This study was made with the purposes of characterizing milk supply and marketing chains, post-production losses of milk, and evaluating the potential of supply chain management approach to reduce milk losses in Ethiopia. Primary data were collected by semi-structured survey questionnaire and interview of key informants. The collected data were analyzed using SPSS and Microsoft Excel sheets. Mapping, characterizations, and descriptive statistics were used to analyze the collected data. Both quantitative and qualitative-narrative methods were used in analysis. The finding revealed that farmers, cooperatives/unions, traders, and catering institutions were the major chain actors in milk chain in the study area. With 73% of milk sold by farmers passing through cooperatives/unions to the next chain actors, cooperatives/unions were the focal firms in this supply chain. Production was characterized by smallholders with few numbers of cows and low productivity of milk per cow per day. Cow breed and lack of access to credit were identified as critical resource and the most constraint that hinder production improvement. Marketing relationships among the chain actors were characterized as lacking long-term market orientation and were mostly on the spot and transaction based. The assessment on the enabling environment indicated further need of support from governmental and non-governmental stakeholders to build the capacity of chain actors, particularly the farmers. The study indicated existence of significant amount of milk losses in the milk chain. With 39% of the total losses happening at cooperatives/ union stage, cooperatives/unions were identified as loss hotspot point in the chain. Poor milk handling practice at the collection points, lack of immediate acceptors, milk carrying tools used, means of transport used, and ineffective communication with other partner in the chain were identified in order of severity as important problems causing milk losses in the study area. Based on the study results and review of others’ work in similar contexts, this study argued for SCM to be part of solution in improving this dairy chain. The study showed cases where effectively implemented SCM approach converted dairy chains from chains characterized by dismantled, high conflicts of interests among the chain actors, and high losses of food in the chain to chains with mutual interest trying to maximize the profit to the whole chain actors. Integrated and collective actions by all chain actors aiming at reducing costs, improving quality, and minimizing food losses in the chain were central to these efforts. Therefore, SCM approach needs to be part of the solution in increasing profitability and reducing milk losses in Ethiopia in general and in the study area in particular. However, the needs for detailed further study, some of which are recommended by this study, are worthwhile.
Feeding 9 billion people by 2050 that requires food production increase by 70% was a repetitively mentioned challenge of the world [
[
Inefficiencies and ineffectiveness in food supply chains are major reasons for food losses, particularly in developing countries [
According to [
Regardless of the necessity of consistent measurement of food losses as a step towards food loss minimization, introducing appropriate methods of estimating food losses across the food value chain remains a challenge. Estimating milk losses across supply and marketing chain is not an exception to this difficulty. From management point of view, it needs a clear measurement to determine the amount of losses i.e., we know it, if we measure it. However, as indicated by [
With about 52 million head of Cattles [
The main objective of the study was to characterize the supply and marketing chains and losses of milk in the study area. The specific objectives were to:
1) map-out and analyze milk supply and marketing chains,
2) assess post-production milk losses and factors causing the losses, and
3) evaluate the potential of supply chain management approach for improving the dairy chain performances including reduction of post-production losses of milk in the study area.
The study was conducted in two districts of central part of Ethiopia: Ejere and Wolmera (see Annex 2). These districts were purposefully selected because of their potential for dairying and the present increasing trend of dairy production observed in these areas. Their geographical position of nearness to the capital city, 40 - 60 kms to west, also made the two districts areas of operation for a number of the dairy processing plants and commercial oriented dairy farmers are common in these districts.
In the study, different dairy value chain participants were included for the fulfillment of the study objectives. As the study addresses, heterogeneous population groups participating in the milk supply and marketing chains, a mixed sampling technique was used. For dairy farmers, referring to lack of previous study indicating the variance and proportions with regards to the variables assessed, simple random sampling formula by [
where: n is sample size; z is value of standard variate from normal curve; p is estimated population proportion; q is 1 − p; and e is error term (5%). Even though p value of 50% could give highest sample size, it was limited to 80% due to resource constraints and consistency observed during the pilot study. Accordingly, the farmer respondent sample size was determined to be 246 but in the process of selecting from stratified areas under the two districts, 262 dairy farmers were randomly selected and included in the study from the two districts.
