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Assessment of innovation and performance in the fruit chain The innovation-performance matrix Jacques Trienekens Department of Business Administration, Wageningen University, Wageningen, The Netherlands Ruud van Uffelen Agricultural-Economics Research Institute, WUR-LEI, Wageningen, The Netherlands, and Jeremy Debaire and Onno Omta Department of Business Administration, Wageningen University, Wageningen, The Netherlands Abstract Purpose – This paper aims to bridge the concepts of innovation and performance and to develop a framework to assess innovation and performance in food chains. Design/methodology/approach – Based on an extensive literature search the paper identifies critical success factors (CSFs) and related indicators for innovation in food chains, on the one hand, and performance in food chains, on the other. Main CSF categories for innovation are: product, process, market and organization. Main CSF categories for performance are: efficiency, responsiveness, quality and flexibility. A chain process model is developed that enables one to identify main chain processes that impact on innovation and performance. A trade-off matrix is constructed in which effects of innovations on performance and vice versa in typical chain processes can be identified. Findings – This article reviewed available supply-chain innovation and performance indicators and models and methods used to assess performance and innovation within fruit supply chains. Based on the existing literature a conceptual framework for assessing innovation and performance of companies in the European fruit supply chain has been developed. The framework consists of a supply chain process model and an innovation-performance matrix which have been successfully applied to several cases along the apple chain in The Netherlands. Practical implications – The chain process model and matrix are applied in an integrated way to the Dutch fruit chain. An apple grower case and a fruit cooperative case are worked out. Managers in food chains can use the framework to assess their company’s innovations and performances. Originality/value – The paper aims to bridge the concepts of innovation and performance. Literature and research on this subject are minimal. Keywords Innovation, Performance measures, Fruits, Supply chain management, Critical success factors, The Netherlands Paper type Research paper The current issue and full text archive of this journal is available at www.emeraldinsight.com/0007-070X.htm The authors greatly acknowledge the partners and companies of the EU-Sixth Framework Integrated Project ISAFRUIT for their support in the data collection and for providing their knowledge of the European fruit sector. BFJ 110,1 98 British Food Journal Vol. 110 No. 1, 2008 pp. 98-127 q Emerald Group Publishing Limited 0007-070X DOI 10.1108/00070700810844812

Transcript of Assessment of innovation and performance in the fruit chain

Page 1: Assessment of innovation and performance in the fruit chain

Assessment of innovation andperformance in the fruit chain

The innovation-performance matrix

Jacques TrienekensDepartment of Business Administration, Wageningen University, Wageningen,

The Netherlands

Ruud van UffelenAgricultural-Economics Research Institute, WUR-LEI, Wageningen,

The Netherlands, and

Jeremy Debaire and Onno OmtaDepartment of Business Administration, Wageningen University, Wageningen,

The Netherlands

Abstract

Purpose – This paper aims to bridge the concepts of innovation and performance and to develop aframework to assess innovation and performance in food chains.

Design/methodology/approach – Based on an extensive literature search the paper identifiescritical success factors (CSFs) and related indicators for innovation in food chains, on the one hand,and performance in food chains, on the other. Main CSF categories for innovation are: product, process,market and organization. Main CSF categories for performance are: efficiency, responsiveness, qualityand flexibility. A chain process model is developed that enables one to identify main chain processesthat impact on innovation and performance. A trade-off matrix is constructed in which effects ofinnovations on performance and vice versa in typical chain processes can be identified.

Findings – This article reviewed available supply-chain innovation and performance indicators andmodels and methods used to assess performance and innovation within fruit supply chains. Based onthe existing literature a conceptual framework for assessing innovation and performance of companiesin the European fruit supply chain has been developed. The framework consists of a supply chainprocess model and an innovation-performance matrix which have been successfully applied to severalcases along the apple chain in The Netherlands.

Practical implications – The chain process model and matrix are applied in an integrated way tothe Dutch fruit chain. An apple grower case and a fruit cooperative case are worked out. Managers infood chains can use the framework to assess their company’s innovations and performances.

Originality/value – The paper aims to bridge the concepts of innovation and performance.Literature and research on this subject are minimal.

Keywords Innovation, Performance measures, Fruits, Supply chain management,Critical success factors, The Netherlands

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/0007-070X.htm

The authors greatly acknowledge the partners and companies of the EU-Sixth FrameworkIntegrated Project ISAFRUIT for their support in the data collection and for providing theirknowledge of the European fruit sector.

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British Food JournalVol. 110 No. 1, 2008pp. 98-127q Emerald Group Publishing Limited0007-070XDOI 10.1108/00070700810844812

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IntroductionNew lifestyles, higher income and awareness of consumers, lead to a demand forvariety, quality, year-round supply of fresh produce, convenience, value added and“healthy” food. There is also an increase of demand for “ready-to-eat” food. It is welldocumented that fruit and vegetables are an important component of a healthy dietand, if consumed daily in sufficient amounts, can help preventing major chronicdiseases such as cardiovascular diseases and certain cancers. Several reports indicatethe need for an increased intake of fruit and vegetables as a means to prevent certainhuman diseases (WHO, 2002; Pomerlau et al., 2003; EURODIET, 2001). The recent JointFAO/WHO Expert Consultation on diet, nutrition and the prevention of chronicdiseases, recommended the intake of a minimum of 400 g of fruit and vegetables perday. Worldwide, low intake of fruits and vegetables is estimated to cause about 19percent of gastrointestinal cancer, about 31 percent of ischaemic heart disease and 11percent of stroke (FAO/WHO, 2004).

