efficiently as possible to meet customer requirements. Logistics management coordinates and
optimizes all those activities and integrates them with marketing, sales, manufacturing, finance, and IT.
Providing dependable, error-free logistics service while controlling costs is the primary goal of logistics
and agribusiness managers. While no single model will fit the needs of all agribusinesses, safety, quality,
and the environment should constitute an integral part of any strategy. For developing effective
logistics, bottlenecks in transport, fleet, storage, warehousing and inventory, and supply/demand
planning must be resolved, especially in SMEs that constitute a large portion of Asian agribusiness but
are often inefficient in logistics management. A welldesigned logistics management scheme enables
agribusinesses to minimize costs, maximize profits, and sustain operations. To equip participants with
skills and knowledge in designing and conducting effective logistics management and enhance their
understanding of emerging issues and critical factors in agribusiness logistics management, the APO in
collaboration with the Iranian Ministry of Jihad-e-Agriculture and National Iranian Productivity
Organization organized a training course on Logistics Management in Agribusiness, 28 January–3
February 2012, in Tehran. Eighteen participants from 10 member economies, along with five local
observers, attended. To observe good practices of logistics management in agribusiness, the participants
visited Madan-e-Markazi Miveh va Tarebar (Central Market for Fruit and Fresh Produce, Tehran) and the
milk-processing and packaging plant of Tehran Pegah Dairy Company. The participants also drafted a list
of follow-up actions needed to develop efficient logistics systems for agribusiness in their countries. As
one followup, Managing Director Chan Seng Kit of K-Farm Sdn. Bhd., Malaysia, suggested that there was
a need for subsequent communication between the resource persons and participants to enhance the
impact of the course on their job environment. He also recommended more detailed practical training
during field/company visits with explanations of business models. As often noted, many, including Dr.
Abdul Ghafoor of Pakistan, thought that the schedule was tight. Iranian Masood Malekhani was
appreciated of both course content and the enthusiasm of the resource persons, while Indonesian Yuli
Sri Wilantim felt that one of the high points was that the methodology encouraged actual application.
Logistics management for successful agribusiness Observing the processing of fruit and vegetable waste
into cattle feed at Madan-e-Markazi Miveh va Tarebar.

The importance of logistics in the agri-food


sector

Logistics for the agricultural and food produce


industries

The topic of supply chain processes and logistics for agriculture and food
produce is indeed, somewhat intricate. Handling the logistics of such products,
operators are faced with taking accountability for all actions conducted
throughout the entire chain. These being; to safeguard the quality and well-being
of all products (including livestock) as well as to create a sustainable solution for
their clients (allowing them to maintain control of their market by being an
attractive source financially), whilst, of course, not compromising their standards
of service. Over the years the importance of logistics for the agri-food industry,
has become more recognised by organisations globally. Wherever you are in the
world, it is vital that the quality of raw materials is upheld at all times and reaches
the end destination in a consumable state.
The supply chain process relating to such
goods has, over time, developed into an increased chain of services being
offered such as in-time deliveries, centralising specialised production systems
and maintaining low load rates. Essential success elements for both retailers and
manufacturers is the efficiency of the logistics and the technology that is used.
The entire process needs to be monitored effectively to ensure the correct
product(s) are delivered, in the right condition, to the right place, within a
reasonable time whilst maintaining cost efficiency for all parties involved.
According to the DEFRA (Department for Environment Food and Rural Affairs)
Food Statistics Pocket Book 2013 – “The agri-food sector contributed £97.1
billion or 7.4% to national Gross Value Added in 2012 and £3.6 million or 13% of
national employment in Q3 2013.” These statistics show the importance of a
good supply chain and logistics system and how vital this industry is to the globe,
not only with the prosperity benefits but also the employment possibilities that are
generated.

Grain supply chain logistics

Over the last two decades, the flow of goods (grain) have been extremely
augmented, predominantly owing to the influences of elements such as the
concentration of production systems and the globalisation of marketing. The
transportation of goods, classified as agricultural, plays an important role within
the system and must therefore be appreciated and thoroughly investigated to
achieve the best results. Grain transport being one of the most commonly known
“cogs in the system” covers the movement of the goods from farm all the way

through to depots for export if required.


It is the shared responsibility of producers, packers, processors, distributors,
retailers, food service operators and consumers to ensure that an integrated
farm-to-table (see diagram) approach is established from the outset and
continued throughout the chain (this concept applying not only to grain but all
fodder industries).
The following information is an excerpt from Eurostat
(http://ec.europa.eu/eurostat/web/agriculture/overview);
During the last 10-15 years new objectives have been introduced in relation to
agricultural policy.
These include

 Protection of the environment


 Sustainable farming practices
 Food safety and security
 Animal welfare
 Broader perspectives relating to rural development