Semi-structured questionnaire translated to local language was used to gather the data. Beside farmers, one dairy union, three primary dairy cooperatives, six traders, three processors, and six catering institutions were purposively selected and the institutional representatives (at least three from all) were interviewed and observation of the real situations at their business sites were made. Information collected during the pilot study and consultative workshop combined with relevant literature was used as a base for the development of semi-structured survey questionnaire.
The primary data collected was organized and analyzed using SPSS and excel sheets; mapping, characterization, and descriptive statistics were employed. The milk value chain was described quantitatively and qualitatively. The description was made for production, marketing, relationships, logistics practices, and some of the enabling environment for the chain actors. Loss assessment was made using a self-estimate approach where the chain actors gave the estimated milk loss percentage from what they produced or purchased before passing to the next chain actor. The average was calculated for each chain actor’s category, which was used as a base for estimation of quantity loss of milk relating to production and marketing distribution data. The factors causing milk losses were assessed using Likert-scale rating methods [
The scope of this study was limited to the general characterization of milk supply and marketing chains in the study areas that includes production, marketing, relationships and logistics practices. The detail analysis of governance structure was not made and could be a direction for future work. Dairy farmers included in this study were those commercial oriented and engaged in dairying as a substantial contribution to their income and livelihood support. Therefore, don’t represent the majority of Ethiopian farmers in the rural part of Ethiopia who raise animals for other farming activities and whose dairy products chain is not clearly observable. Moreover, the post-harvest milk loss assessment was made focusing only on the segment of the supply chain which covers production through sales and did not covered losses at the consumer stage.
The flow of dairy products in the supply and marketing chains (
The results in
Based on the data collected at farmer, trader, cooperatives, and union levels, most form of dairy product for sale was fresh milk.
Information from the processors showed that they produce value added dairy products from the raw milk such as pasteurized milk, butter, varieties of cream, varieties of cheese, and yoghurt. The value additions vary among processors where majority of the processors in the area were engaged only in production of pasteurized milk. In
Number of milk cows | Breed of cows | ||||
---|---|---|---|---|---|
Frequency | Percent | Frequency | Percent | ||
1 - 3 | 18 | 6.9 | All Local | 11 | 4.20 |
4 to 5 | 133 | 50.8 | All Hybrid | 157 | 59.90 |
6 to 8 | 80 | 30.5 | Mixed | 94 | 35.9 |
9 to 10 | 19 | 7.3 | Total | 262 | 100% |
11 to 15 | 7 | 2.7 | |||
15 to 25 | 5 | 1.9 | |||
Total | 262 | 100% |
catering institution, minor value additions such as boiling and traditional yoghurt (Etitu) making were common practices before selling of milk to consumers as a cup of boiled milk, yoghurt, and/or “makiyato” (milk mixed with coffee somehow similar with Cappuccino). According to the result in
Farmers’ evaluation of overall dairy products demand trend during last 3 to 5 years | Farmers’ evaluation of dairy products price trend during last 3 to 5 years | ||||||||
---|---|---|---|---|---|---|---|---|---|
Trend | Frequency | Percent | Trend | Frequency | Percent | ||||
Has been getting increasing | 212 | 80.9 | Has been getting increasing | 211 | 80.5 | ||||
Has been the same | 11 | 4.2 | Has been the same | - | - | ||||
Fluctuating-sometimes up and sometimes down | 39 | 14.9 | Fluctuating-sometimes up and sometimes down | 51 | 19.5 | ||||
Total | 262 | 100.0 | Total | 262 | 100.0 | ||||
Farmers’ evaluation of competition from other dairy farmers to sell their dairy products | Farmers’ evaluation of competition for cow feed with other dairy farmer | ||||||||
Nature of competition | Frequency | Percent | Nature of competition | Frequency | Percent | ||||
Very tough competition | 13 | 5.0 | Very tough competition | 71 | 27.1 | ||||
Tough competition | 86 | 32.8 | Tough competition | 157 | 59.9 | ||||
Weak competition | 75 | 28.6 | Weak competition | 23 | 8.8 | ||||
No competition at all | 88 | 33.6 | No competition at all | 11 | 4.2 | ||||
Total | 262 | 100.0 | Total | 262 | 100.0 | ||||
Farmers’ evaluation the price trend of animal feed during past 3 - 5 years | Farmers’ source of cow feed | ||||||||
Trend | Frequency | Percent | Source | Freq | Per | ||||
Has been getting increasing | 211 | 80.5 | Own grazing land plus at home fodder production | 15 | 5.7 | ||||
Decreasing | - | Own grazing land plus purchase of additional fodder from external supplier | 153 | 58.4 | |||||
No change | - | At home fodder production plus purchase of grazing land from external supplier | 11 | 4,2 | |||||
Flactuating | 51 | 19.5 | All purchase from external supplier | 83 | 31.7 | ||||
Total | 262 | 100.0 | Total | 262 | 100.0 | ||||
indicated that the demand for dairy products and its price was getting increasing last three to five years. This is an indication for potential development of dairy value chain. However, tough competition on inputs, increasing price of animal feed, and majority of the farmers’ dependence on external supplies as source for supplementary animal feed were identified at farmer level as problems. The farmers indicated that they were not benefited from the dairy products price increment as the increment in operational costs, particularly the feed price affected them. Farmers also indicated market problems during fasting seasons when traders don’t frequently come to their site to buy milk.