Therefore, a shift towards more fruit and vegetable consumption amongst themiddle and upper middle classes is expected. The FAO/WHO report on diet, nutritionand chronic health indicates that these changes in dietary patterns will be tremendousin the coming years, in particular in developing countries (Brazil, China, India, SouthAfrica and others). Consequently, a great opportunity emerges for the fruit market.However, the fruit market does not always meet consumer expectations. Qualitydeterioration along the supply chain, price and availability are major problems.Consumers also often worry about pesticide residues in fruits and are concerned withthe introduction of GMOs in the food chain. These dreads and the lack of awarenessabout the health-giving attributes are amongst the reasons of the low intake of fruits.Therefore, growers need more sustainable production methods and the whole chainshould work closely together to find solutions to meet consumer’s expectations.Although large differences between fruit products, countries and cultures can beexpected, the following critical bottlenecks for increased fruit consumption have beenhypothesised:

H1. Insufficient quality and safety of fruit and fruit products at the point ofconsumption.

H2. Limited availability of certain fruits and fruit products.

H3. Lack of sufficient consciousness of consumers about the health benefits ofregular fruit consumption.

H4. High price and lower levels of convenience of fruit and fruit productscompared to competing products, i.e. snacks and soft drinks.

In order to cope with these critical bottlenecks and to increase the consumption of fruitin the world, especially in Europe, the fruit supply chain has to becomeconsumer-driven, efficient, responsive and innovative.

The objective of this paper is to design a conceptual framework underlying supplychain performance and innovation, to be used as a guide for analysis and improvementof European fruit chains. In this respect, innovation and performance are treated asseparate entities. The exploratory and theory building character of the researchtypically demands for a case study approach (Yin, 2003). Data generation is donethrough a small number of selected in depth research unit interviews. Research units

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are individuals who belong to companies within the fruit supply chain. Thisinstrumental case study approach enables to iteratively build and test the conceptualframework. As a case the Dutch apple chain is chosen. Our research strategy containedthe following steps:

(1) Identify Critical Success Factors (CSFs) for innovation and performance in thedifferent stages of the (apple) chain.

(2) Identify indicators for innovation and performance at different stages in the(apple) chain.

(3) Identify organizational and management instruments that (may) impact oninnovation and performance in the (apple) chain.

For data collection and analysis in-depth interviews were held with companyrepresentatives and other stakeholders in the apple chain. A total of nine in-depthinterviews were performed: one nurseryman; two growers, three cooperatives’ topmanagers; one food service company R&D manager, one fruit advisor; and one expert.Further, the respondents were willing to show their installations, therefore, it was alsopossible to get information through observation.

Description of processes in the apple chainThe Dutch apple chainThe turnover of the Dutch horticulture industry is 8.0 billion Euros. Horticulture hasthe highest production value in Dutch agriculture with an annual value of e6.7 billion(Kalaitzis and Van Dijk, 2005), while it only represents 8 percent of agricultural acreage(145,000 hectare, of which 93 percent is used for open-air production). Horticulturecontributes 41 percent to the value of Dutch agriculture. The horticultural sector in theNetherlands consists of no less than 55,000 companies, and employs over 200,000people. The major factor that has contributed to the importance of The Netherlands infruit markets is its location: The Netherlands is located in the heart of Western Europe,with an excellent port, transportation and logistical infrastructure. The transportationinfrastructure and close proximity to a densely populated area facilitate market access(Kalaitzis and Van Dijk, 2005).

Mapping of processes in the apple chainIn this section two types of processes are considered according to Porter (1985) and hisconcept of the value-chain: Primary processes and supporting processes (Figure 1).

The primary activities are all the processes through which the apple goes from thepoint-of-origin to the point-of-consumption. As far as the supporting processes areconcerned, only the most important for the performance of each chain member aretaken into account. To develop the conceptual framework on performance andinnovation, one of our starting points is the representation of each actor in the chainthrough the performance pyramid described by Ghalayini and Noble (1996) (Figure 2).

Thus, in this research the companies are viewed through three levels. First, the topmanagement embeds the visions and objectives of the organization. The supportingprocesses enable to achieve strategic performance. Finally, at the basis of the pyramidare the operations, or processes through which the apples go and where operationalperformance is measured.

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As described by Van der Vorst (2000), the organization consists of three components:the “managed system”, the “managing system” and the “information system”. Themanaged system refers to the primary processes. The information system’s task is toregister the relevant internal and external data and convert it into control information.The managing system aims at realising a certain system output by adjusting “controlvariables”, whilst dealing with non-manageable inputs (variables such as demand,strikes, illness of staff). It takes decisions on the basis of available information. Controlvariables are decision parameters of the managing system, for example, the location ofa factory or the customer order lead time. Finally, output refers to end productsdelivered to the system’s customers. In this research, in order to be complete in thedescription of business processes, management processes like “information system”and “managing system” are included additional to the operational processes.

Chain processesResearch centres. Research centres develop and select new cultivars in a continuousprocess of innovation. To describe this, the general innovation process model of Tidd

Figure 1.The value chain

Figure 2.Performance pyramid

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et al. (2001) is used (Figure 3). The first stage involves detecting signals from theenvironment. These can come from new ideas of plant breeders, growers, consultants,etc. or from perceived needs of consumers. They also take the form of changingrequirements on the part of markets, changing competition or changing legislation.The second stage is developing strategy. Innovation is risky, so choices have to fit withthe overall business strategy of the research centre. The third stage is the resourcefinding phase which involves combining new and existing knowledge. The fourthstage is implementation. It forms the heart of the innovation process. During thisphase, the research centre develops the selected seeds responding to the signals fromthe environment. Finally, during the learning and re-innovation stage, the seedsdeveloped are tested and new ideas or improvements of their performance areinvestigated. This stage is a feedback loop for product (seed) innovation and appears inthe above scheme. It is obvious that technology and product development is anessential supporting process. Human resources are also of interest for the innovationprocess. Finally, marketing is necessary (Schneider et al., 2004) to sell new seeds toplant breeders or growers.