New indicators and statistics have been developed to provide information


relating to these topics, for example, data relating to the use and impact of
pesticides and nutrients. Another important priority in agricultural statistics has
been to establish statistics that allow the evolution of organic farming to be
followed.
To conclude therefore it remains imperative that regular investigations and
research is carried out by organisations to ensure they are achieving and utilising
the most sustainable logistics supply chain solution available to them at any
given time. Perhaps it is worth considering to re-investigate the procedures that
your company follows on a 2-yearly basis or maybe more frequently. Take into
consideration where improvements can be made with regard to the transportation
routes currently used and look at ways to reduce your carbon footprint by
lowering emissions. Also how about taking a look at the packaging you currently
use for your products. Employing logistics related management and assimilation
procedures can offer greatly improved sustainability. Applying more cost effective
and resourceful models into your everyday logistics will prove crucial for
benefiting the general economic development of a country as well as the
environmental benefits that will be gained along the way.
Visit Whichwarehouse to read many other articles relating to warehousing and
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Managing Logistics Risks in Agricultural Supply Chains along
International Corridors
Jean Francois Arvis, Ian Gillson and Charles Kunaka, The World Bank
FARMD (January 2013) | World agricultural markets have fundamentally changed over the past ten years. Following
almost three decades of decline, prices for many agricultural commodities have peaked in recent years and become
more volatile as a result of temporary disruptions to supply and/or increased demand. This trend is likely to continue
as supply pressures arise from climate change, demand for biofuels increases and the financialization of agricultural
commodities (speculation) deepens. Concerns over high commodity prices, coupled with occasional food safety
outbreaks, have raised interest in designing effective risk mitigation strategies among the private sector, national
governments and donor agencies as risk impacts upon reliability and can push costs and price volatility even higher.
Agricultural production is synonymous with uncertainty often by virtue of its exposure to weather; the unpredictability
of disease and pests; and, the seasonality of harvest and market cycles. Agriculture is also dependent on supply
chains to cope with the geographical separation of inputs, farming and consumption. Agricultural supply chains
comprise input supply (seeds, fertilizer, energy), production, post-harvest, storage, processing, marketing and
distribution. These elements along the ‘farm-to-fork’ supply chain increasingly span national borders and involve
inputs from a wide range of public and private sector participants. These participants typically support three major
types of flows in the supply chain, namely: i) physical products (from input suppliers to farmers, farmers to traders,
traders to buyers, buyers to consumers); ii) financial (credit, payments, insurance); and, iii) information (prices,
transport opportunities).
Logistics are a critical part of these flows, and weaknesses in them are often a major source of risk in agricultural
supply chains that affect the availability, timing, traceability and quality of goods. Until recently food supply
performance was primarily understood in terms of transportation costs for inputs and outputs. Today the complexity of
supply chains is more fully recognized and its performance also assessed in terms of reliability.
Supply chain management means addressing the reliability of the delivery process itself, especially with respect to
delays and uncertainty in time, quality and availability of service and risks of interruption. All of these risks can
undermine the fundamental objectives of any supply chain: to provide products of the correct quantity and quality, to
the right place, at the right time, efficiently at competitive cost – and to make at least normal profit in doing so. For
governments there may be additional objectives, especially for net-exporting countries if cash crops are important for
export revenues or, for net importing countries, to maintain domestic food supply. In the context of low income
countries, and especially landlocked ones, food logistics is dependent on international corridors over relatively long
distances (1,000 km or more), which serve both intra- and extra-regional trade through local port gateways. These
corridor supply chains are often very slow and unreliable by international standards both for imports and exports.
The World Bank and other institutions have recently revisited corridor supply chains and the practical policies and
measures to improve their performance to connect countries more effectively to markets. The logistics on corridors
depends on three pillars. The first is infrastructure, primarily road or rail linking the main economic centers and ports,
as well as linking rural areas to the main international corridors, and storage. The second is the market for private
logistics services. The third is the procedural and regulatory environment to move goods, especially food,
internationally across borders, referred to as transit and border management. Import delays along corridors in low
income regions such as Africa vary significantly from, for example, an average of one week (e.g. Southern Africa) to
several weeks (e.g. Central Africa), but even more characteristically with huge variance on the time to move through
the corridor in terms of lead time. Delays have typically a broad tail distribution where delays exceeding the median
delay by 400 percent are not exceptional. Logistics costs supported by the consumer may sometimes exceed 100
percent the cost of trucking (e.g. West Africa).
A lack of reliability along the supply chain derives from inefficiencies in these main three areas, and the difficulties to
implement the remedial actions, often across several countries.
First, infrastructural development and maintenance in low income countries poses a formidable challenge and
consumes significant financial resources. In certain circumstances, washout, fallen bridges, accidents and
derailments can make roads or railroads impassable. Critical links along the supply chain may be broken altogether
under certain weather conditions. However this is increasingly becoming the exception as alternative corridors are
available in virtually all cases. Hence the provision of infrastructure is not a major source of supply chain risk. Ports
have always had infrastructure dedicated to bulk food commodities (grain). However the tendency has been to
convert some of this capacity to accommodate the growth of container trade and other activities, such as silos, are
also taking prime real estate in may port cities. A recent study in MENA on “The Grain Chain” shows that the
efficiency of ports and grain capacities is also a concern, as boats have to wait longer than elsewhere in the world.
Storage infrastructure is an indispensable component of agricultural supply chains. This is due to the fact that
harvest normally occurs over short periods while consumption is spread over the course of a year. Storage is
therefore unavoidable while at the same time one of the major sources of risk in the supply chain. The risk arises
from losses during storage as well as the opportunity cost of tied-up capital. In a geographically dispersed market,
food prices increase as distance to market increases because transport costs increase. Therefore, the opportunity
cost of storage decreases as distance to market increases. Central to storage is the fact that the price appreciation
net of storage costs should equal the rate of return of holding the stock. However, in most instances evidence points
to what has been termed the “storage at a loss paradox”. The gap between contemporaneous spot and future prices
is normally less than the cost of storage. This has the effect of forcing farmers, especially small-scale farmers, to sell
their produce as soon as they harvest. Therefore, the location of a storage facility or an agricultural processing center
determines if it is worthwhile for producers to sell their produce or not. This affects all products but is even more
critical for those that are highly perishable, such as food. A whole-of-the-chain perspective is therefore critical to
balancing the reliability of transport and the location and size of storage facilities.
Secondly, the
provision of services is a major source of risk and more complex in the context of food logistics than elsewhere. Risks
associated with logistics services are especially important for perishable agricultural commodities or for those
products in which timely market delivery is a key feature. For example, risks of loss of product quality due to a
breakdown in logistics are high for trade in fruit, vegetables, cut flowers, beef and fish. They are less important for
bulk traded goods such as cotton, rice, tobacco and sugar where price volatility, for example, often poses the greatest
risk.
Services are typically highly fragmented in developing countries with separate providers for trucking, brokerage and
warehousing instead of consolidated providers of these services as are often found in developed economies. Even
the relatively large public entities typically involved in agricultural trade or the World Food program have to rely on an
array of separate providers for long distance corridor logistics or regional distribution or collection. These services can
be more or less efficient, but in some regions segment informality means low predictability of services losses.
Relatively small and seasonal volumes as well as unbalanced volumes between exports and imports also mean
shallow services markets with little competition and high rent seeking behavior. In many instances, spikes in demand
for fertilizers or imported goods coincide with increases in prices for logistics services sometimes by up to 50 percent.
Trucking reform would be part of the solution to lower costs.
Distribution services within economic centers of the corridors are typically larger and better quality than providers in
rural areas. For farmers and traders in developing countries, the greatest sources of logistics risks are poor roads,
together with low quality, high cost and infrequent trucking services. Also important are weak communications
infrastructure and resultant deficiencies in timely market information. Lack of access to services and information
implies a high reliance on traditional intermediaries with significant impact on farm gates prices. Recent examples,
including in India, show that cell phones can help farmers better manage their access to markets, services and
intermediaries.
Thirdly, trade and transit facilitation is another area of concern. The corridor supply chain is almost everywhere a
series of duplicated clearance procedures by customs and border agencies at each land border and in the country of
destination. This sequence explains much of the delays and markups over transportation costs. It also offers
opportunities for rent seeking behavior. As compared with non-food merchandise, trade in grains and other food
items are subjected to more regulatory control (e.g. health and SPS regulations) as well as other non-tariff measures
(e.g. licensing). However, imports and exports are often organized by large institutions on a recurring basis and with
high volumes, and so have developed experience to manage this red tape and limit the risk of bureaucratic
interruption along the supply chain. The complexity is in fact greater for cross-border flows by small traders in their
attempts to respond to local opportunities to trade in food, where unpredictability of clearance and import unfriendly
behavior can create serious delays and losses even over relatively small distances (a problem well known for garden
producers in Central Asia and Sahelian countries). The paradox may be that trade between neighboring countries in
a product can be more complex than that in same produce with another continent.
Despite these significant sources of risk there are important changes being observed in agricultural supply chains that
hold the promise of improved efficiency.
First, private sector initiatives are an important starting point. Partnerships between logistics providers (freight
forwarders, airlines, shipping lines) and agricultural entrepreneurs lie at the origin of diversification into higher value
agricultural exports (e.g. cut flowers, beef, mangoes) being shipped around the world. Stronger professional
organization is indispensible to addressing market weaknesses and to upgrading quality, and building longer term
commercial relationships with institutional food shippers helps to address some of the concerns relating to the
availability of transport or transport price volatility. The private sector is also key to the design and implementation of
government sponsored facilitation initiatives. For example, corridor arrangements such as the Mombasa corridor in
Kenya and the greater Mekong corridors in Asia have all set up private sector fora.
Governments also have an important role in conditioning logistics risks through establishing the domestic and
international policy frameworks in which these services operate, including the design and implementation of transport
sector policies, pricing, investment incentives and institutions. Through simplifying and harmonizing trade procedures
and regulations, Governments can reduce the number of ‘choke’ points at which risks from theft or delay of
agricultural consignments may occur. Policy consistency is also critical in giving the right signals to the private sector
to invest in systems and practices that minimize risks along the agricultural supply chain.
Finally, donors are also helping to reduce logistics risk through supporting the development of trade infrastructure
including the “software” (regulatory) dimensions of transport and trade facilitation projects. For example, the World
Bank’s Trade Facilitation Facility is a US$53 million trust fund available to LDCs and regional organizations to help
developing countries’ enhance their competitiveness by strengthening the quality of their trade facilitation systems. It
focuses on providing support to project implementation in areas such as border management, institutional
development, trade procedures, logistics services markets; gateway infrastructure; and, international trade
agreements.