As the results presented in
On the other hand, results presented on
With regards to their primary buyer selection criteria (
Looking at farmers’ relationships with their feed supplies (
The result of dairy farmers’ relation with other dairy farmers in the vicinity was presented in
in the area, increasing negotiation capacity to get better price being the major reason of their collaboration.
According to the observation made and collected data from the chain actors in the study areas, the logistics practice was described as poor performing, particularly at farmers’ level. At peri-urban based farmer level, milk was mostly (89%) transported by human labor that resulted in delay of reaching collection points, physical losses due to fall-down of people who transport it (usually under age children), and quality losses due to exposure to sun heat and microbial developments. The farmers have no home storage facilities with cooling system. 95% of the farmer respondent responded that they had no cooling machine for home storage. As a result, they store night milk in water by container but during hot season they claim the existence of loss increases. Traders also claim farmers for mixing night milk with morning milk as a reason for losses and rejection downstream chain. At Urban areas, the logistics practice is relatively better; cars and animal cart were used for transportation. Chain actors here were union, processors, traders, etc, had relatively better established cooling/storage facilities at their sites, but the milk transportation vehicles used were freight transportation vehicles without any cooling system and adjustments for standard milk transportation.
For this study, post-production milk loss refers to quantity, quality and economic losses. It includes physical loss of milk due to spillage and rejections of milk for quality reasons. Losses which were reported by chain actors may not be total losses as well. For instance, if the fresh milk was rejected at collection point due to quality matters, it may not be total loss because the farmer can make butter and cheese out of it. However, the economic values may not be the same with selling fresh milk to the farmers. Therefore, farmers consider milk rejections as losses even though it does not mean total loss. Sometimes rejection also creates forced consumption at home by people or animals which still has some economic value. With the difficulty of addressing these detail issues separately, we only base the assessment based on what the chain actors reported as losses, hence we like to note the limitation in this regard.
According to this study, all respondents who were asked about the existence of milk loss across the chain responded that there was significant amount of milk losses. The average percentage estimated milk losses at each stage of the chain actors were presented in
Results presented in
Factors behind losses as indicated on
Integral to the development of effective value chain is the enabling environment in which the supply and marketing chains interact. For this study, chain actors were asked on how they evaluate the support from government and non-governmental organizations, political-legal environment, and physical infrastructure for the
Result | Item | Major problems identified | How SCM could solve the problem |
---|---|---|---|
Post-production- loss factors | Poor milk handling practices at collection points: lack of appropriate facility and mismanagement. Lack of immediate milk acceptors/waiting time at collection points. Lack of cooling systems both at home, at collection points, and during transport. Poor means of transportation. Inappropriate milk carrying equipment- plastic, narrow opening difficult to clean inside. Poor storage facilities. Poor communication with other partners in the chain. | SCM could solve the facility related logistics problems through enhancing collective investments in logistics tools and infrastructure and enabling coordinated and integrated use of existing facilities. SCM could also alleviate the milk handling practices at collection centers through awareness creations. With effective SCM system, qualified and responsible operators across the whole chain could be achieved. SCM could also improve the communication among chain actors through effective relationships among chain actors. Effective and efficient sharing of information is integral to SCM system. | |
Figures 2-4 | Production | Low milk production per cow per day. Lack of access to improved cow breeds. Lack of access to financial services. | The farmers could get support from downstream chain actors in terms of better access to the improved cow breed and financial services. |
Figures 5-9 | Marketing and relationships | Relationships characterized by individualistic and opportunistic behavior. Focus on own profit or lack system thinking among the chain actors. No strong trust based relationships among the chain actors and no ultimate customer conceptualization. | Through SCM approach the relationships could be improved where all the chain actors focus on satisfying ultimate customers and improving overall performance of the whole chain. SCM creates system thinking where chain actors develop win-win partnerships and an attitude of winning the competition all together as a chain, not as individual business. |
