The Importance of Supply Chain Management in Positioning and Creating Brands of Agro-Based Products

The Importance of Supply Chain Management in Positioning and Creating Brands of Agro-Based Products

Aroop Mukherjee (Universiti Putra Malaysia, Malaysia) and Nitty Hirawaty Kamarulzaman (Universiti Putra Malaysia, Malaysia)
DOI: 10.4018/978-1-4666-7393-9.ch005

Abstract

This case aims to provide information on the importance of supply chain management in creating and positioning of brands of products by companies. Supply chain management entails configuration, collaboration, and coordination. The company that uses only costing for creating brands without resource availability exposes its supply chain to an insufferable risk. Consequently, the company hoping to create its brand in the world market needs to be more resilient in the supply chain process and resources. A strategic and holistic approach to supply chain in collaboration with different companies will help to identify the different strategies, which can be more resilient and efficient supply chain. Supply chain management acts as branding tool and is vital for conveying branded goods to the market in optimal time and cost. The creation of a brand name is linked to management strategies, but persistence and character are possible solely by using supply chain efficiently.
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Organisation Background

The best supply chains aren't just fast and cost-effective. They are also agile and adaptable, and they ensure that all their companies' interests stay aligned. - Lee (2004)

Palm oil is the second most consumed oil in the world after soybean oil. Malaysia is the biggest exporter of palm oil in the world, which currently produces 39% of the world palm oil, and exports 44% of its total production. As Malaysia is also the largest producers of palm oil and palm oil products, it plays a major part in meeting the growing demands of sustainable products from Unilever, which is the largest user of palm oil. Unilever buys 1.3 million tons of palm oil in a year to make products such as Dove soap, TRESEMME shampoo, and Flora Margarine (Evans, 2014) (Figure 1).However, by the end of 2014 Unilever has decided to stop buying unsustainable palm oil that cannot be traced(Evans, 2014) in the supply chain due to ‘green movement’. The Malaysian palm oil industry could achieve another milestone as in the 80s, which bolstered the Oleochemicals industry to grow due to an ample supply of palm and palm kernel oil.

Figure 1.

Use of palm oil in various final product

Source: Patel, 2013.

Malaysia is now the second largest manufacturer of palm oil products after Indonesia, which took over the number one position in 2007.The oil palm, Elaeisguineensis, originates in a region from Angola to Senegal from West Africa and was first introduced to Malaysia as an ornamental plant in 1870 by the British under the colonial rule (Figure 2). The leading producer of palm and palm oil until 1960 was Nigeria, however, now Nigeria is an importer of crude palm oil (CPO). Malaysia started producing refined palm oil after gaining independence in 1950s. Since 1960, the planted area had increased at a rapid pace and the innovations in technology helped the government of Malaysia to overcome Nigeria’s dominance. In 1985, 1.5 million hectares were set with palm tree, which increased to 4.917 million hectares by 2011 and palm oil has become the most important commodity crop in Malaysia (Palmoilworld, 2014). The Malaysian government made attempt to displace upward the value chain by running across the refining and marketing abroad. Malaysia has led the other Asian states to diversify its export by developing the palm oil cluster.

Figure 2.

Palm fruits at glance

Source: MPOB, 2014.

The palm oil plant grows within 10 degrees in latitude from the equator, whereas the ideal growing condition is within 5 degrees, but due to global warming the area has been increased to 15 degrees in latitude from the equator. Hence, Malaysia is naturally gifted to produce palm, as long as the land resources exist. The oil palm plantations (Figure 3) have evolved in ensuring that the palm oil produced is according to set standards. The oil palm systems inherent advantages are to have high productivity and efficient carbon assimilation. The oil palm is credited to have a higher yield per unit area as compared to other crops like soybeans, sunflower, and rapeseed (Figure 4). The palm oil planted current yields about 4.0tons of palm oil per hectare along with 0.5 tons of palm kernel oil and 0.6 tons palm kernel cake (Palmoilworld, 2014). The oil palm has an economic life of around 25 years, and usually the harvesting of the palm could begin 30 months after field planting (Palmoilworld, 2014) (Figure 5).

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