Supply-demand integrated management model for effective farmer-buyer coordination: case of the Hawaii avocado industry

Abstract

The paper presents possible solutions to small farmers in the agricultural sector in a small island setting grappling with challenges of enhancing their local industry and import substitution through a supply-demand chain framework. In 2005, Hawaiian farms produced approximately 363,200 kg of avocados. However, Hawaiian demand for these fruits required an additional 908,000 kg of avocados that were supplied through imports. At the same time, it is worth noting; almost 49% of locally produced avocados did not reach the market. These facts clearly suggest inefficiencies in the local avocado supply chain. Review of the literature on supply chain management suggests a sustainable avocado industry requires an integrated supply and demand chain management system. Hence, a modified conceptual model of supply-chain management called the Supply Demand Integrated Management (SDIM) model is proposed in this paper. Traditional supply chains contain three functional components: supply coordination, physical production and logistic management. In the new model, we propose adding R4D (Research for Development), a public good provided by the government to agricultural industries as an integral part of the supply-demand chain system. It articulates the significance of research and supply chain partnerships between small growers, industry groups, and public agencies. A well-integrated demand/supply chain in the avocado industry allows sharing of vital market information which can contribute to long-term strategic decisions that help local avocado growers increase their competitiveness against foreign imports. It also provides metrics in terms of consumer satisfaction, profitability, competitiveness, self-sufficiency, import substitution and sustainability. The SDIM model as applied to the avocado industry suggests two hypotheses relevant to the current situation. The hypotheses are: (1) There is a lack of coordination between what the farmers are growing and the chefs' (a high-end customer/buyer) preferences; (2) Forming an avocado farmer cooperative will enhance the profitability of local farmers. Survey data was collected from Hawaiian chefs and avocado farmers. Data was analysed using a Duncan multi-range test and a mathematical model, respectively, to test the hypotheses. The test revealed a lack of coordination between what the farmers are growing and buyer preferences. The results from the mathematical model suggested that formation of an avocado marketing cooperative would enhance the profitability of local farmers. Thus, the SDIM framework expands existing body of knowledge about supply chain management and provides useful information to local avocado growers that can help strengthen their supply and demand chain management.