Nurserymen. Nurserymen buy seeds from the research centre and grow them. Thisis their primary process. However, a process called “selection/ innovation” is added inFigure 3 since some nurserymen also implement product innovations. They select thebest trees or seeds and cross varieties to improve performance. The same supportingprocesses as for the research centre are relevant for nurserymen since they also aim atproduct innovation. They also need to innovate and be aware of new breedingtechnologies or at least they should have a good maintenance of current ones. Finally,the procurement of seeds is of importance (Figure 4).

Figure 3.Research

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Growers/producers. Growers buy trees from the nurseries and grow them. The mainsub-processes of the growing process are: planting, pruning and thinning (Schneideret al., 2004). Spraying and irrigation are also of importance for the growing. The secondmain process is harvesting. This consists of picking and placing fresh apples in bins.Some growers who sell directly to consumers or through a grower association mightalso take care of washing, sorting and packing fruits. To simplify the model, these arenot included. Procurement is one of the biggest risks for growers (Schneider et al., 2004)and therefore is of interest. Technology development (like methods of growing) andmaintenance of the orchard and its material is important for growers to perform better.Finally, human resource management is also important since variation in harvestlabour availability affects efficiency (Schneider et al., 2004) (Figure 5).

Cooperatives. Cooperatives integrate more and more fruit chain processes. Basically,they take care of washing the fruits, sorting, packing, cooling and moving them intothe cold storage (Figure 6). Most cooperatives have developed capabilities to add valueto fruits by processing them. After the sorting process, fruit can be processed.Management of cooling and storage in cold rooms is very important (Schneider et al.,2004). Inventory control is a key supporting process for cooperatives, particularly forcooperatives integrating the wholesale function. Product development is key torespond to consumer demand and to marketing to understand consumer demand.

Packaging company. Packaging firms are not directly involved in the sector. But asthey play an essential role in the innovation of packaging to respond to consumersdemand, they are included in the general framework (Figure 7). The development of anew packaging has similar characteristics as other innovation processes. Therefore,the same processes and supporting processes as for the research centre are used. The

Figure 4.Nurserymen

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Figure 5.Growers

Figure 6.Cooperatives

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first phase involves detecting signals from the environment. These could come fromnew ideas of cooperatives, beverage industry, consultants etc. or from perceived needsof customers, or take the form of changing requirements on part of markets, changingcompetition or changing legislation. The next phases have already been explainedbefore: strategy, resourcing, implementation and learning and re-innovation.

Beverage/food company. When fruits go to the beverage or food industry they firsthave to be washed and sorted, before being processed. In the beverage companies, thefruits are transformed into juice, while in food companies the processed fruits can bedried or frozen. Whatever the industry is, there is a close relationship with thepackaging industry. After the packing process, the products are moved into the coldstorage (Figure 8). This research does not focus on food and beverage industries. Theyare included in the framework for information but they are not studied further.

Wholesalers. This level is concerned with distribution of the products. Thecartons/boxes or pallets are unloaded at the distribution centre and transferred to thecold store. Then they are transferred out of the cold store and loaded on a truck (Lovell,2002; Figure 9). One of the central supporting processes is inventory control. This is onall fours with procurement. Technology development seems to be of interest in order tomove faster and hence lower inventory levels.

Retailers/food service. Retailers/food services have a central role in the supply chainsince they are in contact with final customers. Because there are just a few players inthis link of the chain, they have most power. Their information and managing systemsare essential to influence and collaborate with suppliers. On the other hand, marketingis also fundamental to understand consumer demand. Inventory control is important,the retailers own distribution centres where cross-docking takes place to reduce

Figure 7.Packaging

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Figure 8.Food industry

Figure 9.Wholesalers

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inventory levels. As far as primary processes are concerned, it’s all about moving theproducts to the cold storage and then to the display area (Figure 10).

As stated before, the whole fruit chain might work in close collaboration throughsupply chain business processes like customer relationship management, customerservice management, demand management, etcetera. Fruit chains are also“surrounded” by government and EU legislation, and the World TradeOrganization. The model shown in this section can be used as a basis for ourframework. The primary processes of chain links are not very different across differenttypes of chains. One should keep in mind, however, that different types of chains exist– more or less integrated. For example, Fruitmasters (one of the large Dutch fruitdistributors) considers its supply chain as a two player supply chain: Fruitmasters andthe retailers. It is a supply chain where research centre, growers, processors andwholesalers all are collaborating in the Fruitmasters – cooperative.

InnovationInnovation classificationThe discipline of innovation management has rapidly developed into a separatedresearch field throughout the past years. It can be regarded as one of the most rapidlygrowing fields in terms of attention devoted by economics, strategic management andorganizational sciences. The source of interest can be found in the increasing belief thatfirms can proactively adapt to changes in their environment by renewing theirproducts, processes and organization. This multidisciplinary interest has a positiveeffect of generating a rich amount of knowledge on what product and processdevelopment is about and why some firms perform better than others. On the other

Figure 10.Retailer

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hand, the research field faces the consequence of numerous variations in concepts andtopics. Several authors have argued that the innovation field is characterised by amulti-formity of definitions, of designs and units of analysis (Huizinga, 2000). Amongvarious ways to classify innovation, product innovation and process innovation wouldappear to be central in innovation literature. In this research we broaden thisclassification to include organizational and marketing innovation as suggested by OsloManual of OECD and Eurostat (2005) (Figure 11).

Critical success factors of innovationInnovation is important in today’s markets and can dramatically improve a company’scompetitive position. In management literature it is observed that innovation drivescorporate success and is a strategic endeavour contributing to a firm’s differentiatingcapacity, growth, and sustainable competitive advantage. Recent studies haveinvestigated the key success factors and source of attaining competitive advantagethrough innovation (Huizenga, 2000).

