Supply chain characteristics

The importance of the study products to the intermediary businesses varied depending on the type and function of the intermediary. If the intermediary was fairly small in size, the importance of a single product was naturally relatively high, and vice versa. There were also differences according to product group. In the fi sh product group, for example, the importance of a single supplier was sometimes very high for an intermediary. The fi sh product sector, ‘wild’ fi sh, (not farmed), is very much subject to the forces of nature, and fl uctuation in supply is enormous in different seasons. The intermediate chain members’

views concerning traceability of raw materials were rather similar to the views of SME processors. Both SME processors and intermediate chain members regarded traceabi-lity as highly important in general. However, intermediate chain members did not see taking care of traceability as their principal duty whereas the SME processors did. The interviewed SME processors and intermediate chain members both had almost equally vague opinions about consumers’ views concerning traceability.

The supplier selection process varied greatly where different types of intermediary chain members were concerned. The interviewees in the group of multiple wholesalers usually stated that they do not have to search for new suppliers: they get enough contacts and thus are able to choose from a large number of possible newcomers. Speciality wholesalers usually know their own branch very well and rarely are they contacted by a completely

‘new’ supplier. In the case of speciality wholesalers it is as normal for input suppliers to contact them as it is vice versa.

The signifi cance of small suppliers to intermediary chain members had less to do with fi nance and more to do with image. Usually SME suppliers’ products were seen being rather low-volume for intermediaries, but as the following quote shows, the meaning of SMEs’ products is unarguable.

A few multiple wholesalers said that having SME suppliers was a fundamental part of their service supply. If they did not have SMEs as suppliers, something would clearly be missing. A noteworthy comment was also that each small supplier must be taken seri-ously in a small municipality or town because these suppliers are usually the wholesal-ers’ customers too. In summary, the quality of SME suppliwholesal-ers’ products was generally regarded as fairly high and therefore SMEs were appreciated as suppliers and partners if their volumes were adequate and logistical issues were solved cost-effectively.

The interviewed intermediate chain members were also asked whether having SMEs as suppliers had any particular implications for their business. One multiple wholesaler said that the size of the supplying business has no absolute value per se but it is the day-to-day operations and their smooth functioning that really counts and defi nes whether a business relationship can succeed. If the relationship with an SME works without any great dif-fi culty, it makes no difference for wholesalers whether their supplier is an SME or not.

Flexibility of SMEs was highly appreciated by many speciality and multiple wholesal-ers. They said they are could be sure that an SME as a supplier would be able to provide them with new supplies at short notice and usually even at odd hours. When dealing with large food businesses the ordering schedules are fi xed, as agreed in the contract. It was also acknowledged that SMEs treat all their customers with respect.

On the other hand, it can be much more time-consuming to have a business relationship with an SME because the interaction is not always as ‘professional’ as with larger busi-nesses. Some interviewees indicated that SMEs did not always have a clear picture of how everything works in the business environment. However, some interviewed intermediar-ies seemed to appreciate the more informal way of doing business. Some interviewees indicated that they had actually made good friends with their SME suppliers and some even met socially.

The interviewees were also asked about their criteria and requirements for suppliers.

On average the most commonly mentioned selection criteria were: 1) an ability to meet delivery schedules, 2) delivering correct quantities, 3) high quality, and 4) reasonable prices. Most of the intermediaries, regardless of their type, preferred long-term, established supplier relationships to spot trade. They said that they wanted to use the same suppliers because together they have created over the years a certain way of doing business and therefore it was fairly easy to understand each other. Confl ict situations thus happened very rarely in established supplier relationships. The multiple wholesalers in particular indicated that because of the large number of suppliers in total, they had no interest whatsoever in changing suppliers if everything is working fi ne, because it would tie up so much human resources for noreason. The common view among intermediate chain members was that they wanted to devote time and energy to attending to the existing supplier relations.

Approximately half of the interviewed intermediaries had (at least partly) formal, written contracts with their suppliers. Written contracts were usually valid for a year, a season, or a shorted period. Oral contracts were used mostly by small businesses. The group of speciality wholesalers (especially for berries and vegetables) and also secondary proces-sors were the most common types of intermediaries who used informal, oral contracts.

The reason for not using formal contracts was for example the constant change in the price of raw material or long-term co-operation with the supplier side, sometimes for several generations already. Multiple wholesalers and marketing businesses used written contracts almost without exception. One respondent stated that a written contract is best for both parties; there are no ambiguities when everything is written down.

Although all the intermediary businesses had one main customer group (direct sale to retail stores, multiple wholesalers, food service sector, other processors, etc.) to whom they supplied the majority of their products, they usually did not depend on one customer group only (the exception being the multiple wholesalers, who only supplied their own

retail stores). According to the interviewees it is not commercially wise to have just a couple of big customers, as the economical risks are too high. But specialising in a cus-tomer group, though, can economically be a good decision. Because competition is hard, it is very important to know the customers and their needs well. Some interviewees, for example, considered it impossible to deal directly with the retail stores and the multiple wholesalers at the same time. Choosing a practical supply chain for the business is an important strategic decision for an enterprise. The decision is greatly affected by the nature of the products supplied and the services the business wants to offer its customers.

The familiarity of the products and services and the demand for them had an essential effect on the fact of whether the intermediary business was actively seeking potential new customers. For those businesses with long business traditions and established brands the search for new customers was rather different compared to those businesses which were just about to start operations. For the young businesses, active marketing of their products was essential in creating new business relations. In general, young businesses emphasised their own activity when a business relation was established. Once a business had an established clientele, active selling did not become unnecessary. As one of the interviewees said: “This requires active selling every day”. Selling was done either by phone, e-mail, post or personal visit. Although the great majority of the businesses were in some respect using well-advanced communication technology, the phone was still the most important communication device between a business and its customers. Despite the age and size of the business, personal meetings with customers were considered to be very important when maintaining good relations with them.

According to the interviewees, typical of their business relations was that they were long-lasting and continuous. In many cases the business relations were established con-temporaneously with the establishment of the business and were still, after many years, functioning well. It should be noted that the nature of the product has some effect on the nature of the business relation. In the case of speciality products, the product might be so unique that it cannot be purchased anywhere else, while with bulk products there might be numerous suppliers. This can affect the loyalty of the customer. Furthermore, in some cases, a supplier of a speciality product has developed the product together with a customer. This kind of collaboration naturally increases the customer’s awareness of the product and at the same time increases the commitment of both parties to the busi-ness relationship.

According to the interviewees, an important element in a successful business relationship between a supplier and a customer is trust. Mutual trust was considered to be a precon-dition of both information exchange and fruitful negotiations between a business and its customers. Although communication with customers was often rather unoffi cial and based on trust, the business contracts were usually offi cial written contracts. This was a business policy especially where large businesses were concerned.

Several facts infl uenced the way distribution of the products was organised in the busi-nesses. According to the interviewees, the size and location of the market as well as the nature of the business and the product were important factors affecting the distribution policy of an intermediary businesses. In particular, the perishable nature of the products greatly affected the distribution systems of the businesses studied. Because of the high risk of spoilage, food deliveries have to be especially fast, and effectively arranged. The distribution decisions were justifi ed by the quality of the service and by the reliability of the supply. Furthermore, distribution decisions are naturally important economic deci-sions as well.