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Linking supply chain practices to competitive advantage An example from Australian agribusiness Ferry Jie School of Business IT and Logistics, RMIT University, Melbourne, Australia Kevin A. Parton Institute for Land, Water and Society, Charles Sturt University, Orange, Australia, and Rodney J. Cox Faculty of Science, Charles Sturt University, Orange, Australia Abstract Purpose – The purpose of this paper is to present an integrated modelling framework that links management action to supply chain processes and then to competitive advantage. Design/methodology/approach – Using survey responses about supply chain management in the Australian beef processing industry, regression analysis was used to develop a model simultaneously explaining the links from management action to supply chain processes and on to competitive advantage. Findings – A relatively simple regression model was established that should be widely applicable in agri-food processing industries. In the context of our example industry, the results suggest that there is a strong link from some supply chain practices to competitive advantage, with trust and information quality being important drivers of the process. Research limitations/implications – Being based on a survey approach, a limitation is that that the results show managers’ perceived influences on supply chain performance, not the influences observed by the researchers. Practical implications – The regression method provides an easy way of summarising the links between supply chain practices and competitive advantage. This method may be generally applicable across agri-food industries, particularly those with many small and medium-size food enterprises. Originality/value – This research provides a new method of integrating various aspects of supply chain management and competitive advantage. The method has the great advantage of parsimony. Keywords Agri-food, Supply chain management, Competitive advantage, Australia, Beef processing, Process management, Meat Paper type Research paper Introduction Using the Australian beef processing industry as an example, our principal objective was to establish an integrated modelling framework that would be widely applicable in agri-food supply chain management analysis. Our approach was to develop a method of assessing how management actions could lead to process improvements, and how in turn these process improvements might lead to competitive advantage. In addition, as the research to develop the modelling framework proceeded, improvements for the industry at the centre of our work were discovered. These involved management action The current issue and full text archive of this journal is available at www.emeraldinsight.com/0007-070X.htm Australian agribusiness 1003 British Food Journal Vol. 115 No. 7, 2013 pp. 1003-1024 q Emerald Group Publishing Limited 0007-070X DOI 10.1108/BFJ-10-2010-0181

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Page 1: Linking supply chain practices to competitive advantage

Linking supply chain practices tocompetitive advantage

An example from Australian agribusiness

Ferry JieSchool of Business IT and Logistics, RMIT University, Melbourne,

Australia

Kevin A. PartonInstitute for Land, Water and Society, Charles Sturt University, Orange,

Australia, and

Rodney J. CoxFaculty of Science, Charles Sturt University, Orange, Australia

Abstract

Purpose – The purpose of this paper is to present an integrated modelling framework that linksmanagement action to supply chain processes and then to competitive advantage.

Design/methodology/approach – Using survey responses about supply chain management in theAustralian beef processing industry, regression analysis was used to develop a model simultaneouslyexplaining the links from management action to supply chain processes and on to competitiveadvantage.

Findings – A relatively simple regression model was established that should be widely applicable inagri-food processing industries. In the context of our example industry, the results suggest that there isa strong link from some supply chain practices to competitive advantage, with trust and informationquality being important drivers of the process.

Research limitations/implications – Being based on a survey approach, a limitation is that thatthe results show managers’ perceived influences on supply chain performance, not the influencesobserved by the researchers.

Practical implications – The regression method provides an easy way of summarising the linksbetween supply chain practices and competitive advantage. This method may be generally applicableacross agri-food industries, particularly those with many small and medium-size food enterprises.

Originality/value – This research provides a new method of integrating various aspects of supplychain management and competitive advantage. The method has the great advantage of parsimony.

Keywords Agri-food, Supply chain management, Competitive advantage, Australia, Beef processing,Process management, Meat

Paper type Research paper

IntroductionUsing the Australian beef processing industry as an example, our principal objectivewas to establish an integrated modelling framework that would be widely applicable inagri-food supply chain management analysis. Our approach was to develop a methodof assessing how management actions could lead to process improvements, and how inturn these process improvements might lead to competitive advantage. In addition, asthe research to develop the modelling framework proceeded, improvements for theindustry at the centre of our work were discovered. These involved management action

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

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

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British Food JournalVol. 115 No. 7, 2013

pp. 1003-1024q Emerald Group Publishing Limited

0007-070XDOI 10.1108/BFJ-10-2010-0181

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to improve information quality and trust. Such actions would be expected to enhancethe process attributes food quality and responsiveness, and thereby lead to competitiveadvantage.