International Association of Scientific Innovation and Research (IASIR) (An Association Unifying the
Sciences, Engineering, and Applied Research) International Journal of Engineering, Business and
Enterprise Applications (IJEBEA) www.iasir.net IJEBEA 15-172; © 2015, IJEBEA All Rights Reserved Page
147 ISSN (Print): 2279-0020 ISSN (Online): 2279-0039 Logistics Support for Agro business in context of
the Supply Chain of Perishables 1Md. Kamruzzaman 1Assistant Professor, Department of Business
Administration, Pabna University of Science and Technology, Pabna-6600, BANGLADESH 2Md. Amirul
Islam 2Assistant Professor, Department of Business Administration, Pabna University of Science and
Technology, Pabna-6600, BANGLADESH
_____________________________________________________________________________________
____________________ Abstract: Bangladesh economy is primarily dependent on agriculture. About
84% 0f the total population lives in the rural areas and is directly or indirectly engaged in a wide range of
agricultural activities. Agriculture contributes about 20.29% to the country’s GDP (23%) About 43.6% of
the labor force is employed in agriculture with about 57% being employed in the crop sector.
Bangladesh has resource endowments to develop agro-based industries. It has rich alluvial soil, a year-
round frost-free environment, available water and an abundance of cheap labor. Increased cultivation of
vegetables, spices and tropical fruits now grown in Bangladesh could supply raw materials to local
agribusiness for both domestic and export markets. Progressive agricultural practices have improved
marketing techniques. Modern processing facilities have raised the quality of agribusiness and expanded
production levels significantly. Priority agro products are canned juices, fruits, vegetables, and dairy and
poultry products. Keywords: Agro food product, Supply chain management, logistics of the supply chain,
Inventory management.
_____________________________________________________________________________________
_ I. Objectives of the Study Objective of this study is to develop a logistics activity mix which will result in
the highest possible return on investment over time. Keeping the imperatives in view, the following
proponents have been embedded in this paper: Snap of the main supply chains for agro food products
and discussed the important features in Context of consolidation and distribution ; Status of harvest
handling and cold storage logistics of the supply chain; Logistics management of the supply chains;
Main causes of success of agro food products supply chains; Salient issues and impediments in
enhancing performance of consolidation and distribution system for agro food products; To identify
findings and observations of agro food products supply chains; Suggestions. The key feature
attributes of the supply chains are: Figure 1: A Model of Supply Chain Management The Supply Chain for
Agro-Food Products in Bangladesh Inter-business Co-ordination Md. Kamruzzaman et al., International
Journal of Engineering, Business and Enterprise Applications, 11(2), December 2014-February 2015, pp.
147-152 IJEBEA 15-172; © 2015, IJEBEA All Rights Reserved Page 148 A. Maintain customer service
standards: Supply chains determine customer needs and wants for logistics customer service;
Determine customer response to service; Set customer service levels. B. Transportation: Supply
chains select mode and transport service; Consolidate freight chart; Select carrier route; Prepare
vehicle scheduling; Choice appropriate equipment; Process claims document C. Inventory
management: Supply chains formulate raw materials and finished goods stocking policies; Prepare
short-term sales forecasting; Determine product mix at stocking points; Determine number, size,
and location of stocking points; Formulate just-in-time, push, and pull strategies; D. Information
flows and order processing: Supply chains prepare sales order-inventory interface procedures; Use
appropriate order information transmittal methods Follow ordering rules II. Post Harvest Handling
and Cold storage Logistics of the Supply Chain Post harvest handling and cold storage logistics are a
collection of functional activities (transportation, inventory control, etc) which are repeated many times
throughout the channel through which raw materials are converted into finished products and
consumer value is added. Because raw material sources, plants, and selling points are not typically
located at the same places and the channel represents a sequence of manufacturing steps, logistics
activities recur many times before a product arrives in the marketplace. The following figure exhibits
post harvest handling and cold storage logistics Figure 2: Graphic view of Post-harvest handling and
Cold-Storage logistics A single firm doing business of agro food products in Bangladesh is not generally
able to control its entire product flow channel from raw material source to points of the final
consumption, although this is an emerging opportunity. For practical purposes, the business logistics for
the individual firm has a narrower scope. In Bangladesh physical supply channels agro food products are
impeded by time and space gap between a firm’s immediate material sources and its processing points.
Similarly, the physical distribution channels have also the time and space gap between the firms’
processing points and its customers. Due to the similarities in the activities between the two channels,
physical supply (more commonly referred to as materials management) and Warehouse/Cold storage
Warehouse/Cold storage Processing Unit Growing field /Cluster Md. Kamruzzaman et al., International
Journal of Engineering, Business and Enterprise Applications, 11(2), December 2014-February 2015, pp.
147-152 IJEBEA 15-172; © 2015, IJEBEA All Rights Reserved Page 149 physical distribution comprise
those activities that are integrated into business logistics. Although it is easy to think of logistics as
managing the flow of products from the points of raw material acquisition to end customers, for many
firms there is a reverse logistics channel that are managed as well. The life of a product, from a logistics
viewpoint, does not end with delivery to the customer. Products become damaged, or nonfunctioning
and are returned to their source points for disposition. Packaging materials may be returned to the
shipper due to environmental regulations or because it makes good economic sense to reuse them. The
reverse logistics channels are utilized by the supply chains. The supply chains terminate with the final
disposition of a product. The reverse channels are considered to be within the scope of logistics planning
and control. III. Successful Consolidation and Distribution System of Perishables Figure 3: Logistics
activities of Agro Products The main causes of success are: Agribusiness firms set customer service
standards It determines customer needs, wants concerning the products and sets customer service
levels. For transportation agro firms select appropriate mode and transport service ; It consolidates
freight chart and select carrier route; Prepare vehicle scheduling; Choice appropriate equipment;
Process claims document For Inventory management Firm formulates raw materials and finished
goods stocking policies; It prepares short-term sales forecasting; Determines product mix at
stocking points; Determine number, size, and location of stocking points; Formulate just-in-time,
push, and pull strategies; For order processing Business firms prepare sales order-inventory interface
procedures; Use appropriate order information transmittal methods; Follow ordering rules; For
storage Agro firms determines space; It prepare stock layout and dock design; Do warehouse
configuration and accordingly Complete stock placemen. For materials handling these firms
appropriate equipments; It follows equipment replacement policies, order-picking procedures and
stock storage and retrieval. For purchasing/ procuring raw materials the Group selects supply source ;
It prepares purchase timing and quantities. For its products protective packaging are designed for
handling, storage and protection from loss and damage agro firms specifies aggregate quantities
,sequence and time of production ,schedule supplies for production/operations .For information
maintenance Information collection, storage and manipulation, data analysis and control procedures are
followed. Customer Md. Kamruzzaman et al., International Journal of Engineering, Business and
Enterprise Applications, 11(2), December 2014-February 2015, pp. 147-152 IJEBEA 15-172; © 2015,
IJEBEA All Rights Reserved Page 150 IV. Market responses and adjustments- Lesson Attributes Major
marketing themes of the agro products are: To focus on transactions to building long-term, profitable
customer relationships. Companies focus on their most profitable customers, products, and channels.
The company offer to deliver a constantly needed product on a regular basis at a lower price per unit
to capture the customer’s business for a longer period. For gaining market share the company
emphasizes on building customer share by offering a large variety of goods to existing customers.
They train the employees in cross-selling and up-selling. The company’s marketing is facilitated by the
proliferation of special-interest magazines, TV channels, and Internet, news groups. For creating
customer database, the company collects sales data about individual customer’s purchases,
preferences, and demographics and profitability. Companies apply data mining techniques to discover
new segments and trends hidden in the data. The company heavy relies on communication tools such
as advertising or sales force to blending several tools to deliver a consistent brand image to customers
