CARD 004/04VIE Report Milestone 4: Supply Chains Defined Deliverables: • Methodology, analytical techniques and training material for supply chain analysis and development • Key issues and options for improved supply chain management of selected vegetables • Supply Chain maps for at least 2 vegetable crops • Supply Chain training needs analysis and strategy and timetable for training program The major aims of this project centred around building capacity in protected cropping systems, trialling these systems with tomatoes and cucumbers in Vietnam and introducing farmers and other supply chain partners to these systems. As such, the emphasis was never intended to be on improving supply chains, merely examining current vegetable supply chains and determining the major problems. This milestone was added to the project after the original design and in-fact was extracted from another CARD project and added into this project. Despite this being only a minor component of this project the research team has attempted to address this milestone. Supply Chain Training The Australian training component included training specifically in supply chain mapping and quality assurance systems. Dr Newman introduced the concept of supply chain mapping, described the methodology and then as a training exercise the team mapped out typical vegetable supply chains in North, Central and Southern Vietnam. Part of Dr Newman’s workshop presentation in Vietnam also included a section on supply chain mapping and this generated considerable discussion and questions particularly at the Hanoi workshop. The concept of supply chain mapping is a relatively new concept to our production focussed Vietnamese partners, but through the training courses they now have an understanding of the process and with further guidance should be able to utilise this in future projects and activities. Joseph Ekman, NSW DPI Quality Assurance Officer provided study tour participants with 1-2 days of training in the Australian Quality Assurance program - ‘Fresh Care’. Mr Ekman is one of the developers of this QA system and regularly provides training to farmers in ‘Fresh Care’ to enable them to implement their QA system. Mr Ekman provided Vietnamese study tour participants with a condensed version of this course using ‘Fresh Care’ training materials. Time was also provided for training participants to ask questions and for discussion on how such a system may be implemented in Vietnam. As one of the reviewers for ASEAN GAP, Mr Ekman was able to demonstrate clearly to participants what they needed to do to achieve this standard in Vietnam. Part of the training also included field visits where Mr Ekman was able to demonstrate the practical application of these systems and also the Vietnamese team was able to ask farmers how they went about implementing such a system. Mr Ekman’s workshop presentations in Vietnam were also focussed on quality assurance and how this might be implemented in a Vietnamese context. Supply Chain Study . In addition to the training activities above, two case studies were undertaken looking at 2 supply chains: a) Mr Phong’s and his farmer group tomato supply chain b) Metro’s vegetable supply chain The approach taken in these case studies was to: • Identify case studies (2) representative of typical supply chains • Map process flows from harvest to retail sales • Describe and document relationships as well as each process in the handling system • Identify key problems/issues in the handling systems • Identify potential solutions (modifications to the supply chain, training and extension etc.) Training in supply chain management is a key component of this project and whilst the emphasis in this project is on providing training, the case studies used in this study will provide Vietnamese project partners with the skills to adapt current vegetable supply chains. SUPPLY CHAIN 1:TOMATOES AND TOMATO SEEDLINGS Mr Nguyen Hong Phong, Vegetable farmer and seedling producer, Duc Trong, Lam Dong Province Photo 1 Mr Phong and his greenhouse operation Mr Phong’s farm is located in Duc Trong in Lam Dong Province. Throughout the course of this project he has been a key collaborator and ‘farmer champion’. His business supplies seedlings to many of the vegetable farms in Lam Dong. To gain a better understanding of both the seedling and vegetable supply chains in Lam Dong province the research team interviewed Mr Phong on the 1 st October 2006. A full script of the interview can be found in Appendix 1. Mr Phong has 4 ha available for field vegetable production. He grows 1 crop of tomatoes per year and utilises both field and greenhouse space for this crop. His crop Fig 1 Tomato Supply Chain