Epsilon Archive for Student Projects

Abstract

As the world enters an era of rapidly growing demand for food, declining resource availability and rising volatility, leaders in global food processing have recognized the need for more sustainable food production and are beginning to implement strategies for improved environmental, social and economic performance in their supply chains. With significant growth occurring in emerging markets like China, multinational food processors must consider the context of the market and the impact this has on the viability of their sustainable supply chain management (SSCM) strategies. Addressing a shortage of related literature, this study aims to understand the conditions for sustainable supply chain development in China’s food processing sector and factors that companies pursuing this strategy must consider.

An exploratory case study of two multinational food processors based in China and serving the domestic market, investigates progress made in implementing SSCM strategies, with a focus on the upstream and agricultural producers. Use of Transaction Cost Economics (TCE) and the Sustainable Purchasing Portfolio (SPP) model highlight differences in asset specificity and supply risk that contribute to
understanding observed variations, despite the firms having similar stakeholders, common threats to triple bottom line sustainability and proven track records for SSCM in their home countries.

Findings suggest that current conditions in China’s food sector may not support widespread adoption of SSCM strategies. While undergoing remarkable change, the industry is still characterized by a high degree of fragmentation and low levels of development. Intense competition, a lack of traceability infrastructure and the need for more reliable enforcement of regulations has spurred opportunistic behaviour that threatens basic food quality and safety. Stakeholders concerned with these issues and the affordability of food for consumers spending more than a third of their income on food, have low expectations for triple bottom line (TBL) sustainability. As such, the high cost of pursuing SSCM represents a significant risk to the economic sustainability of commodity food processors. However in contrast, processors of specialized inputs that require high levels of coordination to achieve quality standards face less risk in pursuing SSCM. Furthermore, the process and the relationships fostered may support reduction of supply risk stemming from market volatility and the short-term investment focus of many agricultural producers.

Future study of a wider range of MNC food processors are necessary to test the findings from in this study. Including MNCs processing for export markets or Chinese-owned MNCs may produce new insights into the application of the SPP, and facilitate a more detailed stakeholder analysis that considers differences in
expectations of overseas stakeholders or those in different segments of China’s domestic market. Lastly, as findings suggest the importance of supply chain relationships, a closer investigation of the entire chain using Vurro et al.’s (2009) network view of SSCM may also provide understanding of interactions with and the impact of retail and food service sustainability strategies.