The beef sector in Australia is undergoing rapid change because of globalisation, ahighly competitive meat market (local and export), increased production efficiency, aquicker production cycle and delivery times and consequently reduced inventories.Parts of the beef industry have introduced advanced quality assurance that has led tohigher customer satisfaction, a trend toward more outsourcing of activities, and therapid development of applications dependent on information technology (IT) (MLA,2004a). In this type of business environment, advanced supply chain systems havebeen observed to have a dramatic impact (Finch, 2006). This industry presented uswith ideal, challenging circumstances for our research.

The Australian beef industry is the nation’s fourth highest commodity exportearner with about 65 per cent of production exported in a typical year (Frost andParton, 2005). This means that for a comprehensive supply chain analysis, overseascustomers should be included. In addition, the Australian red meat industry employsmore than 50,000 people (Commonwealth of Australia, 2006).

The process involved in the transfer of beef from farms through to the finalconsumer in Australia or overseas has four main levels: cattle production, beefprocessing, beef wholesaling/retailing and final consumer. The two largestsupermarket chains in Australia (Woolworths and Coles) have fully integratedsupply chains, which have cattle moving from feedlot/farms to processors whotransform them into beef products and organise delivery into the hands of endcustomers. However, for the most part supply chains are partially integrated withsmall or medium-size firms engaged in activities only from producing to slaughteringor from processing to end customers. The processing and wholesale stages tend tohave larger firms while retailers range from sole enterprise butcher shops through tothe large supermarket chains.

For an industry undergoing rapid change, as in Australian beef processing, theliterature suggest various aspects that would be worth examining. These includestrategic supplier partnerships, customer relationships, information sharing,information quality and a lean system (Kim et al., 2010; Li, 2002) and also trust andcommitment in trading partners (De Ruyter et al., 2001). After attending to these typeof aspects, improvement in process attributes such as flexibility, efficiency, foodquality and responsiveness might be expected. Furthermore, the link from theseprocess attributes to competitive advantage of Australian beef processors wasconsidered worthy of examination (Aramyan et al., 2006, 2007; Gunasekaran et al.,2004). Lee et al. (2007) suggest that the above kinds of improved supply chainmanagement should lead to competitive advantage. However, there has been littlework that formally models the link between management of supply chains andcompetitive advantage. Our objective was to contribute to filling this gap byinvestigating whether a quantitative model could be estimated that first links processattributes of the supply chain to competitive advantage and second, by backwardinduction, indicates how the process attributes can be improved by variousmanagement actions.

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Literature review and conceptual frameworkA study of agri-food supply chains in Germany (Reynolds et al., 2009) concluded thatagribusiness managers can enhance the sustainability of their business relationshipsby effective communication to promote personal bonds with their suppliers and/orbuyers. Moreover, Johnsen et al. (2008) showed that in agribusiness we should beevaluating supply relationships rather than the performance of the supplier. In thisrelationship context, five aspects of the supply chain were viewed as being of possibleimportance to the Australian beef processing industry: strategic supplier partnerships,customer relationships, information sharing, information quality and lean thinking(Alvarado and Kotzab, 2001; Chen and Paulraj, 2004; Min and Mentzer, 2004; Sezen,2008; Tan et al., 2002). These aspects can exist both on an intra and/or aninter-organisational basis, for instance within processing firms or between processorsand wholesalers. Moreover, they could give various advantages to beef enterprisesincluding improved responsiveness and flexibility, increased production efficiency,and improved beef quality, and overall enable firms to better satisfy customers.Improving these aspects of the supply chain might lead to higher profitability both byincreasing revenues and reducing costs of firms in the supply chain. Also, given thatcooperative actions form the basis of these supply chain relationships, trust andcommitment are usually necessary antecedents.

While van Hoek et al. (2001) and Lowson (2003) support the strategic importance ofintegrated supply chains, Barratt (2004) suggests that supply chain collaboration hasproved difficult to implement. Barratt (2004, p. 30) further:

[. . .] proposes the need for a greater understanding of the elements (emphasis added) thatmake up supply chain collaboration, and in particular how the relevant cultural, strategic andimplementation elements inter-relate with each other.

