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Supply chain management of differentiated agricultural products under imperfect information.


Description

Participants in a supply chain of agricultural value added products face two significant challenges. First, many of the costly distinctive traits being desired by consumers are difficult (if not impossible) to observe even after consumption. In order for markets for these classes of goods to develop, firms touting the quality of the product need to be trusted. Hence, maintaining an excellent reputation is essential for firms to keep their customers' good will. Secondly, production is conducted in an environment of yield uncertainty, making it impossible for producers and processors to predict with certainty either the quantity or the quality of the input that will be available in any given season. In short, production, processing, and marketing of some value added products require tighter coordination mechanisms than those afforded by open market transactions.