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Evolution of Category Management in UK Supermarket Fresh Produce Networks: A Return to Direct Supply Channels?

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  • Hingley, Martin
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    Abstract

    The premise of this paper is investigation into retailer-driven agri-food supply channels. Food sector dominant UK multiple retailers have in recent years invested in close Category Management (CM) based supply channel relationships with key/ preferred suppliers (Hingley, 2004; Hingley, Lindgreen and Casswell, 2006; Sodano and Hingley, 2007). Category Management allows a nominated supplier to take greater responsibility for the entire supply chain of a given product category and aims to maximise sales and profitability through an end consumer orientation (Jarvis and Woolven, 1999) and this became universally employed by retailers in recent years (Hingley, 2005a). However, critics such as Dapiran and Hogarth-Scott (2003) contend that the development of CM has not necessarily increased co-operation in supply chains and that it can be used by retailers to actually reinforce power and control. Some suppliers are reported as being concerned that risk is put on to the supplier and away from the retailer (Allen 2001; Hingley, 2005a; 2005b). Duffy et al (2003) concur, and state that CM in food supply chains has led retailers to a preference for larger suppliers who dominate a product category. UK retailers have been happy to go down the CM route as by doing so they have off-loaded a good deal of responsibility onto category lead suppliers, whilst retaining channel control (Hingley, 2005b). Most of these retailers have developed a 'super middleman' hub of CM suppliers, based on suppliers’ undertaking centralised activities (taking lead on volume, quality and technical, innovation etc) on behalf of their retailer (Hingley, 2005a). This has built a (not necessarily mutual) reliance and enhanced the role of key CM partner suppliers. However, despite the benefits of CM, its infrastructure has a good deal of central control cost and overhead. The core purpose of this study is to establish whether CM has run its course and perhaps circumstances are again evolving towards a leaner, and more direct sourcing philosophy; where stripped-down suppliers can gain a direct route to multiple retailers? The context for this premise is derived from ongoing price pressures in the channel management of what are essentially low value fresh commodities. Such pressure on cost/ price may lead retailers to develop a slimmed down and more direct supply route for many fresh products. In addition to this, supplier criticism and discussion of the more negative aspects of the approach has led retailers to reappraise the future of CM. Further, perhaps retailers no longer require such a close 'relationship' with suppliers (given that the supplier quality/ integrity issues and protocols that initiated such an approach are well established and can be covered by freelance outsourced agents)? For the purpose of this paper, the investigation is preliminary and qualitative, based on depth interviews with members of a fresh produce supplier/ intermediary (sourcing produce widely from around Europe). To follow, further empirical studies will be undertaken using a larger number of semi-structured interviews with key multiple retailer fresh produce Category Managers and CM suppliers in the UK.

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    Bibliographic Info

    Paper provided by European Association of Agricultural Economists in its series 110th Seminar, February 18-22, 2008, Innsbruck-Igls, Austria with number 49852.

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    Date of creation: Oct 2008
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    Handle: RePEc:ags:eea110:49852

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    Related research

    Keywords: retail supply networks; category management; innovation; fresh produce; Agribusiness; Agricultural and Food Policy; Farm Management; Food Consumption/Nutrition/Food Safety; Industrial Organization;

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