Our empirical work is based on such an examination of the elements of supply chaincollaboration and their interrelationships.

A rudimentary conceptual framework that incorporates possible supply chainelements for the Australian beef processing sector, based on Aramyan et al. (2007) andFantazy et al. (2009), is shown in Figure 1. At level 1, actions such as informationsharing result in enhanced process attributes at level 2 such as food quality, and theseattributes produce outcomes in terms of competitive advantage at level 3. The task ofour research was to discover which particular supply chain elements close to beefprocessors can lead to enhanced performance and hence competitive advantage. Interms of the conceptual framework of Figure 1, our research questions were: preciselywhat attributes are the key drivers of competitive advantage, and what combination ofthe seven actions leads to the development of the critical attributes? The answer to

Figure 1.Conceptual framework ofthe supply chain linking

actions with processattributes and competitive

advantage

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these questions depends on the characteristics of the particular industry underconsideration. Hence we considered that we were in the process of developing a generalframework for agri-food industries, the specific details of which would be defined in theempirical investigation. Therefore, the methods should be applicable to other foodindustry supply chains both in Australia and elsewhere.

As an example, Fearne (1998) showed that supply chain partnerships in the Britishbeef industry were driven by changing consumer demand, food safety legislation, aconcentrated and highly competitive retail sector and the BSE crisis. Furthermore,several components of such partnerships may be of major importance to the Australianbeef industry: high quality of communications (Dyer and Singh, 1998), for instancebetween beef processors, wholesalers and retailers; trust, interdependence andcoordination (Gunasekaran et al., 2004; Monczka et al., 1998); participation in jointproblem solving and conflict resolution (Balsmeier and Voisin, 1996; Hendrick andEllram, 1993); and integrative relationships in key enterprises, for instance in effectivecontinuous improvement (Fawcett and Magnan, 2001; Tompkins, 2000).

One of the major challenges facing the Australian beef processing industry is toprovide a consistent level of service across its wide variety of customers (Cox andCunial, 2006). The implementation of a suitable customer relationship management(CRM) process is designed to assist beef organisations to achieve this serviceconsistency. A CRM system can also allow the company to become closer to itscustomers and more aware of their needs (McGarry, 2006; Shaw, 1999).

It is clear that efficiency in supply chains is influenced by both the level and qualityof information sharing (Moberg et al., 2002). In a beef industry context, informationsharing between producers, processors, wholesalers and retailers about carcaseweight, size, etc. needs to be accurate, adequate and credible. For example, if the chillerassessment and carcase information are accurate, complete, reliable and not delayedfrom processors to beef wholesalers, it will impact positively on the quality of beef.Then, wholesalers can deliver high quality products to their markets (either domesticor international).

Lean thinking is another approach worthy of consideration. Perez et al. (2010)showed the value of a lean approach for the Catalan pork sector, and similarly is wasconsidered by Henchion and McIntyre (2010) for the Irish beef industry. The logicbehind lean thinking in supply chain management is that organisations identify thevalue stream for each product from concept to consumption and optimise this valuestream regardless of traditional functional boundaries (McIvor, 2001). In the context ofthe Australian beef industry, a lean approach would follow the principles outlined byTaylor (1999): understand what creates value from the customer’s point of view;identify the activities which are necessary to deliver that value across the whole supplychain – the value stream; create value by eliminating waste between value-addingactivities and within value-adding activities; only make, or move, what is pulled by thecustomers and not what production units choose to make and push into the supplypipeline; and strive for perfection not only in terms of product quality, but also in thephysical process, information systems, and management. The statistical analysisdescribed below examined the potential for a lean approach for beef processors’ supplychain management.

Mutual trust and long-term commitment (antecedent cooperative behaviour) arecharacteristics of successful partnerships among supply chain partners (Mirani et al.,

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2001; Mohr and Spekman, 1994). Trust is a general expectancy that the word of anindividual or organisation can be relied on (Rotter, 1967). It is “the belief that a party’sword or promise is reliable and that a party will fulfil his/her obligations in anexchange relationship” (Schurr and Ozanne, 1985, p. 12). Commitment is characterisedby a long-term relationship, which can be defined as the willingness of each partner toexert effort on behalf of the relationship (Balsmeier and Voisin, 1996; Lee and Kim,1999; Tompkins, 2000).