at every brand contact. The company thinks intermediaries as customer, treating them as partners in
delivering value to final customers. V. Salient Issues and Impediments SME Agro food manufacturers
observe that the customers increasingly expect higher quality and service and some customization. The
customers perceive fewer real product differences and show less brand loyalty. They obtain extensive
product information from the Internet and other sources, which permit them to shop more intelligently.
They are showing greater price sensitivity in their search for value. SME manufacturers in Bangladesh
are facing intense competition from domestic and foreign brands, which is resulting in rising promotion
costs and shirking profit margins. They are being further buffeted by powerful retailers who command
limited shelf space and are putting out their own store brands in competition with national brands. For
this store-based retailers are suffering. Small retailers are succumbing to the growing power of giant
retailers and `category killers. Store-based from catalog houses, direct-mail firms, newspaper, magazine,
and TV direct-to-customer ads home shopping TV and e-commerce on the Internet. As a result, they are
experiencing shrinking margins. In response, entrepreneurial retailers are building entertainment into
stores with coffee bars, lectures, demonstrations, and performances. They are marketing an experience
rather than a product assortment. VI. Major findings and observation A. Sector Performance Production
of the food items in 2011-2012 and 2012-2013(up to February, 2013) exhibits the following: Agro
products Production 2011-2012 2012-2013(up to February ,2013) Food grains 34.11 million metric ton
37.04 million metric ton Milk 2.37 million ton 1.89 million ton Meat 1.26 million ton 1.27million Eggs
5742.40 million pieces 4211.00 million pieces Fish 2.90 million metric ton 3.10 million metric ton Source:
Bangladesh Economic Review-2013. Business logistics is a relativity new field of integrated management
study in comparison with the traditional fields of finance, marketing, and production. It is that part of
the supply chain process which plans, implements, and controls the efficient, effective flow and storage
of goods, services, and related information from the point of origin to the point of consumption in order
to meet customers’ requirement. In business, logistics support ensures to get the right goods or services
to the right place at the right time and in desired condition while making the greatest contribution to
the firm. Govt. sources and Bangladesh Economic Review-2013 articulate that there are about 0.80
million cottages, small and medium enterprises in Bangladesh of which about 30 percent are agro food
industries. In 2011-2012, cottage, small, medium and large enterprises produced goods worth Tk.6,
25,707 million while these enterprises in 2012-2013 (up to February, 2013) produced goods of Tk. 6,
85,218 million. Md. Kamruzzaman et al., International Journal of Engineering, Business and Enterprise
Applications, 11(2), December 2014-February 2015, pp. 147-152 IJEBEA 15-172; © 2015, IJEBEA All
Rights Reserved Page 151 The main supply chains for agro products in Bangladesh have been snapped in
the following paradigm: Name of the of Industries Name of the Products Mondal Agro Industries Limited
Yellow Potato, Used Pet Bottle, Molasses Golden Fisheries & Agro Industries Fresh Vegetable, Fresh Fish.
Intercon Agro Limited Agro Based products, Organic Fertilizer & Organic Pesticide, Fresh Vegetable.
Chowdhury Agro Industries Food, Fertilizer. Surovi Agro Industries Ltd Hybrid Seed, Gypsum Powder.
Northern Agro Services Ltd (NASL) Organic Fertilizer, Food BEXIMCO Bangladesh Fresh Garments,
garments stock lot, Finish Leather & goods. PARTEX Group( Food group) Spices, Beverages. BD Foods
Ltd. Spices, Food. Shajib Corporation Spices, Beverages. ACI Group Food, Beverage. Ship N Shore
Shipping & Trading Handy Craft, Garments, Agro Products BRAC Food, Milk products. VII. Suggestions 1.
We should follow the model of supply chain management in a systematic way; 2. Physical supply and
physical distribution should be well Managed; 3. Customers demand should be considered; 4.
Transportation cost, Inventory cost, ordering cost and packaging cost should be controlled; 5.
Management should ensure logistic support for the supply chain of perishable item. VIII. Conclusion
Transportation in the supply chain system is essential because no modern firm can operate without
providing for the movement of its raw materials or its finished products. This importance is underscored
by the financial strains placed on many firms by such disasters as a national railroad strike or
independent truckers’ refusal to move goods because of rate disputes. In these circumstances, markets
cannot be served, and products back up in the logistics pipeline to deteriorate or become obsolete.
Inventories are also essential to logistics management because it is usually not possible or practical to
provide instant production or ensure delivery times to customers. They serve as buffers between supply
and demand so that needed product availability may be maintained for customers while providing
flexibility for production and logistics in seeking efficient methods for manufacture and distribution of
the product. Order processing is the final key activity. Its costs usually are minor compared to
transportation or inventory maintenance costs. Nevertheless, order processing is an important
element in the total time that it takes for a customer to receive goods or services. It is the activity
triggering product movement and service delivery. Although support activities may be as critical as the
key activities in any particular circumstance, they are considered here as contributing to the logistics
mission. In addition, one or more of the support activities may not be a part of the logistics activity mix
for every firm. For example, products such as Protective packaging is a support activity of transportation
and inventory maintenance as well as of warehousing and materials handling because it contributes to
the efficiency with which these other activities are carried out. Purchasing and product scheduling often
may be considered more a concern of production than of logistics. However, they also affect the overall
logistics effort, and specifically they affect the efficiency of transportation and inventory management.
Finally, information maintenance supports all other logistics activities in that it provides the needed
information for planning and control. In group discussions with the agro food business firms the
following benefit attributes were derived: Error rates of less than one per 1,000 orders; Logistics costs
of well under 5 percent of sales; Finished goods inventory turnover of 20 or more times per year
Total order cycle time is five working days; Transportation cost is one percent of sales revenue or
less. Md. Kamruzzaman et al., International Journal of Engineering, Business and Enterprise
Applications, 11(2), December 2014-February 2015, pp. 147-152 IJEBEA 15-172; © 2015, IJEBEA All
Rights Reserved Page 152 References [1]. Bangladesh Economic Review-2013; [2]. SME Report-2013; [3].
Profiles of the Agro food Industries [4]. Azim. Syed, Market Strategy and Agro business Development
(2009); [5]. Ahmed R, Supply Chain Management and SMEs (2010). [6]. Andersen, O. and A. Buvik (2001)
Inter-firm co-ordination: international versus domestic buyer seller relationship. Omega, the
International Journal of Management Science 29: 207-219. [7]. Boehlje, M., L. Schrader and J. Akridgel
(1998) Observations on formation of food supply chains. In: Proceedings of the third international
conference on chain management in the agribusiness and the food industry edited by G. W. Ziggers, J. H.
Trienekens and P. J. P. Zrbier. Wageningen [8]. Buurma, J. S. et al. (2001) Developing countries and
products affected by setting new maximum residue limits (MRLs) of pesticides in the EU. The Hague:
Agricultural Economics Research institute (LEI). Cok, M. L., T. Reardon, C. Barrett and Joyce Cacho (2001)
Agro industrialization in emerging markets: overview and strategic context. International Food and
Agribusiness Management Review 2 (3/4): 277-288. [9]. Farina, E.M.M.Q., and T. Reardon (2000)
Agrifood Grades and Standards in the ExtendedMercosur: Their Role in Changing Agrifood System,
American Journal of Agricultural Economics, 82(5): 1170-1176. [10]. Grievelink, J. W., L. Josten, and C.
Valk (2001) State of the art in food: the changing face of the worldwide food industry. Amsterdam:
Elsevier. [11]. Gaisford, J. D. and W. A. Kerr (2001) Economic analysis for international trade
negotiations: theWTO and agricultural trade. Northamptom: Edward Elgar. [12]. Handfield, R. B. and E.
L. Nichols (1999) Introduction to supply chain management. N.J.:Prentice Hall. [13]. Itharattana, K.
(1996) Market Prospects for Upland Crops in Thailand, Working Paper 21, CGPRT Center, Bogor. [14].
Jaffee, S. M. (1994) Contract farming in the shadow of competitive markets: the experience of Kenyan
horticulture. In: Living under contract, contract farming and agrarian transformation in sub-Sahara Africa
edited by P. D. Little and M. J. Watts. Wisconsin: University of Wisconsin Press. [15]. Kurt Salmon
Associates (1993) Efficient Consumer Response: enhancing consumer value in the grocery industry,
Washington DC: Food Marketing Institute. [16]. Lambert, D. M. and M. C. Cooper (2000) Issues in supply
chain management. Industrial Marketing Management 29: 65-83. [17]. Lazzarini, S. G., F. R. Chaddad and
M. L. Cook (2001) Integrating supply chain and network analyses: the study of netchains. Chain and
Network Science, 1 (1): 7-22.
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The Role and Importance of Logistics in


