The Supply Chain and Management of Fresh Produce in China

1. 浙江大学中国农村发展研究院 China Academy for Rural Development, Zhejiang University The Supply Chain and Management of Fresh Produce in China Huang-Zuhui E-Mail：zhhuang@zju.edu.cn

2. I Introduction • In recent years, some wet markets have been transformed into supermarkets in China. Although this transformation was driven by the government to some extent, it’s also a reflection of the changes in consumers’ demands. The successful operation of supermarkets is determined by the successful selling of fresh produce. According to the experience of the developed countries, 80%-95% fresh produce is sold in supermarkets and groceries. • In China, according to statistics, the commercialization rate of grain and vegetable is over 30%, that of livestock products and aquatic products is over 50%, and fruit is nearly 90%. In such background, traditional produce transaction cannot satisfy the mass selling of produce. The objective of this paper is to analyze the management of the supply chain of the fresh produce in the supermarkets, explore the existing problems in the management and relevant causes and then provide relevant suggestions. E-Mail：zhhuang@zju.edu.cn

3. II Factors for the supply chain management of the fresh produce • Unlike other goods, fresh produce easily goes to decay and has a higher requirement for safety. Consumers demand for the diversity due to their changing tastes. All these determine the following characteristics and requirements for the management of the supply chain of the fresh produce: • (1) it should be moved from the field to the table as soon as possible; (2) the quality during transportation should be maintained; (3) consumers should be provided with fresh and safe varieties; (4) the waste during the transportation should be decreased and the cost of transportation should be lowered down; (5) fresh produce should be a core competitive advantage for the supermarkets. • The management of the supply chain for the fresh produce in the supermarkets may include two aspects: the one is the management of the logistics, and the other is the management of the relation and organization. E-Mail：zhhuang@zju.edu.cn

4. III Status of management of fresh produce in China’s supermarkets • At present, the market of fresh produce in China is still divided into three levels, namely, wholesale market in the producing area, wholesale market in the selling area and retail produce market. With the rise of the supermarkets and groceries, the traditional channels of fresh produce are also changing.In practice, there is no genuine application on the management of the supply chain for the fresh produce in China’s supermarkets. The main reasons are two aspects. • 1. Different parts in the supply chain of the fresh produce are not linked effectively. • 2. There seems no special distribution system for adding value in the supply chain. E-Mail：zhhuang@zju.edu.cn

5. Even so, it has been about 10 years sine supermarkets in China began to sell fresh produce. According to our surveys, we find out that most of supermarkets are attaching more and more importance to the selling of the fresh produce, but selling fresh produce in most supermarkets is not profitable. • The gross profit of selling fresh produce in overseas supermarkets is around 20%, but that in the domestic supermarkets is only between 0% and 10%. Such situation is related to the living condition and consumption habit of China’s consumers as well as the lack of the effective supply chain of the supermarkets. Therefore, the cost of fresh produce sold in the supermarkets is comparatively high, and the price, quality, freshness and varieties of the fresh produce are often not very satisfying. E-Mail：zhhuang@zju.edu.cn

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7. Capital flow Producers Chained stores Middlemen Distribution centers Chained stores Producers Middlemen Chained stores Producers Material flow or service flow Logistic supports Packing, loading and unloading Transportation Storage Assembling and distribution Circulation and processing Chart 2 Ideal model of fresh produce supply chain for supermarkets E-Mail：zhhuang@zju.edu.cn

8. Negotiation and arrangement Unfixed logistic support Supermarkets’ purchasers Supermarkets Transportation firms Sorting, loading and unloading units Production bases or major producers Suppliers of packing materials Insurance companies Middlemen Wholesale markets Production bases Producers Producers Broken information flow (a) Regular supply chain (b) Provisional supply chain based on purchasers’ negotiations Chart 3 Existing model of fresh produce supply chain for supermarkets E-Mail：zhhuang@zju.edu.cn

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14. AF in Supermarket E-Mail：zhhuang@zju.edu.cn

15. AF in Supermarket E-Mail：zhhuang@zju.edu.cn

16. AF in Supermarket E-Mail：zhhuang@zju.edu.cn

17. Specific products easily decayed seasonal regional Less technical supports standardization safety inspection cold chain Imperfect market Information pricing competition Weak public policies finance tax research Immature organization producers suppliers services Obstacles to management of supply chain Eliminating obstacles and seeking for successful operation Management of supply chain Potential benefits of management of supply chain IV Obstacles to the management of the fresh produce supply chain of the supermarkets in China E-Mail：zhhuang@zju.edu.cn

18. V Brief conclusions 1. While more and more Chinese supermarkets are involving in fresh produce, the management of the supply chain of the fresh produce should be put into agenda. 2. The supply chain management for the fresh produce in supermarkets is still at the beginning stage in China. Each individual part for the supply chain of the fresh produce is not connected with each other smoothly. And there seems no effective system to distribute the tasks of adding value and benefits among parts concerned. 3. The obstacles, such as specific product characteristics, less technical supports, imperfect market system, immature organization system and weak public policies, have to be taken into consideration. In dealing fresh produce, both the real cost to eliminate these obstacles and the potential benefits to enforce the management of the supply chain should be balanced and trade off in order to obtain real benefits through the successful practice. E-Mail：zhhuang@zju.edu.cn

19. Thank you for your attention! E-Mail：zhhuang@zju.edu.cn