Process Map scheduling is based on market demand. He utilises about 1 ha of land to produce his tomato crop. He gets good yields with 80 t/ha for field production and 120 t/ha for greenhouse production. He sells all of his tomato crop to collectors. He contacts collectors about 4 weeks out from harvest to let them know that his crop will be ready for harvest. Then on the day of harvest he lets them know the expected volume for that day. Quality attributes important to his buyers are size, colour, firmness and freedom from pests and diseases. Supermarkets tend to have higher standards for size and colour and allow only certain chemicals to be used during the production of the crop. These collectors from Duc Trong then on-sell the product to regional wholesalers and the product is then on-sold in Ho Chi Minh (50%) and other regional markets (eg. Nha Trang and Hue). From these major regional markets, product would then be distributed to other districts and markets. A small proportion would be sold in the local market. The best fruit (largest and highest quality) are sent to Ho Chi Minh. Typically, for graded tomatoes, he receives on average VND4000/kg in the Ho Chi Minh market and VND3000-3500/kg in other markets. The tomatoes are harvested from 7-11am with typically 3-4 ton harvested per day. Fruit is picked at 25% colour into 10kg buckets that are then left in the field for the collector to grade, with fruit typically spending 5-6 hours in the field (24-28ºC). Collectors grade the product on-farm in full sun. They grade tomatoes into 3 size grades:  Large - > 80g  Medium – 60-80g  Small- <60g Typically following grading 10% of tomatoes are considered un-marketable and discarded. Following grading the collector/agent places the tomatoes in 60kg bamboo baskets, unless they are supplying to a supermarket in which case a 35kg plastic crate will be used. Banana leaf is used to line the bottom of the basket to a depth of 2cm and a single sheet of newspaper is used to line the sides. Around 5% of the crop is exported to Cambodia or China. In this case 50kg baskets are used and the packaging materials used to line the baskets tend to be more substantial. The baskets are then loaded onto a 10 ton truck, with baskets being stacked 4 high. Timber slats are used to separate baskets. Generally the truck is uncovered unless the driver thinks that rain is possible. Typical transport times are:  8 hours to Ho Chi Minh City  15 hours to Hue  32 hours to Hanoi or Cambodia  3-4 days to China Fig 2. On-farm postharvest operations Potential problems with current handling and packaging practices • Poor temperature management – in supply chains with no cool-chain, reducing the build-up of field heat is critical to making sure the product reaches market in good condition. Whilst field temperatures are not excessive in Duc Trong and harvest is carried out early in the morning, the 5-6 hour delay in the field is likely to result in significant product deterioration. • Over-packed product – packaging into 60kg baskets for the domestic market results in considerable product damage due to impacts and compression. The packaging materials used in these baskets are insufficient (banana leaf and newspaper) to provide any real benefit. • Poor air-flow through containers – whilst the inclusion of packaging materials may to a limited extent reduce product damage due to tomatoes rubbing against the basket, it also has a more detrimental effect in that it prevents good air-flow through the basket. This may cause excessive build-up of field heat and a reduction in product shelf life. Potential solutions • Grading and sorting could easily be undertaken in one of sheds on Mr Phong’s farm. Removing harvested product quickly from the field will reduce the build-up of field heat and reduce product deterioration. Sorting and grading in a clean and shady area will 1) keep the fruit cool; 2) keep the fruit cleaner and 3) provide collectors with a better environment in which to work, thereby improving worker comfort and mostly likely increasing quality out-turn. • Different packaging options should be considered. The use of a 60kg basket for tomatoes results in significant damage to the product. Replacing this with a smaller, easily stackable basket or crate is likely to improve quality out-turn. Care should also be taken when using packaging materials eg newspaper to line the basket as this may also reduce airflow and lead to temperature build-up in the container. Consideration should be given to packaging materials that also allow good airflow around the product. SUPPLY CHAIN 2: VEGETABLES METRO, HO CHI MINH (based on interviews with Ms Nguyet, Supply Chain Manager and Nguyen