New concepts and approaches on innovation management have often arisen out ofmanagement practices. The management field has initiated the interest to find criticalsuccess factors without a need for theoretical foundations (Huizenga, 2000). Managerswere confronted with new problems requiring new solutions quickly and CSFs werepart of these solutions:

CSFs are the relatively small number of truly important matters that managers should focusattention on. They represent the few “factors” that are “critical” to the “success” of theorganization (Hack, 20001).

The key to success for managers is to focus their limited resources on things that reallymake the competitive advantage or the difference between success and failure. CSFscan be ordered in typical areas (Huizenga, 2000):

. The industry: each sector has a set of CSFs that are determined by thecharacteristics of the sector itself, in this case the apple sector.

. Competitive strategy and industry position: each company’s situation within theindustry is determined by its history and current competitive advantage.

. Environmental factors (little control by the companies).

. Temporal factors: a number of areas of activity become critical for a particularperiod of time for a company or a sector. Either because something out of theordinary has taken place or a unique resource is temporary available.

Figure 11.Innovations classification

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. Functional management focus: each management area has a set of CSFsassociated with functional disciplines.

The selection of CSFs in this research is partly based on the findings of Pomerlau et al.(2003) and the Oslo Manual of OECD and Eurostat (2005). The first CSF which seems tobe important to have a consumer-driven chain is product attributes. Productinnovation has to answer consumer demand and wishes. Product strategy is importantto reach the consumer and make him recognize the right product attributes andproduct assortment. As far as the process is concerned, process superiority is a criticalfactor. Processes have to be efficient and of high quality to better answer consumerdemand. To fulfil this requirement, top management must support process innovationand should have the adequate skills. If some skills are not available or inadequate, thechances for success decrease (Hollander, 2002). Marketing innovations are important tounderstand consumer demand. A new product is developed for a certain market wheresize, potential value and growth of the market determine if the product has possibilitiesto be sold. In a well perceived environment, the likelihood of success increases a lot(Hollander, 2002). Finally, all those innovations cannot succeed if at the organizationallevel, there is no good communication. Another central factor in the organization is thestrategy fit. Innovations must fit with the company strategy (Hollander, 2002). Table Igives examples of CSFs for each category. These CSFs seem particularly relevantaccording to the literature (Hollander, 2002; OECD and Eurostat, 2005; Pannekoek,2004) and are used further for our empirical research.

Innovation indicatorsThe selection of the indicators used in this research is based on the findings ofPannekoek (2004) and the Oslo Manual of OECD and Eurostat (2005). The indicatorsused are shown in Table II.

PerformancePerformance measurementWhether supply chain objectives are realized in practice can be measured via outputperformance of the supply chain. Supply-chain performance is defined as the degreeto which a supply chain fulfils end-user and stakeholder requirements concerningrelevant performance indicators at any point in time. Performance indicators areoperationalized process characteristics, which compare the performance of a systemwith a norm or target value. They refer to a relatively small number of critical

Classification Examples of CSFs

Product A Product attributesB Product assortment

Process C Process superiorityD Top-management support and skill

Marketing E MarketF Company environment

Organizational G Strategic fitH Communication/organization

Table I.Innovation CSFs for the

Dutch apple chain

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Table II.Innovation indicators

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dimensions which contribute to the success or failure in the marketplace. It dependson the objectives of the supply chain as to which specific key performance indicatorsare appropriate and used (Van der Vorst, 2006). A supply-chain measurement systemshould reflect the objectives of main interest groups (customers, owners andpersonnel), it should combine operational and financial follow-up data, and linkoperational objectives to critical success factors and goals (Aramyan et al., 2006).Thus, in the next paragraph, objectives are first discussed, and related CSFs aredescribed. Later, the performance indicators of each CSF are investigated. Thisapproach is based on the performance management process depicted by Bititci et al.(1997) (see Figure 12).

Critical success factors of performanceThe selection of CSFs is based on the findings from Grant (1995), Fearne and Hughes(2000), Hack (2000), Poot et al. (2000), Splinter et al. (2000), Wijnands and Hack (2000),Collins (2003, 2006), Muller et al. (2004) – Grant studied the changing structures andstrategies of European fruit supply chain players; Fearne and Hughes (2000) listed thesuccess factors in the fresh produce supply chain in UK; Wijnands and Hack (2000)underlined the determinative key factors for the Dutch horticulture industry; Poot et al.(2000) emphasized the needed information to support Dutch vegetable supply chaineffectiveness; Splinter et al. stressed out the critical arrangements for the success of theDutch horticultural chains; Collins (2003, 2006) made a map of the fresh produce supplychains performance criteria and listed the critical quality drivers of those chains; andMuller et al. (2004) listed the success factors of organic fruit and vegetables supplychains in Germany. From this triangulation of sources, and keeping in mind theobjectives previously cited, first four key performance categories were distinguished:efficiency, responsiveness, quality, flexibility. Thereafter, CSFs have been selected foreach performance category. These CSFs seem to be the most relevant ones and will beused further in our empirical research (Table III).

Performance indicatorsTable IV lists the selected performance indicators related to the chosen CSFs. Theseindicators are classified according to the chosen categories (Efficiency,

Figure 12.Performance management

process

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Responsiveness, Quality, and Flexibility). Moreover, they are classified according tohierarchical decision level in supply chain perspective (Supply Chain, Organization,Process). The last column of the table indicates whether the indicator is quantitative orqualitative. In the first column possible related CSFs have been added. The indicatorsused as basis for the empirical research are shown in Table IV.