Based on these definitions, when attempting to discover trust and commitment inrelationships between cattle producers and processors or processors and beef retailers,one would expect to find trading partners demonstrating reliability in their operations,consistently performing as promised and meeting expectations. Such trading partnerswould have full and accurate sharing of all information necessary for the effectivefunctioning of the relationship. Our survey work and analysis were designed todiscover the extent of such practices.

MethodsA supply chain management survey of the Australian beef processing industry wasconducted by distributing a mail questionnaire to beef processors. The survey askedparticipants in the industry to express their views on various aspects of the supplychain, with focus being placed on the supply chain practices discussed above. Theobjective was to establish a model explaining the competitive advantage of beefprocessors in terms of the various supply chain practices. In other words, whichaspects did those managers working in the supply chain consider essential toachieving competitive advantage?

Scale items of supply chain processes, practices and performance were developedfollowing the Churchill (1979) methodology of scale development. Survey questionswere based on the above literature review and in-depth interviews with Australian beefindustry experts. A pilot survey was carried out with 20 of these experts. Most of thedata were collected using a five-point scale. The data was subjected to validity andreliability tests and scale purification was performed. Following this, the surveyinstrument was finalised (see the Appendix). The sampling frame was establishedusing various sources including Meat and Livestock Australia databases andYellow-pages online. The list developed provided the names, addresses, telephonenumbers, persons to contact (which in the majority of cases inc1udes the president,managing director, general manager, or supply chain/operations/production/plantmanager). In an attempt to achieve a representative sample, stratified randomsampling was adopted, with strata defined by location (state) and size of operation(number of cattle slaughtered). 600 questionnaires were mailed out, and 140 usableresponses were obtained.

The effective response rate to the survey was 23 per cent. Cronbach’s a (Cronbach,1951) was used to test internal consistency of the scale items, and values of 0.60-0.87were obtained. While 0.70 or above is desirable (Hair et al., 2006), 0.50-0.60 isconsidered sufficient (Nunnally and Bernstein, 1994). The majority of items in thesurvey were based on established scales that have already been subjected to tests ofcontent validity (Aramyan et al., 2006; Beamon, 1999; Gunasekaran et al., 2004; Li,2002). In addition, the pre-test confirmed that a group of industry experts viewed thescales used as acceptable.

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Using methods similar to those employed by Arif Khan et al. (2009), discriminantand convergent validity were assessed by using factor analysis. Again the results fellwithin the acceptable range. Finally, multiple regression analysis was used to testwhich elements of the conceptual framework of Figure 1 were significant variableslinking management actions to process attributes and competitive advantage. Hairet al. (2005) shows that multiple regression analysis should be used to analyse therelationship between a single dependent variable and several independent variables.Stock (2009) reviewed many quantitative supply chain management studies, andconcluded that regression analysis was one of the more common techniques adopted. Atypical example is Hsu et al. (2008) who, employing multiple regression analysis, founda positive relationship between information sharing, buyer-supplier relationships andperformance.

Australian beef processors’ supply chain attributes (independent variables) wereregressed on competitive advantage (dependent variable). This produced anupper-level sub-model in which competitive advantage was related to processors’responsiveness, flexibility, efficiency and food quality (process attributes in theframework of Figure 1). The lower-level sub-model then had each of these fourvariables dependent on the supply chain practices (or actions in the framework ofFigure 1) discussed above (b1 – strategic supplier partnerships, b2 – CRM, b3 – levelof information sharing, b4 – information quality, b5 – lean system, b6 – trust, and b7

– commitment). Alternative estimating procedures are considered in the Discussion.

ResultsAs expected with cross-sectional data there were no autocorrelation problems, withDurbin-Watson statistics in the range 1.53 to 2.01. Also the F-statistic for each equationwas significant at the 5 per cent level, confirming the fitness of the model. The onlystatistical problem was that some of the adjusted R 2 values were low (down to 0.39),suggesting that some variables may possibly have been omitted. Overall, however,these values were in the acceptable range for this type of cross-sectional data. Aftercompleting various hypothesis tests, the upper-level sub-model that was obtained isshown in Table I. It shows that the process attributes: responsiveness and food qualityhave a significant influence on processors’ competitive advantage (t-statistics are givenin parentheses).