Van Dung, QA officer Dalat collection point) Metro sells 100 million VND/day worth of vegetables with the highest proportion of these being sourced from Dalat. They are mainly a wholesaler distributor, targeting small retailers and restaurants but are increasingly suppling individual customers. In 2006, Metro thought the ratio was 60% consumers to 40% retailers and other sellers. A collection point has been established in Dalat. Eighteen farmers supply 63 types/varieties of vegetables to this collection point with the centre typically receiving 6-15 tonne/day. They also have a major warehouse at Binh Duong that acts as a central collection point for distribution to other regions. Fig 3 Metro vegetable supply chain ex Dalat Metro has direct contracts with farmers and these farmers are required to have a ‘clean vegetable certificate’ and to supply according to Metro’s product specifications. Consignments are inspected on arrival at collection points to ensure compliance. With farmers or collectors delivering straight to the collection point, Metro has little control over how the product is managed from farm to collection point. Once the product reaches the collection point it is refrigerated prior to transportation, however as it only generally spends a short period of time (typically 1- 3 hours) before being trucked to HCM or other centres the product is unlikely to have cooled sufficiently to be of any benefit to the product. In the future Metro is looking to improve control from supplier to collection point and they are also looking at options for pre-cooling at the collection point. Typical trucking times are 6 hours to Ho Chi Minh, 26-30 hours to Danang and 50-60 hours to Hanoi. Air transport is also used with typical times being 5 hours to Danang and 6 hours to Hanoi. Metro provides training to farmer groups on their quality specifications and meeting food safety requirements. Figure 4 depicts typical postharvest handling operations for a consignment supplied to the collection point in Dalat. Fig 4. Typical postharvest operations – Metro Typically Metro sells 10 tonnes of tomato per week. They typically pay 2000 VND/kg for unsorted tomatoes and 3500 VND/kg for sorted tomatoes. Metro estimates that on-farm losses may be as high as 20-25% and their shrinkage rates to be 3-5%. Often tomatoes do not meet Metro’s quality standards. Typical problems include poor size, poor colour or insect damage. Disease can also be a major problem during the wet season. Potential problems with current handling system • Poor postharvest handling on-farm is likely to be having a detrimental effect on quality out-turn, however this may not be seen until the product reaches its final destination. • Metro named numerous crops including tomatoes, zucchini and strawberries that were failing to meet their quality standards. This may be due to either 1) quality specifications being set too high or 2) grading standards not being met. • The cool-chain starts at the collection point. However the amount of time spent in storage prior to transportation would be insufficient to remove field heat and bring the product temperature down to an optimum transport temperature. Refrigerated trucks are not designed to cool product, but merely keep it at the desired temperature, so hot product entering the truck is likely to remain hot and also the additional heat load from warm product is likely to have a negative impact on other product in the truck that may have been cooled sufficiently. Potential Solutions • Further training on quality standards and grading is likely to deliver Metro a higher proportion of product meeting quality specifications • Postharvest training on on-farm handling practices would reduce losses and improve quality out-turn • Pre-cooling at the collection point would remove field heat enabling the product to be transported at its optimum storage temperature improving quality out-turn. Appendix 1 Interview with Mr Phong 1. Can you describe the main components of your business? 70% seedling production 30% vegetable production 2. What are the main seedlings produced and vegetable crops grown? Seedlings  Tomato – 10 million seedlings/year  Cabbage – 2 million seedlings/year  Choko – more than 10 million seedlings/year  Onions – more than 10 million seedlings/year  Green mustard – 10 million seedlings/year  Lettuce – 40 million seedlings/year  Chilli, pepper and capsicum Vegetables He has 4 ha for field production, rotating his crops. His last crop was Chinese cabbage and onions. He is currently growing corn and will also make silage from the remaining area. As far as tomato production is concerned, he grows them in both the open field and greenhouse. He tends to produce 1 tomato crop per year (1 ha), with planting time determined largely by market demand. Tomato production 3. When did you grow your tomato crop in 2005-06? The crop was transplanted in January 2006, with harvest commencing in May 2006. 