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A Coevolutionary Approach to Understanding the Paradox of Social Pressures versus Economic Efficiency Across the World's Food Chains Open Access


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Ng, Desmond
Westgate, Randall E.
Sonka, Steven
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supply chains
commodity food chains
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In recent years considerable social pressure has been brought to bear on commodity food chains throughout the world. Events such as the introduction of bioengineered crops, the discovery of BSE in beef and instances of food contamination directly leading to human illness have focused attention on the food supply chain. Traditionally the operations of commodity-based food chains attracted relatively little attention from anyone not directly involved in agriculture and food systems. And, even with those logistical and marketing systems, their low margins and scale efficiencies tended to inhibit innovation. Now, however, the tension between social pressures and food chain economic efficiency has become an issue of concern. On the one hand, loud voices \"demand\" rapid and dramatic change to the commodity-based system to provide each consumer with any physical and information attribute that might be of interest. Conversely sector decision makers know that consumers, voting with their pocketbooks, will discipline those food chains that venture too far in adding costs to final products. This setting extends beyond, however, the normal marketing question of whether sufficient numbers of consumers will buy a new product and at a sufficiently high price to attain profitability. In food chains today, decision makers are besieged with messages that are contradictory and paradoxical. For example, at the same time that there is a potential threat that US commodity exports are being restrained because of international resistance to bioengineered crops, US soybeans and cotton exports (both primarily produced from bioengineered seeds) are at record levels (Abbott, 2001). Because every supply chain is a collection of economic transactions, it is natural to expect economic analysis to be able to provide insights as to the future directions of the food system. Stated very simply, one would expect that, if consumers are willing to pay for additional product attributes (both physical and informational), agricultural and food systems would respond to provide those attributes. However, it is always difficult to estimate what consumers will actually pay for attributes they are not now receiving. And specific consumer segments, potentially delineated by income, geography, demographics or several other criteria, may have markedly different preferences for these attributes. Food chains, themselves, are systems and change often requires substantial initial investment, which can forestall innovation even if an the long run such change would be economic. Further, if the presence or absence of a certain attribute is imposed by government regulation, the competitive dynamics of change can be significantly different than would be the case if such regulations didn't exist. Despite these complexities, private and public sector decision makers with interest in food supply chains have to make decision today whose outcomes will be significantly affected by the future resolution of these paradoxes. The purpose of this paper is to describe an innovative conceptual approach and to present a specific analytic framework that can be employed to enhance the understanding of the \"paradoxical\" forces pressing for change and the likely future directions of change.
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