The innovation – performance matrixUsually, studies focus either on innovation or on performance. To enable assessment ofthe trade-off between performance and innovation in this study a matrix has beendesigned. This matrix including CSFs, indicators and trade-off “cells”, supplements thetheoretical process model as described in section 2. The two following examples clarifywhat is meant by trade-off:

(1) A cooperative could need to reach the highest quality of apples, e.g. .50percent of class 1 (performance), in order to promote these high quality appleswith a new name, e.g. “prestige” (marketing innovation).

(2) Growers could need to innovate in a new plant system (e.g. new pruningmethod) in order to increase the yield (kg/ha) of production (performance) – therelation is illustrated the other way around in comparison with the previousexample.

Figure 13 shows the basic design of the matrix. In the figure only the mainperformance and innovation categories are given.

In this matrix the CSFs for innovation and the related indicators are in the X-axiswhile the CSFs for performance and the related indicators are in the Y-axis of thematrix, keeping the selected categorization of each one. CSFs and major indicators areselected by company respondents and therefore will differ from company to company.Figure 13 gives examples of CSFs and indicators for a hypothetical company. Theempirical research was dedicated to fill in the matrix. The goal was to come up withone specific matrix per link of the apple chain since each link has got specific CSFs andindicators. The next step in the use of the matrix is to find the most importantperformance-innovation combinations. Each combination applies to one or moreparticular processes. In the matrix these processes are described in the cells (forexample this could be in the marked cells in Figure 13). In this way we find out whichprocesses are critical in the chain.

Classification Examples of CSFs

Efficiency I CostII Profitability

Responsiveness III Lead timeIV Collaboration

Quality V Food safetyVI Communication/collaborationVII Environment

Flexibility VIII Market adaptability

Table III.Performance CSFs for theDutch apple chain

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CSFs CategoriesHierarchicaldecision level Indicators

Quantitative (QN)/Qualitative (QL)

I Efficiency SC Total supply chain management costs QNI Information costs QNI Total logistics costs QNI Organization Total organization’s costs QNII Sales QNII Net profit margin QNII Return on investment QNII Return on assetsI Process Total cost of resources QNI Manufacturing cost QNI Process cost QNII Process yield QNII Average collection periodII Inventory turnover ratio QNII Days of inventory QNI Warranty/returns processing costs QNIII Responsiveness SC Total supply chain response time QNIII Total supply chain cycle time QNIII Organization Order lead time QNIII Customer response time QNIII Product development cycle time QNIV Horizon of business relationship QLIII Through-put time (time required to

perform chain business process)QN

III Process Time required to perform the process QNIV Delivery reliability QNIII Delivery lead time QNIV Shipping errors QNIV SC Product availability on shelf QNV Quality SC Product quality QLV Traceability QLV Product safety QNV Tracing/tracking QLVI Organization Buyer-supplier partnership level QLVI Mutual trust QLVI Satisfaction with supplier

relationship/knowledge transferQL

VI Extent of mutual planning cooperationleading to improved quality

QL

VI Quality and frequency of exchange oflogistics information between supplier andcustomer

QL

VI Information availability accuracy andtimeliness

QL

VII Process Environmental aspect QNVII Energy usage QNVII Input usage QNV Damage rate QNVIII Flexibility SC Customer satisfaction (or dissatisfaction) QLVIII Inventory range or capacity QNVIII Organization Inventory level QNVIII Production flexibility QNVIII Volume flexibility QNVIII Delivery flexibility QNVIII Process Process flexibility QNVIII Number of backorders QN

Notes: CSFs: I ¼ Cost; II ¼ Profitability; III ¼ Lead time; IV ¼ Collaboration; V ¼ Food safety;VI ¼ Com./collaboration; VII ¼ Environment; VIII ¼ Market adaptabilitySources: Beamon (1999); Gunasekaran et al. (2001); Chan (2003); Shepherd and Gunter (2006); Aramyan et al.(2006); Van der Vorst (2000, 2006)

Table IV.Performance indicators

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Linking the process model (see section 2) with the innovation-performance matrix (seeprevious section) enables:

. bringing out the main management and supporting processes;

. emphasizing the CSFs and related indicators for performance and innovation ofeach link;

. assessing the trade-off between performance and innovation;

. showing within which process(es) this trade-off takes place; and

. defining instruments to improve performance or innovation.

This leads us to our basic theoretical framework (Figure 14).In practical cases first critical success factors (CSFs) and indicators for innovation

and performance are identified by the respondent based on the CSF and indicatortables presented in the previous sections. Next, the processes in the company areidentified that have an impact on the innovation and performance indicators, based onthe generic process model developed in section 2. Then possible measurements(organizational and management) are identified that may impact on innovation andperformance. These are described in the cells of the matrix.

In the following we will give the case study results for two links in the chain: growerand cooperative.

Figure 13.Theinnovation-performancematrix

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Figure 14.Theoretical framework on

performance andinnovation

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Empirical researchGrower resultsTwo growers were interviewed with opposite strategies. One is only producing freevariety apples (free or open market type of chain) and conference pears, while the otherone is a particular case since he is producing Kanzi (closed market chain), free marketapples and one niche market apple, Pinova. The two main operational processes are“Growing” and “Harvesting”. The growers buy the material, young trees of one ortwo-years-old from the nurserymen. These young trees are planted and harvested forthe first time after two to three years (five years with the old planting system). Theyproduce during 12 years, so their cycle life on the orchard is 15 years. With the oldplant system (20 years ago) the yield was 15 tons/ha, nowadays it’s 30 tons.

