Fixing the supply chain

Aug 27, 2008 Features / Columnists

Peter R. Ramsaroop, MBA

INTRODUCTION

Supply chain or logistics network is the system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer.

Supply chain activities transform natural resources, raw materials and components into a finished product that is delivered to the end customer.

We struggle locally in getting our products to international markets. Recently I spoke to a local entity which is exporting finished lumber to Europe.

Apart from the knowledge of the business and a quality product, they were able to break into new markets by connecting to the customer mainly through a sales network tailored for each country.

AGRICULTURE SUPPLY CHAIN

We know this is one area where the supply chain is broken. Many farmers have reduced their investments because of the inability to get their produce to markets.

Specifically fresh produce that is in great demand both in the Caribbean and North America, we cannot connect to these markets. Why?

One, we lack large refrigeration capacity and two, and more importantly, lack of dedicated air cargo to the region. If a distributor takes their produce to the Airport and there is no cargo space available, then the only choice left is to sell it at the local market at a reduced cost.

We know Guyana boasts some of the most fertile soil in the region, within hours of millions of people in the Caribbean and North America. I have written many times before that Guyana has the natural wealth to feed an entire nation and the Caribbean, but it can barely feed itself.

Farmers harvesting their land earn meaningless dollars because the entire supply chain has not been developed in order for their products to get from farm to markets globally.

One of the key leadership flaws we in the private sector see in politicians is their inability to think, to develop a plan prior to executing, and seeing them measuring the success of their plan as to the benefit of our people versus a political win.

The recent government intervention at Ogle Airport will severely hinder the air transport of fresh produce. If we can land an ATR 42/72 that needs a 4,000-5,000 foot runway, we may be able to get a daily flight of cargo to the region.

We should aggressively tie raw materials to the market but with solving the other parts of the supply chain such as transport.

It is great to tell people to plant more, but without any movement into the two areas described above, the chain will continue to be broken.

VALUE ADDED PRODUCTS

Value added refers to the additional value of a commodity over the cost of commodities used to produce it from the previous stage of production.

For example, the cost to make pepper sauce is just not from the raw peppers, but other components such as vinegar, onions, etc., must be purchased in order to get to the final product. Add the labour cost, VAT, and profit margins to get to a final cost.

Where the issue stands with most of our value added products is when it comes to the shipping cost to other markets.

Given that the cost of energy is higher than competing countries, our products then do not make it to the shelves.

Key to value added products, also, is packaging. If your bottle does not fit like the competitor’s bottle, then certain supermarkets may not carry it on their shelves.

Obtaining shelf space becomes a very important factor to the distributor. This is another area, as part of our supply chain, which we must fix.

CONCLUSION

The purpose of this column was to enlighten all of us that it is not just the growing of more food or investing in new areas.

We must solve the key components of the supply chain that have kept us back over the years and seen other countries get ahead of us.

A key to moving ahead in this process is developing the correct technological links to the electronic marketplace.

Many buyers and distributors use technology to connect them to the supplier, therefore we have to develop a public/private sector knowledge base marketplace where we can help link the supply chain.

We have to concentrate on supply chain management in order to fulfill customer demands through the most efficient use of resources, including distribution capacity, inventory and labour.

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