The Modern Chicken Supply Chain Integration - Case Study Example

Consumption of meat has always been associated with wealth but recent food scares like the Bovine Spongiform Encephalopathy (BSE), foot and mouth crisis and general health concerns have led to reduction in red meat consumption. As a result, poultry has overtaken red meat and is the most commonly purchased meat for the home in the UK. Poultry per capita consumption has increased over the last decade and now account for almost 40 percent of the meat eaten in UK (Kennedy et al., 2004). While poultry accounts for 40% of the volume sales within the meat and the meat products sector, 78% of the animals slaughtered within the poultry refer to broiler chickens (Yakovleva & Flynn, 2004). As chicken now forms a regular part of the daily meal, quality expectations and perceptions have changed over the years. Consumers expect good quality products derived from healthy animals raised in a healthy environment, to be natural, fresh tasting and nutritious (Morrisey et al., 1998 cited by Kennedy et al., 2004). Consumers’ concern for animal welfare and food scares has posed a challenge for the retail food supply chain industry. The challenges have forced the retailers to view the supply chain as one chain and not as a number of several independent supply chains. Meat suppliers now have to cooperate with the competitors. Apart from BSE and foot and mouth disease, many incidents of bacterially contaminated meat carrying campylobacter have surfaced. Despite consumer concerns the food supply chain organizations have not responded giving immediate and accurate information to the consumers (Lindgreen & Hingley, 2003). In the UK food supply chain close partnership exists between multiple retail buyers and a reduced supply base of more significant suppliers to their businesses in their given food categories. UK supermarkets are under heavy criticism with regard to ‘fair’ dealings with suppliers. Because of the shortcomings in the treatment of suppliers to supermarkets, code of practice has been drawn up the Director General of Fair Trading in the UK to which most leading retailers comply with. The code has been criticized by the UK farmers’ leaders. While a vast range of ethical programs have been initiated and code of conduct drawn up in UK, most of the codes focus exclusively in the area of production (Hughes, 2001). Very little attention is paid to social and environmental issues and almost always the terms of agreement between producers and buyers are ignored. Retail chains like Tesco and Sainsbury have influenced the way they do business. Supply chains have been influenced by a complex interplay of trade liberalization and intense global competition. Deregulation, new technology, reduced transportation costs, debts and concentration of market power in the hands of a few buyers have resulted in a large number of competitive and relatively powerless suppliers face a few large buyers (Vorley, n.d.). Value has been transferred from producers and rural areas to consumers and urban areas. Market distortions have been caused by the protectionist trade policies. Disparities in bargaining power exist along with anti-rural and anti-poor bias in the market. Four companies control 40% of cocoa grinding while in livestock three companies control the major share of crushing and feed production along the entire chain from South America to Europe. Firms with vertical integration have the control as they are high on resources, low on costs, and are able to employ the right technology to meet the rapidly changing demands. As they have the capital and the economies of scale they are able to invest in the environmental and social policies. Buyer power undermines justice and fairness in the supply chain as the family owned producers are at a great disadvantage. Due to globalization the supply chain strategy elements carry severe risk implications. There is a move towards lean supply, centralized distribution and stock holding (Juttner, 2006). Besides, the companies are interested in cost cutting irrespective of the consequences of the supply chain’s resilience. Broiler chicken in the UK is produced on a massive scale to the extent that annually more than 800 million chicks are placed from hatcheries to rearing. Poultry production is a highly concentrated sector. British Poultry Council (BPC) is a voluntary trade association funded by members’ subscription. Almost 90% of the firms engaged in production of poultry meat are members of this association involved in breeding, hatching, rearing and processing of poultry meat. BPC represents the members’ views to the government and participates on bird welfare and food safety. The chicken market is made up of fresh, cooked and frozen areas where fresh poultry accounts for the highest in the retail sales. The modern chicken supply chain is integrated in UK and is controlled by a small number of large enterprises and the distribution is mainly through large supermarket chains (Yakovleva & Flynn, 2004). The entire chicken supply chain is heavily dependent on technological setting both in growing and processing chicken. The supply chain of the poultry industry consists of four key elements, the breeders, the factory farmers, the abattoirs/packers and the supermarkets. Selective breeding takes place for developing breeds for broiler production and production of eggs. The eggs are then hatched in special incubators and the process takes 21 days. After that one-day chicks are transported to chicken farms. Here the rearing of the birds takes