Agri-Food Supply Chains: An Overview of
Empirical Findings
Article (PDF Available) · July 2016 with 1,560 Reads
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Karol Wajszczuk
 9.08

 Poznań University of Life Sciences

Abstract
This paper presents a survey of empirical literature on the role of logistics in the agri-food sector. The main objective
of the paper is to systemise and comprehensively describe the knowledge and information derived from a large
number of sources about the specifics of food supply chains in terms of logistics, with particular emphasis on
agricultural enterprises. Moreover, taking into account the increasing environmental, social and ethical demands
concerning Agri-Food Supply Chains, the article formulates challenges for logistics and future trends in its
development. In conclusion, it proposes a definition of logistics for the agri-food sector.

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47
1. INTRODUCTION
The agri-food sector plays a significant role in
the economy, being one of the main contributors to
the GDP of many countries, particularly in
developing countries, where the share of this sector
in the GDP reaches even as much as 50%. On the
other hand, in highly developed countries, such as
the USA or the EU countries, it is not greater than
2% [5]. According to The World Factbook, in 2013
this index reached nearly 4% in Poland [41].
According to the European Commission, in
2008 slightly more than 48 million people were
employed within the EU-27’s food chain; they
worked in nearly 17 million different
holdings/enterprises [16].
In view of the fact that in agri-food supply
chains (AFSCs) there are raw materials and
products with short sell-by dates, and due to the
fact that there are living organisms in the initial
links of this chain, this sector is a logistic
challenge. In contrast to all other sectors of the
economy, apart from the requirement of efficient
logistics, it must guarantee the delivery of safe

1
The paper is funded from the research budget under
the scientific development project for 2009-2015 No.
POIG.01.03.01-00-132/08, financed by the European
Regional Development Fund as part of the Operational
Programme ‘Innovative Economy’.
food to final consumers. Apart from that, the
transport of food products, especially livestock,
requires the application of specialised logistic
infrastructure.
At the same time, for a few years we have seen
growing environmental, social and ethical
concerns, and increased awareness of the effects of
food production and consumption on the natural
environment. These phenomena have led to
increased pressure exerted by consumer
organisations, environmental advocacy groups,
policy-makers, and several consumer groups on
agri-food companies to deal with social and
environmental issues related to their supply chains
within product lifecycles, from 'farm to fork' [23].
Therefore, effective and environmentally friendly
logistics and production technologies are key
success factors both for manufacturers and retailers
in the AFSC.
The main goal of the article is to make a
synthetic presentation of the role and significance
of logistics in AFSCs based on an overview of
empirical findings. The detailed objective is to
present specific features of food supply chains in
the logistic aspect, with a particular focus on
agricultural enterprises.
Apart from that, in view of the increasing
environmental, social and ethical demands
concerning food supply chains, the article1will

Chains: An Overview of Empirical Findings

This paper presents a survey of empirical literature on the role of logistics in the agri-food
sector. The main objective
of the paper is to systemise and comprehensively describe the knowledge and information
derived from a large
number of sources about the specifics of food supply chains in terms of logistics, with particular
emphasis on
agricultural enterprises. Moreover, taking into account the increasing environmental, social and
ethical demands
concerning Agri-Food Supply Chains, the article formulates challenges for logistics and future
trends in its
development. In conclusion, it proposes a definition of logistics for the agri-food sector.

The Role and Importance oof Logistics in Agri-Food…


Logistics and Transport N 2(30)/2016

48
formulate challenges for logistics and further
trends in its development in the agri-food sector.
The article will also attempt to answer the
question: What is an adequate definition of

2. THE LOGISTICS ASPECTS OF


AGRICULTURAL PRODUCTION
Agricultural enterprises are an essential link in
the AFSC. They produce raw materials for
agricultural processing and make fresh products,
which are directly or indirectly delivered to the
consumer. Thus, the quality of raw materials and
products and the costs generated by agricultural
enterprises will have considerable influence on the
final efficiency of the entire supply chain. Apart
from that, the type of production technologies and
logistics will significantly affect these costs and
quality due to the direct contact with the
environment and living organisms.
As Stachak [39] reports, specific traits of
agricultural production can be divided into primary
and secondary traits. Primary traits are mostly
characteristic of plant production, but due to their
connections with raw materials they influence the
traits of animal production and the food industry.
Primary traits result in secondary traits of
production, such as: promptness and seasonality of
outlay used and production gained, diversification
in production between enterprises, etc. It is specific
that agricultural production is characterised by
combined application of all of these traits rather
than exclusive application of each individual trait,
because some of these traits are also important
characteristics of forestry, building, the food
industry and mining industry.
and land,
climatic conditions,
genetic traits of plants and animals.
elements:
enterprises,
Most of the traits listed above strongly affect
logistic processes in an agricultural enterprise and
the entire food supply chain. Studies which have
been conducted for many years by different
scientific centres resulted in a detailed list of
specific traits of agricultural production,
determining the logistics of agricultural
enterprises. The following traits were distinguished
[17, 43, 53, 4, 48, 26, 27]:
(considerable costs of internal transport
resulting from multiple journeys to individual
fields within one season and travelling the
distance of a dozen or more kilometres from
the economic centre),
the need to make large reserves in a short
time, which occupy a large warehouse area),
harvest may cause a considerable loss in the
yield or even its complete loss in extreme
cases, interrupted transportation of some
products, e.g. milk, may cause the loss of their
properties and thus, the loss of their
commercial value),
from the seasonality effect and causes uneven
demand for factors of production),
grains, beetroots, potato tubers, dry and juicy
roughages, milk, livestock) determines the
need to have a wide range of different means
of transport [15]. There are special
requirements concerning animal transport, as
2
described in applicable EU regulations ,
(including both tonnage transported and the
multitude of journeys). It is illustrated by the
results of previous studies, which prove that

2
The first EU directive on the protection of animals
during transportation was agreed on in 1977 and new
resolutions, which are applicable now, were passed in
1991 and 1995. According to these regulations, it is
necessary to meet the following requirements before the
beginning of animal transport: the carrier must be
licensed to transport animals; only competent personnel
with appropriate skills and know-how may transport
livestock; animals must be appropriately loaded and
provided with space on the means of transport; animals’
basic needs for water, food and rest must be satisfied;
animals must be fit for transport [46].

49
depending on the type of production and
degree of intensity, there are 20-80 tonnes of
weight transported per 1 ha of farmland [47,
49, 50, 53, 44].
burdensome trait can be eliminated from
external transport on condition of good
management – haulage of a product to be sold
and return to the base with means of
production purchased, but it is impossible to
eliminate it from internal transport – between
the base and field). Empty haulage is common
in the agricultural sector and the load capacity
utilisation level of vehicles is very low (it
varies between 10% and 95%) [19].
(the poor quality of roads lowers the quality of
agricultural products, especially juicy
roughages – green forage, fruit, some
vegetables, etc.)
from their short shelf life and high
perishability (it involves the risk of loss
during too long-distance haulage and during
too long storage period – the following plant
products are particularly sensitive: green
forage, fruit, vegetables, and the following
animal products are perishable: milk, meat). If
we take inappropriate transport, storage and
processing technologies into consideration,
the loss during and after harvest reaches 60-
70% in developing countries [19, 40], whereas
this index reaches only 1-2% in the USA [40].