impact on their performances. According to the result presented in
The result of political legal environment as presented in
Marketing relationships and supply chain management: Marketing relationships and supply chain management: The marketing relations among the majority of these chain actors were not going beyond the instant buying- selling relations. It lacks long-term market orientation from value chain perspectives [
Dairy product losses and supply chain management: In case studied milk chain, the milk loss was important problem. Though the milk loss quantification was made based on subjective estimates, may be difficult to trust the figures, the existence of significant amount of milk losses in the milk supply and marketing chains was an evident. From the results, the major reason for the losses can be argued as the inefficiencies and ineffectiveness of the supply chain. The problems related to milk handling practice at collection points, lack of immediate acceptors and long waiting time at the collection points, milk carrying tools used, means of transport used, and ineffective communication with the other partner could be addressed through supply chain management. Some of these problems emanated from the relationship management problems. An example was the inadequate communication in the chain, i.e., farmers claimed that sometimes they were waiting at the milk collection points, but the collector/buyer fail to come due to various problems without communicating with the producers. Hence, producers loss both their time, milk or economic values. The other problems were mostly related to logistics functions. The problems of equipment used, transportation mechanism, problems at the collection points, and lack of cooling systems at home, at collection points, and during transportation were few examples of logistics problems observed in the study. These could be addressed through logistics function improvement across the milk supply chain. To this end, the overall chain actors’ commitments to make necessary investments at required stages are critical. For instance, most farmers in the sampled study had no cooling machine even though they have access to electricity, at least in peri-urban areas. The reason is that they have no money to buy it. If the chain works with mutual understanding, then there is possibility of acquiring such necessary equipment by the farmer through an arranged finance system from the processors or traders down the chain, agricultural value chain finance commodities could be thought as possibilities [
Few evidences on importance of SCM in dairy product chains: With the overall value generation to the whole chain as prime motive, SCM has evolved in food sector in general and dairy industry in particular. Under this section, few evidences on SCM in dairy value chains, in developing countries were discussed so as to enable learning lesson for dairy chains in Ethiopia in general and case studied dairy chain in particular.
With regards to dairy/milk, one may remember India for its successful white revolution in 1970 that includes establishing milk marketing facilities in major cities and milk processing and preserving competences in the rural areas; Anand-pattern dairy cooperatives, today known as Amul dairy, was part of the process that benefited more than ten million farmer families [
・ the need of SCM department as separate unit in dairy chain actor organizations with responsibility of managing all activities in the dairy supply chains,
・ the need to establish reliable supplier relationships in the dairy industry, and
・ the need to maintain safe and clean manufacturing practices as a quality parameter.
In sum, [
[
・ potential for overall improvement in logistics as result of sharing logistics facilities among members’ of the supply chain, avoiding overlapping investments on logistics facilities, establishing information interchange platforms through cooperation of enterprises in the supply chain, and overall working efficiency improvement of logistics in the supply chain,
・ potential for reduction of transaction costs, particularly, the information cost aspect,
・ potential for improving customer satisfaction.
[
・ food product quality, particularly for emerging global markets, can be ensured by establishing right supply chains,
・ the dependence on inexperienced and non-trustful suppliers of the food commodities could end with dangerous result in terms of food quality,
・ as a solution to second problem above, the authors favored the centralized food quality control over the decentralized situation for the causes of milk adulterations incidents in 2008 in China. However, the authors also noted the difficulty/impossibility of centralized or vertical integration type food supply chain and recommended establishing strong partnership among legally independent organizations in the food supply chains instead.