place when they are fed till they reach the appropriate age and weight. They are placed on litter and allowed to grow up to 2.2 kg in 39 to 42 days whereas adulthood is not reached until 5 or 6 months. From here the fully grown but juvenile chickens are transported to the processing plants. In the primary processing stage, slaughtering, de-feathering, chilling, maturing, packaging and pricing is done. At the time of slaughter the average weight of the bird is 2.5 kg. Further processing involves cooking or adding spices after which the final manufacturing takes place. At this stage chicken is used mostly as an ingredient for the preparation of chilled foods. After this distribution is done through wholesalers to retailers and markets. While retail supply dominates the sale of chicken, the food service industry also consumes a huge amount. From here it reaches the end consumer who purchases, stores, and cooks, consumes and disposes it off. The Greatest Happiness Principle states that the end result should give least pain and the maximum happiness to the greatest number of people (Mill, 1863). Utilitarianism says we must always do what has the best consequences. Anything that gives happiness has instrumental value. Happiness is supposed to be good and unhappiness evil. Hence the right thing is to promote happiness. A moral act is one that produces positive results and makes the world a better place. So actions are solely judged based on their consequences. Actions are right when they promote happiness and wrong when the reverse takes place. In the chicken supply chain all are happy as time is reduced, prices are reduced due to technological advancement and hence it is justified. Thus the supply chain involves the input of feed, water, energy, chemicals, transport, while outputs include air emission, waste water, manure, animal by-products, and waste at different stages within the chicken supply chain. The supply chain is very energy intensive and hence technological innovation is essential. Each stage has become efficient so that products to move to the next stage in lesser time. Selective breeding has halved the length of time to grow broiler chickens to 2 kg and the amount of feed needed has been reduced by 40%. Processing is a matter of hours and since the chickens have a shelf life of 7-10 days they move quickly through the distribution system. Transportation time has also been reduced which means the consumers receive fresher products. The chicken supply chain has a product life cycle of approximately 70 days from hatching to consumption. Hence changes in the supply chain can be easily integrated. Within the chicken supply chain several trends are emerging like many chicken producing companies are becoming vertically integrated. When happiness is the sole end of human action, the criterion is morality. If in a certain situation lying brings greater happiness than telling the truth, then it is act-utilitarianism and lying is justified. In the case of chick supply chain, there is no lying involved. It is merely using technology to expedite the process; at best it may result in producing sub-standard product. What matters is that at the end all in the supply chain are happy. Mill believes that act-utilitarianism should be used only when rules conflict or when two rules could be applied to the same situation without being in conflict. Mill further states that it is better to be a human being dissatisfied than a pig satisfied. Human beings often choose an inferior good. The sole end of human action is the standard of morality, which defines the rules and precepts of human conduct. Thus utilizing technology to enhance the supply chain performance results in maximum good to maximum number of people including the consumers as they too pay less for the same chicken. Deontology on the other hand is defined by it emphasis on moral rules. Deontologists believe that morality both requires us and allows us to do things that may not produce the best possible consequences (Greene, 2005). Even if killing one person to save several others maximizes good consequences, deontologist would still consider it wrong. Deontology focuses on rights and duties. It is a judgment made out of respect for certain types of rules. Immanuel Kant maintains that various actions are morally wrong if they are inconsistent with the status of a person as a free and rational being. Besides, acts that further the status of the people as free and rational beings are morally right. Hence human beings have a duty to avoid the first type of act and perform the second type of act (Wikipedia). The consumer groups are right when they protest or criticize the production and trade in the chicken supply chain. Chicken is known to carry campylobacter and is the main source of food poisoning in Europe (ElAmin, 2005). The Food Standards Agency (FSA) has already launched a food safety program to reduce the 76% of campylobacter infection in the UK raised chickens. The chickens contain antibiotic resistant Campylobacter. The Royal Society for the Prevention of Cruelty to Animals (RSPCA) has launched a campaign to educate the consumers about the living and dying conditions of the broiler chickens. This has been prompted because they found that nearly half of consumers think that chickens are raised in the same manner as egg-laying hens. While fifty percent of chickens entering the food chain are also known to carry campylobacter, a cause of food poisoning, about 100,000 "broiler" chickens die prematurely every day "due to strains placed on their young