Therefore, there was a good reason why as


early as in 1813 Albrecht Thaer formulated his
well-known statement that … the farm is

3. LOGISTICS-RELATED CHALLENGES
AND PROBLEMS IN AFSCs
In view of the progressing globalisation, the
specific traits of agricultural production which
were discussed above determine not only the
logistics in agricultural enterprises but they also
affect the functioning of entire AFSCs. They
intensify and generate new determinants, which
make them difficult to identify in AFSCs. Having
analysed different publications, the following
factors can be distinguished:
from variable weather and biological
conditions affecting organoleptic traits such
as: taste, aroma, consistence, etc.)
factor, but it is intensified by the
internationalisation of chains resulting from
the search for new and cheap sources of
supply of raw materials),
contribute to contamination (infection) issues
and difficulties in ensuring a fixed processing
recipe upstream the AFSC,
sugar, flour, etc. – it is difficult to trace the
sources of supply of raw materials) is the
predominant type of production in AFSCs in
contrast to other sectors, where discrete
manufacturing prevails (assembling cars,
washing machines, etc. - it is easy to trace
individual parts and subassemblies),
farmer’s field to the consumer’s table’ (it
causes numerous disturbances in the
information flow and in consequence, it
generates excessive inventories increasing
upstream the supply chain – ‘the bullwhip
3
effect’ ) [11, 27]. Apart from that, the
multitude of participants in the supply chain
favours the presence of numerous formal and
informal relations, which make difficulties in
the desirable development of partnership and
trust in the chain,

3
The bullwhip effect, whiplash effect or whipsaw effect
consists in amplified transfer of demand changes in the
supply chain. Relatively small deviations in the final
consumer’s demand increases as the information about
the demand is transferred upstream the supply chain – to
the producer and further to suppliers. The demand
Jay Forrester in 1958. He thought that the main cause of
this effect was the behaviour of managers, who made
rational decisions and overestimated the increase or
decrease in clients’ demand and they assumed the
change would continue. He also noted other sources of
this effect, i.e. the time gap between the transmission of
order, delivery and material flow as well as the
influence of promotional actions on creating
fluctuations in the demand [38].

The Role and Importance oof Logistics in Agri-Food…


Logistics and Transport N 2(30)/2016

50
models that cannot be sustained by small and
medium farms. The final price of food
products can be almost 250-350% higher than
the price at the farm level, especially in
developing countries [45],
innovation) to achieve high efficiency
(suppliers from developing countries consider
transport and post-harvest costs to be the most
important challenge [34] and standards (e.g.
4 5
ISO 22000 or FSSC 22000 ) required by
global markets) [18],
lack of trust and supporting means, mostly in
developing countries (e.g. the lack of proven
business models, modern storage
infrastructure, ICTs, training, etc.).

4. LOGISTICS COSTS IN AGRI-FOOD


SUPPLY CHAINS
The abovementioned specific traits of AFSCs
affect the generation of a particular level of
logistics costs and have influence on their
structure. So far there have been few domestic and
foreign reference publications concerning the level
and structure of logistic costs in AFSCs (especially
in agricultural enterprises) and the factors which
influence them. The author’s research on
agricultural enterprises in Poland revealed that
there was a high share of logistics costs in total
costs of production, i.e. 42.2% [52]. Other studies
conducted under the IGRE project analysed
logistics costs in the production of silages from
selected plants for biogas production. The studies
were conducted in five groups of farms with
average areas of 15 ha, 35 ha, 130 ha, 600 ha and
1500 ha of farmland. The scale of production had
the greatest influence on the share of logistics costs
in total costs. This index ranged from 51.1% to
54.2% on the smallest farms. This share was about
8.5% lower on the farms with 35 ha of farmland
and it ranged from 42.9% to 45.7%. On the farms
with 130 ha of farmland the share of logistics costs
was lower by about 13% again and ranged from

4
The ISO 22000 standard for food safety and quality
5
The FSSC 22000 standard was developed by the
Confederation of the Food and Drink Industries in the
European Union and by leading food producers; it is an
extension of the ISO 22000 standard.
30.1% to 32.1%. The share of logistics costs was
slightly lower on the farms with areas of 600 ha
and 1500 ha, where they ranged from 28.6% to
33.3% and from 29.6% to 32.2%, respectively. The
lowest share of logistics costs was noted in
Virginia mallow farming, whereas the highest
share was noted in sorgo cultivation [37].
By comparison, as results from global data, the
average share of logistics costs in total costs of
manufacturing products in enterprises of different
branches ranges from 10% to 25% [31].
Table 1 compares the structure of logistics costs
in agricultural enterprises with the enterprises in
other sectors.

Table 1. The share of basic components of logistics


costs in agricultural enterprises vs enterprises of other
branches.
Component of
logistics costs

Percentage of basic components of


logistics costs in total logistics costs
(%)
Agricultural
enterprises
Enterprises
of other
branches
(Poland)
Enterprises
of other
branches
(world)
Physical flow costs 86.5 44.2 31.5
Inventory costs 12.2 34.3 39.7
Costs of information
processes
1.3 14.2 19.5
Source: 2013. Model rachunku kosztów logistyki dla
Poznań

As results from the data, in comparison with the


enterprises in other sectors the predominant cost in
the structure of logistics costs in agricultural
enterprises is the cost of physical flow of raw
materials, materials and products. It is mostly
conditioned by the scale of outlay in internal
transport, which results from the abovementioned
specific traits of this type of enterprises.
As results from the research conducted in
Thailand, the analysis of the structure of logistics
costs in the production of mangos revealed that
there was a high share of costs of transport in total
logistics costs. The research findings proved that
the mean costs of orders in this structure amounted
to 9.74%, inventory costs – 2.24%, costs of
information processes – 2.43%, whereas mean
costs of transport reached 16.29% [35].

51
5. CURRENT TRENDS AND PROGNOSES
IN AFSC LOGISTICS
In view of the considerations presented above,
we can now discuss the current trends and
prognoses concerning changes in the AFSC
logistics.
Until recently there were two aspects of classic
optimisation in logistics, i.e. costs and time. Such
aspects as environmental costs or social problems
were usually ignored [33]. Since the 1980s, when
we saw the emergence of considerable influence of
environmental protection on the functioning of
enterprises, there has been increasing pressure on
the optimisation of three aspects of logistics, i.e.
costs, time and the environment.
As far as the environmental aspect is concerned,
initially optimisation only concerned the
optimisation of transport routes, maintenance of
means of transport, consumption of non-
sustainable raw materials, emission of exhaust
gases and noise, traffic congestion on roads,
disposal of dangerous waste [6]. Research on these
issues contributed to the development of the term
‘green logistics’, which began to be used in
publications. Green logistics originated in the mid-
1980s as a concept characterising logistics systems
and approaches that use advanced technology and
equipment to minimise environmental damage
during operations [10, 42].
Studies show that a considerable number of
consumers prefer purchasing products from the
companies which take care of environmental
protection and build good models of civic
behaviours. Apart from that, these preferences are
reflected in investments – consumers more often
invest their money (purchase shares) in such
companies [3, 21].
The abovementioned phenomena concerning
logistics are closely related with the CSR concept,
which has been elaborately described in many
publications [8, 32, 12]. Due to the AFSC traits
described in the aspect of logistics and its
significant influence on the environment, in recent
years there have been many attempts to adapt the
CSR concept to assess logistic actions in the aspect
of social responsibility. The new concept was
called Logistics Social Responsibility (LSR) [7].
As results from the research conducted so far, the
LSR concept encompasses 47 practices classified
in five areas: Purchasing Social Responsibility
(PSR), Sustainable Transportation (ST),
Sustainable Packaging (SP), Sustainable
Warehousing (SW) and Reverse Logistics (RL)
[12]. In view of the increasing consumers’ demand
for food quality and safety (fresh, palatable,
nutritious and safe food) and animal welfare, and
in view of increasing social expectations and legal
requirements concerning environmental protection,
the LSR concept will continue to develop,
especially in food supply chains.
In view of the large number of intermediaries in
AFSCs and especially due to the high
fragmentation among producers of agricultural raw
materials, there will be progressing concentration
of farms, processing plants and wholesalers so as
to reduce their number and simultaneously, to
increase their size. These changes will favour
greater integration within the chain and they will
help to build partner relationships between all
links. Such solutions in AFSCs may be a chance
for small producers to operate on global food
markets.
However, in order to guarantee that they can
compete successfully it will be necessary to
implement systems certifying the quality of
supplied raw materials and products. The best-
known standards in AFSCs are as follows: 6
IFS - International Featured Standards [24]. It
is a group of international standards which provide
a fully objective image of food quality and safety
thanks to the application of appropriate
mechanisms. Apart from that, the IFS may be a
tool for traders to assess the quality of a supplier.
Above all, it may ensure continuous improvement
of producers and enable them to define the weak
points of their organisation. There are different
varieties in this group of standards. The following
standards concern logistics:
rules of evaluation and auditing procedures,
standardise the rules of qualifying suppliers
and to make periodical, independent and
objective assessments of food distributors.
Today the IFS is a ticket to cooperation with
leading trade companies from Western
Europe. IFS Food was the first of the IFS

6
The IFS is a requirement in all German retail chains
associated in the HDE, such as: Metro AG, Rewe,
Tegut, Edeka, Aldi Tengelmann, Ava, Lidl, Spar,
Globus, Markant, COOP and Migros (Switzerland). It is
also a requirement of French retail chains, such as:
Auchan, Carrefour, EMC, Groupe Casino, Metro,
Monoprix, Picard Surgeles, Provera (Cora, Match),
System U. It is estimated that today the IFS is
recognised by 65% of entities involved in food trade.
Apart from the United Kingdom, the IFS is the most
important standard for suppliers of large retail chains.

