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Supply Chain Management - Portuguese Tuna Industry

Supply Chain Management - Portuguese Tuna Industry

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Published by Carlos Ferreira

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Published by: Carlos Ferreira on Apr 12, 2009
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11/18/2010

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Sustainable Competitive Advantagethrough an effectiveSupply Chain Management:The case of canned Tuna in Portugal
Prepared for Module CB9011“Supply Chain Management” 
byCarlos FerreiraSubmitted on the 3
rd
April, 2009
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The canned tuna industry has long been one of the key players of the Portuguesefood industry. Portugal, a country with a large fishing area, was for a time at the beginning ofthe 20
th
century one of the largest canned tuna producers in the world, and maintains animportant presence in this market worldwide. However, this industry faces many problemsthat could jeopardise its ability to exist in the future, including commoditisation of itsproducts, diminishing margins and profits along supply chains, environmental concerns – including depletion of the base resource – and loss of market share to substitutes in themarket.In this report, we start by analysing the canned tuna production industry in Portugal,identifying some of the problems that affect it and some of the challenges that the futuremight bring. Part two of the report analyses the failures of the industry to cope with thosechallenges, from a Supply Chain Management point of view. In part three, we present thecase for Supply Chain Management as a strategic weapon that should deployed by theindustry in order to overcome those problems and prepare for the future, while obtainingprofits for players engaged and delivering value to the costumer.
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I. The long descent: present problems and future challenges
Tuna has long been one of the most important fisheries in Mediterranean-likecountries, such as Portugal. A staple food for centuries (since the Phoenician Civilization, atleast), tuna provided an important source of protein intake for seaside populations, so it wasonly natural that, at the end of the 19
th
century, in the Southernmost part of Portugal – Algarve, close to the Mediterranean Sea – the budding industrialization would result in tuna(plentiful, affordable and demanded) being processed, canned and sold, both in the internalmarket and abroad. Success was immediate, and the industry quickly expanded capacity, inwhat it was accompanied by the fishing industry, continuously improving catchmentmethods.In the early 20
th
century, a time of extensive population growth and migration to cities,canned tuna was not only important for nutritional reasons; availability of conservationequipments (such as refrigerators and the like) was null, so food had to be processed orconsumed in a short period after purchase. In contrast, canned tuna was a ready-made,affordable source of protein that could be carried or kept for a long time – indeed, its longshelf time is, arguably, one of its most important advantages. Not only did it provide areasaway from the sea with a variety of food (fish) that is notoriously prone to losing qualityquickly after being harvested, it also increased the pace of industrialization, generatedseveral hundreds of jobs in fisheries and in processing, and created a source of revenuefrom exports.The result was booming demand and falling prices. Three factors conspired to curtailthe success of this industry: environmental problems, growing competition from substitutesand commoditisation. Later, as consumer awareness of health issues became moreprominent, a fourth factor, food security and traceability, became a relevant issue as well.
I.a. Environmental problems and the Sustainability issue
Tuna fishery, like most fisheries, is a remnant of Humanity's past as hunter-gatherer:existing wild resources are extracted with little or no management (Grimond, 2009). In thecase of tuna, this problem is compounded by the open-access regime of the waters wheretuna is found. In these situations, cost of extraction of fish rather increases as the availablestock increases (Perman et al, 2003); consequently, fishermen are forced to either sell the
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