The first main process is growing. It includes planting, pruning, thinning,fertilisation, irrigation, crop protection and crop maintenance. The second mainprocess is harvesting. It consists of picking by hand and placing fresh apples in bins.The next processes are done either by growers or cooperatives or shippers orspecialized graders and packers. Thus, some growers are storing the fruits at homewhile others sell directly to the cooperative or to shippers or wholesalers.Washing/sorting (or grading) is one process since it is done by one machine.Usually, washing/sorting and packing is done by the cooperative or a specializedgrader since it needs huge investments. Some growers form producers organizations(POs) to be able to buy a grading machine or storage facilities. In any case, usuallygrowers store their production in cold storage. Thus, the main stock in the apple chainis at the growers’ enterprise.

Management and supporting processes. From the interviews the generic processmodel (section 2) is adapted (Figure 15).

There is a consensus among the respondents that an information system is crucialfor growers. Growers need to gather information about new varieties from nurseries,visit research centres like PPO, visit Inova Fruit (the key research organization intonew fruit varieties in The Netherlands) or read specialized newspapers, magazines andrequest a fruit advisor. It is crucial for them to know the market and to be aware of newtechnologies, although technological innovations are developed at a very slow pace(more than 15 years for a widely adopted innovation).

Strategy and critical success factors. As stated before strategy is critical for growers.Grower 1 said “A grower cannot harvest without objectives”. In the past growers couldonly produce apples for mass production (Golden Delicious, Cox, and more recentlyJonagold, Elstar), i.e. through an open market chain (focusing on efficiency). Nowadays,the market is moving toward more consumer-driven varieties like Kanzi (long shelf life,tasty, high quality): 95 percent of the new varieties are in closed market chains. Thereare also niche markets like Pinova which is also a consumer-driven free variety (longshelf life, tasty, high quality). The strategy does not rely only on the choice between oldand new varieties. The decision to produce a new variety is often associated with thedecision to become a member of a cooperative. This is an important issue since 50percent of the growers are by-passing the cooperatives, selling to shippers. The laststrategic decision concerns again procurement, since the picking season differs amongvarieties. Focusing on supply chain strategies, there are again huge differencesbetween growers. Some of them report to have “no strategy” (are not aware of having a

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Figure 15.Grower link model

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strategy), while others have a strategy in line with the cooperative, often implyingspecific attention for quality.

Matrix. The matrix described in this paragraph is mainly based on the informationof one of the growers. Additional information came from the fruit advisor and expert.The innovation critical success factors for the grower are the following (ranked byorder of importance):

(1) Product assortment (product innovation): is very important and directly relieson strategy. Product innovation is a gamble because nobody knows if the newvarieties will be successful in the market. So to produce a good productassortment a clear strategy is needed.

(2) Process superiority (process innovation): is important because the trees have acycle life of 15 years; thanks to new plant systems this can be shortened.

(3) Top management skills (process innovation): is important to develop a goodstrategy. The growers need to be able to stand off, to have an external visionand not a tunnel vision in developing strategies.

(4) Market (marketing innovation): to know which variety the grower shouldproduce (what are the new market segments he could enter), he needs to beinformed of the market demand.

The performance critical success factors are the following:. Collaboration and communication (quality) with the customer is critical.. Food safety (quality) Every grower follows EUREPGAP requirements.. Product quality (quality).. Profitability (efficiency).. Market adaptability (flexibility): This year, September was warm and the fruits

were ripening quickly. Process flexibility was therefore critical.

From these lists of CSFs the matrix has been constructed. In this matrix (Figure 16)also key performance indicators have been filled in, based on information of thegrower.

Growing new varieties depends on the grower’s risk sensitivity. Strategicprocurement enables mainly to increase the turnover and the profit margin since newvarieties are sold at a higher price. Growing new varieties also means to decidebecoming member of a cooperative (usually, the lack of collaboration and transparencyis a barrier). But the most important for growers seems to be their belief in the newvariety. The grower tries to have the newest equipments for harvesting since usuallythese enable a quicker harvest of quality products (no damages). For example, pickingmachines with scanner and arms picking fruits are under development in USA. Plantsystems innovations, for example new planting density combined with new pruningmethods, enable to shorten the usual tree cycle life of 15 years and to increase the yield(Grower 1 increased it from 30 to 40 tons/ha thanks to new plant production systems).Training programs for the farmer and his employees is a good instrument to increasethe efficiency of new plant system implementation. If growers cannot attend trainingprograms, they can get information and advices through their advisors.

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Figure 16.Grower matrix

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Cooperative resultsThree cooperatives were interviewed. The position of the cooperatives in the supplychain is changing. As stressed by Bijman (2002), the traditional auction cooperativesare moving toward marketing cooperatives, take-overs of wholesalers and giving upwashing/sorting installations. This restructuring does take place within eachcooperative. At the same time producer organizations (POs) are formed to promoteproduct specific interest (Bijman, 2002) and to trade directly with wholesalers orretailers. These new associations also have started to invest in washing/sortinginstallations and packing stations. So, the POs can now deliver packed apples to the(restructured) cooperatives that gave up these operational processes. Thus,washing/sorting and packing are only partly done by the cooperatives nowadays,although there are differences between cooperatives in the extend that they performthese activities. All the cooperatives have cold storage. Integrating the wholesalefunction, some cooperatives also own regrouping platforms and distribution centres todispatch the products among the costumers (retailers). However, cooperatives are alsostill delivering to wholesalers who supply fruit specialist’ stores.

Management and supporting processes. Quality control relies on the informationsystem of the cooperative (Figure 17). Depending on the requirements of the customers,gathered through the information system (e.g.: internet, EDI), the company may adjustquality control (e.g.: new size of apple wanted, change of residue limit). Theinformation system is also a good instrument to strengthen the relationship withcostumers. Inventory control is a major managerial process since the cooperative mustnever be out of stock and must deliver produce as fresh as possible (quality). Finally,the cooperative performing the wholesaling function also focuses on logistics andtransport of the apples to be able to deliver to buyers.