The four equations of the lower-level sub-model were estimated next. They aredesigned to show the actions that processors can take to enhance the process attributesof the supply chain. The regression results are shown in Table II. First, improved CRM,information quality and trust have a significant influence on processors’responsiveness. In other words, to achieve better responsiveness would requiremanagement action on CRM, information quality and trust.

The next equation shows that CRM and information quality have a significantdirect influence on processors’ flexibility. Next, strategic supplier partnership,

Explanatory variables (t-statistic)Dependent variable Constant Responsiveness Food quality

Competitive advantage 0.584 0.508(3.473) 0.581(3.700) �R 2 ¼ 0:49

Table I.Upper-level sub-modellinking process attributesto competitive advantage

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commitment and information quality have a significant influence on processors’efficiency. Finally, strategic supplier partnership, information quality and trust have asignificant influence on processors’ food quality. In other words, one factor,information quality affects the four process attributes, responsiveness, flexibility,efficiency and food quality.

DiscussionThe main objective of this study was to develop a method of assessing howmanagement actions could lead to process improvements, and how in turn theseprocess improvements might lead to competitive advantage. The findings from thisstudy show that the competitive advantage of Australian beef processors issignificantly influenced by the attributes responsiveness and food quality.Interestingly, two elements of supply chain practice (information quality and trust)are significantly related to both responsiveness and food quality. Then separately,CRM is related to responsiveness, and strategic supplier partnerships are related tofood quality. Figure 2 shows these relationships.

The regression results combined with earlier correlation analysis (not reported)suggest that it is worthwhile for beef processors to focus closely on improvinginformation quality, then on trust, strategic supplier partnerships and CRM consideredin turn. These four actions result in increased competitive advantage, and they areconsidered further in the remainder of this discussion from the point of view ofprevious studies and management implications.

Information qualityThe results showed that improvement of the quality of the information that istransmitted along the supply chain was the most important action that beef-processingmanagers could perform. Information quality is important to supply chainperformance, because it provides the facts that supply chain participants use tomake decisions (Chopra and Meindl, 2004). Previous research indicates that aninformation quality framework can be further developed through accessibility: qualityaccess and security; intrinsic quality: accuracy, objectivity, believability, andreputation; representational quality: interpretability, ease of understanding, conciserepresentation, and consistent representation; and contextual quality: relevancy,

Explanatory variables (t-statistic)

Dependentvariable Constant CRM

Informationquality Trust Commitment

Strategicsupplier

partnerships

Responsiveness 9.713 0.709 0.951 0.518(6.094) (6.930) (6.425) �R 2 ¼ 0:85

Flexibility 2.916 0.641 1.249(2.582) (4.176) �R 2 ¼ 0:49

Efficiency 2.901 0.669 0.709 0.694(2.687) (3.627) (3.326) �R 2 ¼ 0:39

Food quality 3.279 0.347 0.364 0.790(2.566) (2.360) (3.834) �R 2 ¼ 0:44

Table II.Lower-level sub-model

linking managementactions to process

attributes

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value-added, timeliness, completeness and amount of data (Garvin, 1988; Huang et al.,1999).

Appropriate systems are available to enhance information quality for Australianbeef processors. What is needed is their more widespread adoption. In order to achieveimproved information quality, Australian beef processors can apply approaches suchas VIAscan and linked hardware and software systems. VIAscan is an assessment andfeedback system using Video Image Analysis Scan Technology to deliver moreobjective feedback to supply chain participants on carcase yields (MLA, 2004b). Forexample, assessed yield and quality are recorded by electronic measurement of rib eyearea, rib fat depth, fat colour, meat colour and marbling (Meat Research Corporation,1997).

There are various hardware and software systems currently in use, including:AUS-meat information system (AMIS) to capture slaughter-floor, chiller assessmentand boning room information and assign carcases to a particular price grid (Gregoret al., 1999); a web-based system to enhance traditional paper-based systems such asISO and HACCP, and provide traceability and process control (Theta Technologies,2007); Australian quarantine and inspection service (AQIS) auditing of export meatestablishments over the internet (Theta Technologies and Affiliated Resellers, 2007);and the LILAC Software Package, which has been extensively developed for the meatindustry in Australia, incorporating radio frequency interfaced barcode scanning forall processing in the boning room or cold room, and weight scale interfaces, barcodeand other label printing for use in the abattoir or boning operations (Lennox Computer,2007).