4. What varieties did you grow? 386 5. What was your total production? 80 tonnes (When he grows greenhouse tomatoes he gets 120t/ha.) 6. What made you choose to grow 386? In response to market demand. 7. Who are your main buyers? Collectors 8. What do your buyers look for? There is no contract. Buyers look at size, colour, firmness and freedom from insect and physical damage. 9. What attributes do buyers consider to be the most important? The attributes are equally important. 10. Where do the buyers come from? Duc Trong 11. Who do the collectors sell to? They sell the product to regional wholesalers. 50% of this product would then be sold in the Ho Chi Minh Central Market, while the remainder would be sold to regional markets eg. Nha Trang and Hue. From these major regional markets, product would then be distributed to other districts and markets. A small proportion would be sold in the local market. 12. Do different quality grades go to each market? Yes, the largest fruit and best quality goes to the Ho Chi Minh market 13. What price do you receive? For graded tomatoes, he receives on average VND4000/kg in the Ho Chi Minh market and VND3000-3500/kg in other markets. 14. Do you do any grading? No, collectors undertake the grading. They grade tomatoes into 3 size grades:  Large - > 80g  Medium – 60-80g  Small- <60g 15. Do you sell to the same collectors? He sells to whoever is offering the best price. Normally he would sell to around 5 collectors. 16. How do you decide when to harvest? By experience, pick based on size, colour and firmness. 17. What colour stage do you harvest at? 25% colour. 18. Who harvests the fruit? Employees 19. What time of day do you harvest? 7-11 am and normally 3-4 ton/day 20. What type and size containers is the harvest put into? The tomatoes are picked into 10kg buckets, prior to the collector coming to grade it. Following grading the collector/agent places the tomatoes in 60kg bamboo baskets. The grading is undertaken in the field in full sun. 21. How long does the fruit stay in the field once it is harvested? Around 5-6 hours from harvest. 22. How do they stack the baskets on the truck? They stack to 4 high with timber in-between. The product is covered if rain is expected, otherwise it is left uncovered. [...]...23 How big is the truck? 10 Ton The load is normally a mixed vegetable load Sometimes the truck is not full 24 Any other forms of transport? No, smaller growers supplying the local market would use other types 25 Do other growers pack into any other containers? Nearly 100% of growers would use the 60kg basket The small percentage that go to supermarkets would... supermarkets will tell farmers not to use a particular chemical They normally give you a list of what you can and can’t use But normally they trust the grower to do the job right 32 What supermarkets do you supply to? Metro and Safe fruit and vegetables shops 33 How many hours normally pass between harvest and the tomato leaving your farm? 8 hours 34 What time of day do tomatoes normally leave your farm?... grafted tomato seedlings is on new ground where there is no bacterial wilt 39 How does his marketing approach differ to other farmers? 90% of farmers in the area would market in a similar way to him 10% supply to small markets or supermarkets 40 Do any of the collectors pack in a different way? Only when packing for supermarkets or export (5%) to Cambodia or China In the case of export, a 50kg basket... tomatoes is during the wet season Less demand during the dry season 48 What are the main problems that he has with his tomato seedlings? 10% loss through grafts not taking and on some occasions market oversupply 49 Where does he purchase his inputs? 70% of the peat moss used in his potting mix is bought from Bao Loc The remaining inputs including fertiliser and sprays are purchased locally 50 From sowing . Milestone 4: Supply Chains Defined Deliverables: • Methodology, analytical techniques and training material for supply chain analysis and development • Key issues and options for improved supply. farmers and other supply chain partners to these systems. As such, the emphasis was never intended to be on improving supply chains, merely examining current vegetable supply chains and determining. context. Supply Chain Study . In addition to the training activities above, two case studies were undertaken looking at 2 supply chains: a) Mr Phong’s and his farmer group tomato supply chain