Strategy and critical success factors. In the next section we will focus on one of thecooperatives to show the application of the innovation-performance matrix. Thecooperative has two objectives:

(1) On the grower side, the goal is to have the best or the second best possiblepayout price paid for the grower. Thus, the strategy focuses on efficiency.

(2) On the marketing side, the goal is to deliver year-round quality products to theretail in The Netherlands, neighbour countries and all over Europe. Thus, thestrategy focuses on efficiency and quality.

The strategy on innovation results in a good cooperation with Inova Fruit and otherresearch institutes in order to find new varieties answering buyers and consumersdemand. On a supply chain level, the cooperative has contact with the plant breedersand with the seed companies, but it is not in position to tell the breeders what they haveto develop. It has not the capacity to organize this all itself. Thus, the supply chainstrategy is limited to cooperation with Inova Fruit.

Matrix. The matrix described in this paragraph is based on information of one of thecooperatives. Additional information came from the fruit advisor and expert. Theinnovation critical success factors for the cooperative are the following (ranked byorder of importance):

(1) Process superiority (process innovation): is currently the focus. That means afull automatic FIFO system (first in first out); rebuilding of warehouses; fullautomatic palletizing system; optimization of logistics and storing; forklift

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Figure 17.Cooperative link model

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drivers with pallet pistol, etc. So the cooperative is trying to innovate constantlyas far as logistics and storing and processing techniques are concerned(digitalisation).

(2) Product assortment (product innovation): together, with Inova Fruit andgrower- members, the cooperative tries to find new varieties and to have theright range of varieties.

(3) Product attributes (product innovation): is also important since nowadays aconsumer does not only look at the shape and colour of the product but the tasteis also very important and he is also concerned with environmental issues.

(4) Market (marketing innovation): having new varieties with Inova Fruit does notmake a competitive advantage since all the cooperatives are shareholders ofInova Fruit. Thus, to have a competitive advantage the cooperative tries toenter new markets with forgotten products and tastes (“traditional home”feeling of the consumers).

The performance critical success factors are the following:. Food safety (quality): is of extreme importance to have as little residues as

possible.. Product quality (quality): is crucial to answer consumers’ wishes.. Market adaptability (flexibility): a good inventory control is important to never

say “No” to the buyers and to have fresh products. The performance of thecooperative is measured through the satisfaction of the consumers. As a result ofthis consumer’ satisfaction the turnover of the products in the supermarket ishigh and consequently the buyers are satisfied.

. Lead time (responsiveness).

. Environment (quality). The cooperative aims at reducing water and packagingmaterial usage, and at recycling used water;

. Cost (efficiency).

From these lists of CSFs and performance indicators identified the matrix has beenfilled in (Figure 18).

The quality of the apples is enhanced through advise to the growers. The membersare informed of the new requirements and are controlled by the cooperative. Thequality and environment department of the cooperative is implementing all kinds ofquality standards with the growers – BRC, QS, ISO, etcetera – to ensure quality of theapples. Advisors of the cooperatives also advise growers on the best techniques toincrease quality. Currently, the most important innovations are process innovations.Digitalisation is the main innovation developed in order to increase the performance ofthe cooperative, it takes place in many processes. The cooperative implemented anAPS – “Co-Maker” – in order to be more efficient. This instrument is used togetherwith the retailers and aims at being used by growers as well. For the moment, thecooperative communicates with growers or representatives of associations of growersthrough regular meetings. Downstream in the chain the relationship is also ensured bythe Product manager and the Account manager who meet on regular basis with theretailers to decide which product is good or not, and to answer consumer preferences.

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Figure 18.Cooperative 1 matrix

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Finally, consumer satisfaction is enhanced thanks to a wide assortment of varieties.Collaboration with Inova Fruit can be seen as an instrument to develop new varietiesand consequently, to have the right assortment. Marketing research is also used toassess consumer wishes.

Conclusion, further research and management implicationsConclusion and further researchThis article reviewed available supply-chain innovation and performance indicatorsand models and methods used to assess performance and innovation within fruitsupply chains. Based on the existing literature a conceptual framework for assessinginnovation and performance of companies in the European fruit supply chain has beendeveloped. The framework consists of a supply chain process model and aninnovation-performance matrix and has successfully been applied to several casesalong the apple chain in The Netherlands. In this article two cases have been workedout: apple producer and co-operative.

In future research the conceptual model will be further tested by implementing casestudies across the entire fruit supply chain in various countries in Europe. During thesecase studies the feasibility and the measurability of suggested indicators can bejudged. Researchers can also suggest new indicators or reject the proposed ones andprovide suggestions for better ways to measure. Further research should also focus onthe construction of a toolbox comprising theories, methods and techniques and evenworking applications to analyse and improve the management of the supply chain, andperformance and innovation of each link in the fruit chain. With this objective as astarting point, the following ways to elaborate on this research are identified:

. Investigate the different types of chains and/or product/ market combinationsand choose the most appropriate distinction (e.g.: open/ closed/ niche, or low cost/quality) so as to arrive at a typology of chains with different demands regardinginnovation and performance.

. A basic distinction between “climacteric” (fruit ripening in field but also afterharvesting) and “no climacteric” (fruits only ripening in field) fruits should bemade according to fruit logistic experts.

. More attention should be given to aspects of coordination between chain links.Various SCM aspects could be added to the framework, like inter-companygovernance structure, inter-company information exchange, etc.

. Further investigate the instruments or mechanisms enabling improvement ofperformance and innovation.

. Mechanisms of pricing should be taken into consideration since they play acrucial role in the chain organization.

. Investigate the measurability of the indicators.

. Broaden the investigation to packaging companies and maybe food processingindustries.

