Combining the findings of the four studies enables us to draw overall conclusions and to provide an answer to the central research question:
RQ: What is the impact of supply chain practices on performance in the Mexican avocado industry, and how do organizational arrangements of producers and packers align with these supply chain practices?
By answering this question, we achieve the main objective of explaining the relationship between supply chain practices and inter-organizational arrangements, as well as explaining how particular combinations of supply chain practices and inter-organizational arrangements result in higher performance in the Mexican avocado industry.
6.2.1 Adopting SCPs such as product standardization, information exchange, and supplier partnership allows dealing with agrifood supply chain challenges.
Exporting to the US market has led to specific supply chain challenges for the Mexican avocado industry. From the perspective of the packers, three challenges stand out: creating reliable avocado supply, enhancing product quality, and improving coordination between supply and demand. The findings indicate that despite the substantial efforts needed to successfully introduce product standardization and intensive information exchange, SCPs have clearly contributed to solving the supply chain challenges previously mentioned. Packers that wish to obtain reliable supply should enter into bilateral and/or multilateral partnerships. We found that multilateral partnerships between producers and packers, such as the APEAM, have institutionalized joint interest in maintaining reliable supply. In addition, bilateral partnerships consisting of producer-packer contractual arrangements or of producers financially participating in a packaging house have allowed obtaining higher product quality. These types of bilateral partnership have facilitated that producers adopt high quality standards (such as US-GAP, Global-GAP and Organic). Finally, packers entering into either bilateral partnerships or vertical integration with trading companies have implemented joint planning activities and obtained improved efficiency leading to higher product quality.
6.2.2 It is important for producers to choose an appropriate contractual arrangement to ensure adoption of a particular quality standard.
Quality standards can provide credible quality guarantees, thereby increasing benefits and improving competitiveness. In order to obtain the benefits, adopting quality standards implies complex interactions to decompose production and distribution tasks and to manage interdependent activities among chain partners, as well as safeguarding specific investments. Until 1997, only private quality standards were present in the Mexican avocado industry. After that year, an increasing number of producers has adopted public quality standards. Our results showed that producers that adopt private quality standards (such as US-GAP, Global- GAP or Organic standard) that encompass a high level of asset specificity should select contractual arrangements based on relational features such as a long duration of the arrangement and intensive information exchange. These contractual arrangements safeguard specific investments and allow producers to get sufficient information from buyers for planning of their own activities. Regarding adoption of public quality standards (particularly phytosanitary standards), these present a low level of asset specificity, and producers use simple or market contractual arrangements. The presence of a public-private organization that provides information, inputs and technical assistance to producers, reduces the need for safeguarding specific investments thus allowing the use of simple contractual arrangements. 6.2.3 It is important for producers to opt for appropriate features in their business
relationship with buyers.
Mexican avocado producers have recognized that a consolidated supplier-buyer relationship can help them to comply with quality requirements, adopt appropriate business practices, and meet the qualitative and quantitative demands of buyers. Characteristics of a supplier-buyer relationship such as the long term duration of the arrangement and intensive exchange of information play an important role in improving performance in the agrifood sector
Producers improve their performance when their relationship with the buyer is characterized by a high expectation of continued business interaction and a substantial exchange of information. An ongoing relationship decreases uncertainty about whether the buyer will honour the contract. As a result, these producers have obtained a higher product yield and product quality. In addition, high levels of information provided by the buyers about the quality and quantity their customers demand has resulted in avocado producers improving their performance in terms of yield, product quality and price. However, when the market is characterized by high price uncertainty, producers face the risk that buyers renege on the contract. Under volatile prices, buyers more often start renegotiation prices and quantities. When producers have a continued relationship with a buyer, the risk of buyer opportunism is reduced. The role of buyer commitment is ambiguous. In our case study we learned that buyer commitment is a strong signal for producers to engage in quality enhancing activities. However, in our quantitative study we did not find significant support for the hypotheses that higher buyer commitment leads to higher producer performance.
6.2.4 Packers seeking performance improvements should not only consider aligning activities but also aligning interests with their buyers.
In the Mexican avocado industry, information exchange and the expectation of future interaction between packers and buyers has become increasingly important. Packers selling products to domestic and international markets face an uncertain environment in which prices
are determined on a daily basis and customer demand is volatile due to retail promotions and changes in order procedures and volume requirements. We found that packers that try to improve adaptation through inter-firm coordination may paradoxically face higher ex-post transaction costs. Avocado packers receiving substantial buyer information about customer preferences, promotions, and product flows, have improved their performance compared to other packers, because demand planning and related activities in distribution and transportation have allowed to guarantee product quality and to reduce stock outs. However, as our study showed, more interfirm coordination increases the risk for the packer’s specific investments. Packers that have invested in human capital and information systems tailored to their buyers have created a higher dependency in the packer-buyer relationship. To deal with this dependency and the accompanying transaction costs, packers should create a continued business relationship with their buyers. This relationship allows packers to combine safeguarding specific investments and obtaining additional information that is used for performance improvement. In addition, a high level of interfirm coordination creates benefits for both the packer and the buyer. Whereas the packer improves its performance in terms of sales, the buyer faces less stock outs caused by packer unfulfilment.