The Role and Importance oof Logistics in Agri-Food…


Logistics and Transport N 2(30)/2016

52
family. The standard underwent consecutive
modifications, which started in 2003 and
continued until 2010. The modified system of
assessment enables even better identification
of the companies applying good practice of
food production and distribution [25]:
concerning e.g. weight and nutrient
control and information provided on
labels;
meet the latest version of the document
7
‘GFSI Guidance ’ on the assessment of
risk and legal regulations which are
applicable in a particular country;
market;
packages.
programme for food safety assessment by
retailers and wholesalers from the food
industry. It is based on the GFSI Global
Markets checklist. The programme is chiefly
addressed to new and developing enterprises.
which encompasses all handling procedures
concerning loose products sold by food
wholesalers. It also encompasses the process
of production in small amounts, e.g. meat.
The requirements of this standard are the
same as those in IFS Food but additionally, it
includes the guidelines which describe how to
handle specific requirements on the market of
food wholesalers.
non-food products. It encompasses all logistic
actions, such as loading, unloading, storage,
distribution and transport. The standard can be
applied to all types of transport, ranging from
lorries, trains and ships to aeroplanes or any
other type of transport (both frozen products
and products transported without cooling).

7
The GFSI defines the process where food safety
management systems may gain recognition through the
GFSI. The Global Food Safety Initiative (GFSI) is
managed by the Consumer Goods Forum and it was
established in May 2000. It is a non-profit organisation
established under Belgian law. It provides knowledge
and guidelines concerning food safety management
systems, which are necessary for safety in the entire
supply chain [20].
package systems based on the HACCP
system. It was developed in conjunction with
the Canadian Food Inspection Agency and a
broad spectrum of representatives working in
the branch. The aim of the standard is to
ensure food safety through guidelines for
packaging materials establishing a common,
uniform evaluation system ensuring
comparability and transparency in the entire
supply chain to reduce manufacturers and
retailers’ costs and time. PACsecure was
accepted by the American Food Safety
Alliance for Packaging (FSAP), which
associates organisations such as: General
Mills, Kraft, Nestle, Conagra Foods, Unilever,
Sara Lee and Campbell Soup.
for the evaluation of suppliers. The standard is
applied to each supplier, regardless of the
country of production or origin and it sets the
standards for food producing enterprises.
international food standard developed by the
British Retail Consortium. Like the IFS, the
BRC sets requirements concerning the food
safety management system for food producers
and suppliers and it specifies auditing rules.
The system combines the GMP and GHP
rules and the HACCP requirements with
elements of the management system. A BRC
certified system is a requirement to supply
products to British international retail chains.

To sum up the above considerations concerning


the specific character of AFSCs/agricultural
enterprises, we should make a reference to the
definition of logistics. Since the Council of Supply
Chain Management Professionals defined
8
logistics in 1998 [14], the differences between
individual sectors of the economy and progress in
logistics technologies allowing for the specific
character of a particular branch have caused the
identification of many definitions of logistics,
which are adequate to the particular sector. Having
overviewed the definitions of logistics for the

8
CSCMP’s Definition of Logistics Management:

53
agri-food sector presented in selected publications
[44, 22, 1, 55, 2, 9, 19, 30, 36, 51, 28, 29], the
following definition is 9suggested:
and non-food products with minimum logistics
In this light, in relation to AFSCs, the classical
logistics approach with ‘7Rs’: right product, right
does not exhaust the range and requirements for
logistics in agri-food supply chains and should be
supplemented with another ‘R’ - right
Thus, the modified rule with 8Rs defines eight
requirements for procedures concerning the flow of
materials, raw materials, animals and agri-food
products and it defines appropriate implementation
of the essential logistic tasks in AFSCs. It mostly
concerns:
flow and storage and in consequence, it
satisfies the material demands of people
participating in logistics processes;
construction of food supply chains in the
development strategy of an enterprise;
processes to the requirements concerning
customer service;
materials and products to reduce the flow
costs and in consequence, to reduce the costs
of all logistics processes;
so that they can be friendly to the environment
(including animals) and so that they can
guarantee the supply of safe food products to
consumers.

9
Biomass production for energetic purposes – biofuels.
6. CONCLUSIONS
1. The study of reference publications showed
the specific traits of food supply chains which
should be taken into consideration in the
planning of these systems.
2. We can observe an increasing pressure to
optimise three aspects of logistics, i.e. costs,
time and the environment.
3. In view of the increasing consumers’ demand
for food quality and safety and for animal
welfare and in view of increasing social
expectations and legal requirements
concerning environmental protection, we can
expect that the LSR concept will continue to
develop, especially in food supply chains.
4. There will be progressing concentration of
farms, processing plants and wholesalers so as
to reduce their number and simultaneously, to
increase their size.
5. These phenomena will favour greater
integration within the chain and they will help
to build partner relationships between all
links.
6. In order to guarantee that agri-food supply
chains can compete successfully it will be
necessary to implement systems certifying the
quality of supplied raw materials and products
and the methods of their delivery.
7. The article proposed the definition of agri-
food logistics which allows for
recommendations of the LSR concept.
8. It is postulated that the classic approach to
logistics should be extended with the issue of
due responsibility for environmental
protection (7Rs →8Rs).