Management implicationsFor managers in the fruit chain the developed framework can be used to assessinnovations and performance in their own company. Starting with a detailed analysis

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of the company’s processes and clear definition of its strategic aims (in regards of theposition of the company in the chain), relevant innovations and performance indicatorscan be identified. The innovation performance matrix can show in-balances betweenthe innovation strategy chosen and the performance aimed for. The link of the matrixwith the process model enables the manager to focus on specific company processeswhere improvements should take place. Therefore, the application of the framework isin seven steps:

(1) Description of the company or SC processes in detail.

(2) Identification of the company’s vision and strategy.

(3) Identification of innovation CSFs and indicators.

(4) Identification of performance CSFs and indicators.

(5) Design of the innovation – performance matrix.

(6) Identification of company processes impacting on performance and innovation(indicators).

(7) Conclusions regarding the organizational and management measurements to betaken in specific company processes.

References

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Chan, F.T.S. (2003), “Performance measurement in a supply chain”, International Journal ofAdvanced Manufacturing Technology, Vol. 21, pp. 534-48.

Collins, R. (2003), “Supply chains in new and emerging fruit industries: the management ofquality as s strategic tool”, ISHS Acta Horticulturae, Vol. 604, pp. 75-84.

Collins, R. (2006), “The function and consequences of alternative fresh produce supply chainmodels”, ISHS Acta Horticulturae, Vol. 712, pp. 67-74.

De Jong, J.P. and Vermeulen, P.A.M. (2004), Determinants of Product Innovation in Small Firms:A Comparison across Industries: SCientific AnaLysis of Entrepreneurship and SMEs(SCALES), Research Report N200410.

EURODIET (2001), Nutrition and Diet for Healthy Lifestyles in Europe; Science and PolicyImplications, Core report, available at: http://europa.eu.int/comm/health/phdeterminants/lifestyle/nutrition/report01en.pdf

FAO/WHO (2004), Fruit and Vegetables for Health: Report of a Joint FAO/WHO Workshop,WHO Library, Kobe.

Fearne, A. and Hughes, D. (2000), “Success factors in the fresh produce supply chain: insightsfrom the UK”, British Food Journal, Vol. 102 No. 10, pp. 760-72.

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Ghalayini, A.M. and Noble, J.S. (1996), “The changing basis of performance measurement”,International Journal of Operations & Production Management, Vol. 16 No. 8, pp. 63-80.

Grant, H. (1995), “The challenge of operating in the new Europe: case study – fresh produce”,British Food Journal, Vol. 97 No. 6, pp. 32-5.

Gunasekaran, A., Patel, C. and Tirtiroglu, E. (2001), “Performance measures and metrics in asupply chain environment”, International Journal of Operations & ProductionManagement, Vol. 21 Nos 1/2, pp. 71-87.

Hack, M.D. (2000), “The competitiveness monitor applied on the cut flower industry”, ISHS ActaHorticulturae, Vol. 524, pp. 169-76.

Hessels, S.J.A. (2006), Innovation and International Involvement of Dutch SMEs: SCientificAnaLysis of Entrepreneurship and SMEs (SCALES), Research Report H200606, EIM,Zoetermeer.

Hollander, J. (2002), “Improving performance in business development”, PhD thesis, Universityof Groningen, Groningen.

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Further reading

Pannekoek, L., Van Kooten, O., Kemp, R. and Omta, S.W.F. (2005), “Entrepreneurial innovation inchains and networks in Dutch glasshouse horticulture”, Journal on Chain and NetworkScience, Vol. 5 No. 1, pp. 39-50.

About the authorsJacques H. Trienekens is Associate Professor at Management Studies Group at WageningenUniversity. He is Editor and Associate Editor of Journal on Chain and Network Science andInternational Food and Agribusiness Management Review respectively, and has published in avariety of peer reviewed international journals such as International Journal for ProductionEconomics, Production Planning and Control, Computers in Industry, Food and AgribusinessManagement Review, Journal on Chain and Network Science. He is also director of WageningenExpertise centre for Chain and Network Studies, an expertise centre that bundles research andeducation on food chains and networks of Wageningen University and Research Centre. JacquesH. Trienekens is the corresponding author and can be contacted at: [email protected]

Ruud van Uffelen was born in 1966 in Naaldwijk in The Netherlands. He achieved hisMasters degree in Horticulture from Wageningen University in 1993. Subsequently he startedresearch on the application of management systems in practice at Glasshouse Crop ResearchStation in Naaldwijk. From 2001 on Ruud van Uffelen works at the Agricultural EconomicsResearch Institute in the Hague at the Plant systems division (www.lei.wur.nl). In 2003 hebecame leader of the section Enterprise and Competitive Environment, in which he coaches 12colleagues in socio-economic research on management and entrepreneurship in the arable andglasshouse horticultural sector. At the moment, he is leader of a work package on innovativesupply chains in the EU 6th Framework Integrated Program ISAFRUIT (www.isafruit.org).

Jeremie DEBAIRE (1982) studied Agricultural Economics and Management (Bachelor degree)at the Institut Superieur d’Agriculture de Beauvais (ISAB, France) from 2000 to 2003. From 2005to 2007 he completed a double degree program at ISAB and Wageningen University andResearch Centre (WUR, The Netherlands). He obtained his MSc at Wageningen University with aspecialisation in Management in March 2007. From August 2007 he started working forAccenture in Dublin offices as a System Integration Analyst.

Onno Omta obtained an MSc in Biochemistry and a PhD in Business Administration at theUniversity of Groningen, the Netherlands. He held management and research functions indifferent universities and research institutes. Now he is full Professor in BusinessAdministration at Wageningen University and Research Centre in the Netherlands. He haswritten a book and a number of articles on technology and innovation management in leadingmanagement journals.

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