[
The milk critical loss point assessment in Kenya [
Few scientific works we found concerning the dairy chain matters in Ethiopia also indicated the problems that could be alleviated through SCM. [
How to start SCM approach: SCM as discussed above has already evolved to the food sector. However, it can’t be implemented without necessary preparations and commitments by concerned stakeholders. Different authors [
To sum, SCM could improve the dairy chains of Ethiopia in general and the case studied dairy chain in particular. However, we like to stress that the SCM we are recommending is the one with broader sense, which is not demanding vertical integration type of coordination rather coordination through the formation of partnerships and trust among the legally separate chain actors through collective actions and decisions as noted by Stadtler, (2008) cited in [
In this study we have attempted to describe cow milk supply and marketing chain in two districts of central Ethiopia. The result showed that farmers, cooperatives/union, traders, and catering institutions were the major chain actors. Cooperatives/union may be considered as a focal firm in this supply chain because of the marketing potential they have to influence both backward and forward in the chain. At the same time, cooperatives/ unions were identified as a critical milk loss point in the chain. Production was characterized by smallholder farmers with small number of cows and low productivity of milk per cow per day. For farmers, lack of access to finance was identified as the most constraining factor hindering production. Marketing relationships among the chain actors were characterized as lacking long-term market orientation and were specific to transactions. High opportunistic behavior was observed such as farmers claiming the feed quality for the low quality milk and the buyers claiming the farmers for water adulterations. The enabling environment of the dairy chain was identified as an issue that needs improvement. Using the subjective estimate made by the chain actors, losses of milk in the chain were attempted to be quantified; though the quantitative estimates were rough, it was evident for existence of significant milk loss in this milk chain. Milk handling practice at collection points, lack of immediate acceptor, milk carrying tools used, means of transport used, and lack or ineffective communication with other partner in the chain were identified in order of severity as important problems causing milk losses in the study area. We indicated the potential of supply chain management to alleviate the existing problems and for overall improvement of the dairy chain in Ethiopia in general and for the studied dairy chain in particular. To this end, we recommended the promotion of requirements for the implementation of supply chain management approach such as the supply chain orientation (SCO), trust based partnership formation, and value chain perspective market orientations among the chain actors.
We are grateful to RELOAD project for funding the activities of this study. Particularly, we are thankful to Professor Oliver Hensel and Mr Michael Hesse (RELOAD project coordinators), Ambo University, and Swedish University of Agricultural Science, department of Energy and Technology for supporting this study in all dimensions. Our special thanks also go to all chain actors who provided with the data and technical support. Thank you all!
TadesseKenea Amentae,GirmaGebresenbet,DavidLjungberg, (2015) Characterizing Milk Supply and Marketing Chains and Losses in Wolmera and Ejere Districts of Ethiopia. Journal of Service Science and Management,08,823-843. doi: 10.4236/jssm.2015.86084
a) Average production per cow per day for the whole sampled farmers
Mean estimation formula for using interval frequency data midpoint approach [
where; XHL―is minimum value production in the range for hybrid cow, XHM―is the maximum value production in the range, XLL―is the minimum value production in the range for local cow, XLM―is the maximum value production in the range for local cow; Ri―is percentage of respondent in that particular range.
b) Average number of cows per household (without referring to the type of breed)
The mean number of cows per household was estimated by using midpoints of the frequency
where: XiL―is the lower boundary value of the range, XiM―is the upper boundary value of the range, and Fi―is the frequency or number of respondent of the range.
Hybrid to Local Cow proportion: From
c) Estimated losses at each stage
Thus,
the 8% home consumption was taken from study in same area [
Wholesalers buy fresh milk from two sources (
= 0.26 liters of milk losses per household; amounting to 67 liters of milk losses
for the total sampled farmers per day
Note: wholesalers reported that they didn’t encounter losses on processed milk. Also note 0.9454 (94.54%) of the milk purchased by cooperatives was sold out because there was 5.46% loss at the stage.
Processors buy fresh milk from three sources (
= 0.12 liters of milk losses per household; amounting to 32 liters of milk losses per day for the sampled number of households.
Retailors & catering institutions also buy fresh milk from three sources (
= 0.15 liters of milk losses per household; amounting to 39 liters of milk losses per day for the sampled number of households. Retailors also noted the losses happen only on fresh milk.
Note: these quantification attempts were rough and based on the result of the subjective estimates from the respondents with additional assumptions.