HOW TO DEFINE LOGISTICS IN AGRICULTURE? Uroš Kramar, Darja Topolšek, Martin Lipičnik University of
Maribor, Faculty of Logistics Celje, Slovenia Logistics in agriculture is gaining more importance as it deals
mainly with the smooth supply of food and other agricultural products from the producer to the final
consumer. It is important to take account of the principles that apply in other subsystems of logistics,
the right merchandise in the right place, intact, in the agreed amount on the agreed place at the lowest
possible cost. Scope of agricultural supply chains and logistics are unlike the supply chain and logistics in
the production currently under-researched. The aim of this research is to review the definitions in an
agriculture logistics and to provide a comprehensive definition. Key words: agriculture, logistics,
definition Introduction In The Art of War, published in France in 1836, Baron Antoine Henri de Jomini (de
Jomini, 2007) created the word “logistics” and defined it as “Logistics comprises the means and
arrangements which work out the plans of strategy and tactics. Strategy decides where to act; logistics
brings the troops to this point.” At the time, “strategy” was military strategy and “flows” concerned all
goods, from food to weaponry that needed to be transported to, or close to, the battlefield. Today,
logistics not only remains a major concern in any military operation, but has also emerged as a major
tool in company management. Based on the development, in October 1998 the Council of Supply Chain
Management (CSCMP) proclaimed the following definition, which asserts that logistics management was
solely a part of SCM: Logistics is a part of the supply chain process which plans, implements and controls
an efficient flow of goods and warehousing, services and relevant information from the point of origin to
the point of consumption with the objective to meet consumer needs (CSCMP, 2013). Zhang and Li
(2012) defined agri-food supply chain as a network of business enterprises that are related to food,
through which the food is “moving” from production to consumption, including the activities of pre-
production and consumption. But where in this definition lies the logistics? There are a number of
changes in agri-food industry that initiate a re-orientation of food companies regarding their roles,
activities and strategies. For example, demand and supply are no longer restricted to nations or regions
but have become international processes. Furthermore, product assortments have expanded
significantly and market requirements on product quality, traceability, delivery services and
sustainability are still increasing. The EU's common agricultural policy focuses on quality not quantity. It
helps farmers not just to produce food, but also to protect the environment, improve animal welfare
and sustain viable rural communities. The main highlights of EU farm policy from 2013 are (European
Union, 2013): Enabling farmers to: produce enough safe, high-quality food, contribute to a diversified
rural economy and care for the environment and their animals to the highest standards. Supporting
consumers to make informed choices about their food, through voluntary EU quality-labelling schemes.
These labels – indicating geographic origin, use of traditional ingredients or methods (including organic)
– also help make EU farm products competitive on world markets. Promoting innovation in farming and
food processing to increase productivity and reduce environmental impacts, Encouraging fair trade
relations with developing countries – by reducing EU farm export subsidies, which makes it easier for
developing countries to sell what they produce. To react to these changes and challenges, agricultural
and food companies are continuously working on innovations by developing and implementing
enhanced quality, logistics and information systems (IS). Most literatures on logistics outsourcing discuss
the use of traditional logistics services such as transportation and warehousing. However, very little
research is done and known about logistics implications for food supply chain networks. So in spite that
the great importance of logistics in industry, business and other branches is generally acknowledged,
this problem is not systematically investigated in agriculture (Vanecek and Kalab, 2003). Definition of
agricultural logistics The developed logistics industry and market system are the important guarantee of
modern agriculture. The research on agricultural logistics is of great significance to speeding up the
process of agriculture modernization and improving the competition ability of agriculture (Qi, Yang,
Tang, 2008). The main aim of this article is to find the most appropriate definition of agricultural logistics
or to, based on deferent definition in scientific literature, define agricultural logistics based on the
existing ones. Searching the existing definition of logistics in agriculture sector as made through
browsers EMERALD Management Xtra (EMX); ScienceDirekt; Elsevier; SpringerLink and JSTOR (Journal
Storage). We also searched with browsers IEEE Xplore, JSTOR (Journal Storage), and ProQuest
Dissertations & Theses. In the next section we prepared a table with different definitions from different
authors. Table 1: Existing definitions of Agricultural Logistics Authors Definition Li, Li, Chen, Li Li, Qin,
Zheng (2012) Agricultural products logistics refers to moving material objects and related information
from producer to consumer physically for meeting customer’s needs and achieve the value of
agricultural products. Daoping, Feng, Lei (2012) The logistics of food crops is a special type of logistics of
agricultural products. The production, circulation and sales of food crops matters to state strategic
reserve. Liping (2009) Agricultural products logistics is a branch of the logistics industry, refers to
physical flows of physical entities and related information from producer to consumer that satisfy
consumer demand, including agricultural production, acquisition, transportation, storage, loading and
unloading, handling, packaging, distribution processing, distribution, and information activities. Yao, Cui,
Ying, Wei (2009) Agriculture products logistics dynamic alliance provided a suitable mode for agriculture
products logistics. Zhang, Wang (2011) Agricultural Products Logistics is one important part of economic
behaviour, which is to create value and surplus value with the purpose of the act. Modern agricultural
products logistics is to use modern science and technology to service in modern society. Xu (2011) Based
on the understanding of modern logistics, modern agricultural logistics can be defined as: an integrated
industrial activities of integrated operation and management relying on advanced computer networks
and information technology, integrating the use of modern transport and storage facilities, through a
large number of business information instructions, engaged in agricultural transportation, storage,
processing, handling, packaging and distribution processing, distribution and information processing.
The aim is to optimize the distribution channels of agricultural products, reduce operating costs of
agriculture-related enterprises in full range, and provide faster and better service to consumers of
agricultural products. Li, Zhou, Wang (2012) Taking agricultural products as the core, the agricultural
products logistics refers to the organic combination of the entity flowing from producer to receiver and
the involving technology, organization, management and other basic functions. It consists of a series of
links, such as agricultural production, purchase, transport, storage, loading and unloading, handling,
packaging, distribution, circulation processing, information activities, and etc. and realizing agricultural
product appreciation and organization objectives in the process. Wang (2012) Agricultural products
logistics is a branch of the logistics industry, refers to physical flows of physical entities and related
information from producer to consumer that satisfy consumer demand, including agricultural
production, acquisition, transportation, storage, loading and unloading, handling, packaging, distribution
processing, distribution, and information activities. Development objectives of agricultural products
logistics is to increase value-added of agricultural products, save distribution costs, improve circulation
efficiency and reduce unnecessary losses, to some extent avoid market risks Gan, Zhu, Zhang (2011) It is
defined agricultural product logistics is the economic activity from agricultural product producer to the
consumers in order to satisfy customers’ demands, including the links such as agricultural product
production, purchasing, transportation, storage, loading and unloading, handling, package, processing,
distribution and information processing. Tan, (2012) Logistics in agriculture are activities associated
within the process itself, to improve the quality of agricultural products. The logistical process is
improving and ensuring the quality of agricultural products, reducing logistics costs, an optimal
allocation of resources, promote the welfare and protection of the environment, strives for the
development of agricultural product logistics in the direction of green logistics. Federico (2011) Logistics
plays a central role in modern agricultural production. The predominance of the logic of commodity
trading, expressed by the standardization and international regulation of production, has been
promoting the deepening of the territorial division of labor, leading to regional agricultural
specialization. The enlargement of the agricultural productive spatial circuits has integrated the flows on
a global scale, calling for ever further--reaching logistics in the linking up of the stages spatially separate
from production. Shufeng, Liya, Wei (2010) Modern agriculture logistics should have 12 functional
elements of procurement, supply, storage, transportation, loading and unloading, sorting, packaging,
distribution, distribution processing, marketing, recycling, and information control; the task of modern
agriculture logistics management should not only put foot on solving to lower the logistics cost, and
lessen and avoid the logistics operating risks, but also research how to promote all of function elements
to comprehensively play the integrated effects to create plentiful “3rd party profit” of logistics
enterprises, and become the source of power of the village lowering agricultural production cost raising
agricultural economic benefit promoting the peasants to raise the income and push forward modern
agricultural economic development. The authors of the definitions that we have given in the table
indicate that logistics in agriculture is an economic activity that caters to the optimal, continuous flow in
the process, from the producer of an agricultural product to the final consumer. Logistics in agriculture is
an effective and efficient system that ensures a smooth and successful process of production of
agricultural products. The aim of logistics in agriculture is in increasing production of agricultural
products to care for its continuous operation, optimize the cost of production, storage, transport and
distribution, increase value-added agricultural products and satisfy consumer. Conclusion Our search
strategy started with reviewing theoretical bases of logistics. With extensive search on internet
databases we found more scientific journals that were based on the topic of logistics in agriculture. Next
step was exploring the concept of logistics in agriculture. From each journal we signed out different
definitions of logistics in agriculture writing them down in orderly fashion. The result was a broad range
of definitions and keywords which appeared in each definition. After exploring the concept of logistics in
agriculture we can assume, that the understanding ant the meaning of logistics in agriculture is not so
different than basic meaning of logistics. Like there is no unified definition of logistics we cannot speak
of unified definition of logistics in agriculture. Like Delfmann and others (2010) which have defined
logistics as a scientific discipline we came out with this definition of the term: Logistics in agriculture is a
discipline which analyses and models division-of-labour economic systems as time-based and location-
based flows of agricultural objects (above all goods and people) in agricultural networks, supplying
recommendations for action on the design and implementation of these agricultural networks. Logistics
in agriculture tries to configure, organize, control or regulate different agricultural networks and flows
with the aim of paving the way for progress in the balanced achievement of economic, ecological and
social objectives. The particular approach of logistics is that it interprets economic processes as flows of
goods, information, people, assets and other objects in agricultural networks. Logistics identifies,
describes and analyses these networks and flows of objects from a multi perspectival viewpoint and
creates a foundation for the organisation of these networks and flows geared towards economic,
ecological and social goals. References 1. de Jomini, A. H. (Baron de Jomini)(2007). “The Art of War”, Arc
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