bodies" according to an RSPCA scientist (UPC, 2004). The purpose of creating this awareness among the consumers is that they would make the right choice for chicken and choose only those labeled as Freedom Food, Free Range and Organic. Apart from the fact that human beings are susceptible to infection by consumption of such poultry, consumers also have a duty towards the farmers and the inhuman circumstances under which the chickens are grown. According to Kant, this duty is the categorical imperative. The act should become universal law, which implies that protests raised by consumers should lead to farmers being given a fair price for their produce. Chicken today is cheaper in our supermarkets today than twenty years ago primarily because consumer confidence is lost. The British chicken industry tried to restore the consumer confidence through the Chicken Assurance Scheme but in vain. As a result, chicken is being dumped into the UK wholesale markets. The average retail process of chicken has been steadily declining since 2004. The prices are below the cost of production and severely damaging the companies that supply chicken. Food product innovation has become essential to survive in the global competitive market but how healthy are these broilers is the concern of the end consumers. Farmers are under pressure to supply quality assured chicken at a price below the cost of production. Input costs like energy and labor have increased over the last few years making the British chicken industry not financially sustainable. The largest single input cost is the chicken feed which constitutes around two-thirds of the cost. The price paid to farmers in 2004 was 50p/kg which has been reduced to 48.5p/kg in 2006 while the production costs average 54.69p/kg. Thus poultry businesses will be making a loss of 6.2p/kg. With an annual production of 280,000 kg the loss amounts to £112,840 per annum (ThePoultrySite, 2006). The chicken processing companies are also experiencing difficulties due to significant rise in input costs without any rise in the prices they receive. These companies are hence unable to invest in new technologies to improve efficiency. Under the circumstances categorical imperative must be applied, which would ensure fair rates to the farmers, proper growth of the chickens and the consumers too benefit when hygienic growth leads to bacteria free poultry. Other deontologists like John Locke and John Rawls too believe that consumers must have distinction between the concept of the right and the concept of good. Every act that maximizes the good need not be right, is what the deontologists hold and hence it should not be carried out. Hence, even though prices today are cheaper than what is was several years ago, it is not morally right and consumers should protest and raise voice against the chicken supply chain. While the utilitarian principles support the production methods including all in the supply chain up to the retailers and the consumers, the deontological principles support the growing criticism from the consumers. Even if one were to stick to the utilitarian principles that happiness should be the sole end of human action, unfair trade practices and rates to the farmers, supplying sub-standard quality of chicken to consumers and control in the hands of a few traders brings dissatisfaction to many. In taking a decision for happiness, there should be no vested interests but here few large traders have the control. Such an act cannot be for the sole end of happiness and hence it is not a moral act. On the other hand it is the duty of the consumers’ to disallow such unfair trade practices. Such actions stem from duty which is imposed on one’s self. The sense of duty, responsibility and morality has to come from within. These cannot be externally imposed or enforced. Consumers are rightly raising concerns and protests in the interest of all concerned, which includes the farmers, the chickens and the humanity at large. The chicken supply chain has to undergo transformation which would be in line with the principles of morality as claimed by Kant and others. At the same time it would also conform to the Greatest Happiness Principle as maximum people would be happy at the end, which is the sole end of human action. References: ElAmin, A., (2005), BBC survey another blow against UK chicken, 04 May 2007 Greene, J., (2005), The Secret Joke of Kant’s Soul, 03 May 2007 Hughes, A., (2001), Global commodity networks, ethical trade and governmentality: organizing business responsibility in the Kenyan cut flower industry, Trans Inst Br Geogr NS 26 390-406 200 Juttner, U., (2006), Supply chain risk management, The International Journal of Logistics Management Vol. 16 No. 1, 2005 pp. 120-141 Kennedy, O. B., Stewart-Knox, B. J., Mitchell, P. C., & Thurnham, D. I., (2004), Consumer perceptions of poultry meat: a qualitative analysis, Nutrition & Food Science Volume 34 · Number 3 · 2004 · pp. 122–129 Lindgreen A., & Hingley, M., (2003), The impact of food safety and animal welfare policies on supply chain management, British Food Journal, Vol. 105 No. 6 pp. 328-349 Mill J S (1863), UTILITARIANISM, What Utilitarianism Is. ThePoultrySite., (2006), British Chicken – What Price? 04 May 2007 UPC (2004), US/UK "BROILER" CHICKEN WELFARE, 04 May 2007 Vorley, B., (n.d.), Food Inc, Corporate concentration from farm to consumer, UK Food Group, 04 May 2007 Yakovleva, N., & Flynn, A., (2004), Innovation and the Food Supply Chain: a Case Study of Chicken, 04 May 2007 Wikipedia, Deontological ethics, 04 May 2007 Read More