Profits from partnerships?

5 April 2002

Profits from partnerships?

Everyone in the meat trade

should be working towards

supply chain partnerships,

so the experts say. But do

they work in the field?

James Garner investigates

FOR too long trust, integrity, communication and co-ordination have been absent from the red meat food chain.

Now a plethora of reports suggest this must change and the only way that all parts of the chain can make a decent return is by starting to talk to each other.

At Waitrose, meat buyers, farmers and processors have been running an integrated pork supply chain since 1987, with the Link contract following in October 1998. Lamb and beef clubs are functioning too, although they took longer coming.

This new spirit of co-operation in the red meat supply chain has earned the Link contract between Waitrose, Dalehead Foods and 45 pig producers many plaudits.

Some critics say it is easier for Waitrose to put in place this type of contract, because it is a smaller retail operation than the big four supermarkets, and so does not have to cope with the logistical difficulty of mass supply.

But it does exist in the same fiercely competitive market and, although Waitroses stores might cater for slightly more expensive tastes, the company says it still has to be competitive on price.

Just recently the Industry Forum, a group set up to examine red meat food chain relationships, heralded the Link contract as an example of best practice in supply chain management.

Its ethos is based around sharing values, information, communication and trust that benefits all in the chain. Waitrose gets a more consistent pork product that meets its customers needs in terms of animal welfare, food assurance and provenance.

Dalehead gets improved consistency, which fit more exactly into Waitrose requirements, reducing waste for the processor and adding value.

Most importantly, producers benefit by achieving a stable price that also rewards efficiency and productivity.

Each month three elements define the base value for the fixed price contract. These elements include the adjusted euro spec average pig price for the previous 4-5 weeks, production costs and a retail pricing element.

The three inputs are then combined and an average base price is produced. For example, in February, Link suppliers would have received a base price of 98p/kg. On top of this, each member has the potential to add bonuses by complying with various quality criteria offered by Dalehead.

Since last June, the supply partnership has included extra financial facets in a bid to improve efficiency. For instance, a Link gold producer earns an extra 5p/kg/pig and would have earned 17p above Daleheads average weekly contract price during February, illustrating the stabilising effect of the contract.

But to be eligible for this herds have to be in top band for semen use (use more than 5.5 doses a sow), return performance data and use link approved feeds.

Rick Sanderson, Link supply chain manager for Dalehead Foods, explains: "We are trying to take out variability and streamline the supply chain. Some examples of this are improvements to genetics, feeding, health, welfare and processor performance."

By encouraging the use of artificial insemination from dedicated PIC/Dalehead breeding boars the scheme is improving carcasses. "It has been a big shift getting the group to become 100% AI, and, although not easy, producers have embraced the use of AI and this is proving to be a major success factor in the improvement of carcass quality and consistency."

To foster better communication between the parties, Dalehead produces a newsletter every month that includes a league table showing how Link producers herds have performed in terms of grading statistics, compared with other members of the group.

Mr Sanderson says this information promotes competition and pride in performance among the group.

This fits closely with the Industry Forums conclusions that benchmarking best practice will lift total returns.

"If the schemes success is measured in producers reaction, then it is a triumph. There is a waiting list to join and the existing producers commitment is unparalleled," he says.

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