Trust, strategic supplier partnerships and CRMThe results show that trust, strategic supplier partnerships and CRM are alsoconsidered to be determinants of competitive advantage for Australian beef

Figure 2.Drivers of competitiveadvantage in Australianbeef processing (Note:line thickness indicatesimportance ofrelationships)

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processors. Partnerships, collaboration with trust, and customer relationships are keyfactors for developing networks or group structures often involving verticalintegration to the value chains of producers, retailers or wholesalers. Suchcollaboration ultimately improves market access by assessing and supplying theright product of consistent quality. In common with the British beef industry of adecade earlier, such changes have been driven by food safety regulation, changingcustomer demand, the international BSE crisis and a highly competitive retail sector(Fearne, 1998).

Previous research shows that there are several supporting strategies for Australianbeef processors to maintain customer relationships, to build trust and strategicsupplier partnership. One is to maintain communication with customers in order tobuild long-term relationships (Kim et al., 2010). For example, market information andfeedback from retailers, wholesalers, supermarkets and food services are useful forprocessors to meet their market specifications. In addition, processors need to havegood communications with suppliers. One approach to good communication betweenprocessors and suppliers is a joint strategy meeting every six months to discussinternal or external business strategy. For example, Tasmanian Meat Processors Pty.claims to have good communication with suppliers to ensure that the suppliers meetthe quality standards of meat products and food safety standards, free fromcontamination (Tasmanian Meat Wholesalers, 2007). Such strategy discussions areoften about food safety and traceability between processors and their suppliers. A traceback system must be developed from the end customer to supplier (Cox et al., 2006).

A second strategy is for processors to work with their suppliers (and perhaps otherprocessors) in joint promotion and problem solving. This will reduce waste andproduct contamination, and develop a consistent and efficient response to problemssuch as skill shortages and rapidly changing government policy.

Beef processors have various customers including retail butchers, wholesalers,supermarkets and food services. The main objective of the overall strategy ofmaintaining customer relationships is to improve customers’ overall value. The keystrategy to achieve this is to understand customers’ needs and provide customers withwhat they want in terms of consistent quality, pricing, consistency in beef supply andmarket specifications. Activities that support these strategies include applying bestpractices, regular market research, and an appropriate complaints policy.

There are several beef processing quality assurance programs (MLA, 2004a) toassist in meeting customers’ requirements. First, the Australian Standard for hygienicproduction and transportation of meat and meat products for human consumption(AS4696:2002) is based on world’s best practice and is consistent with the ISO9002:1994 standard. Second, hazard analysis critical control point (HACCP) wasdeveloped for all Australian export abattoirs in 1997. Third, export meat processingplants in Australia operate under several quality assurance programs including theAQIS Health Certificate, the Export Control Act 1982 and the meat safety qualityassurance (MSQA) program. Together these programs are designed to ensure that beefproduced by the export meat processor has conformed to AQIS regulations and meetsthe importing country requirements. The AQIS Health Certificate includes informationon the exporter, importer, processing plant, boning room, a description of the productincluding quantities, container marks/numbers, vessel or aircraft and the port ofloading and discharge. Fourth, a microbiological assessment system can be used to

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verify the Australian Standard, and exporting plants must monitor E. coli andsalmonella. Fifth, the national residue survey (NRS) is an Australian Governmentprogram that monitors meat for residues of agricultural, veterinary, environmental andindustrial contaminants.

Taken overall, the policy implications of our research largely amount to furthersupport for the above policies, such as food safety regulations and trace back, that arealready in place. Our results suggest that an extension of these systems would lead toboth better policy outcomes and higher profitability for beef processing firms.

Analytical frameworkThere are two important econometric limitations of the analysis that we havecompleted. First, the equations estimated might form a system in which thedisturbance in a particular equation is correlated with the disturbances in the otherequations (Judge et al., 1988). In the cross-sectional data of the study this could resultfrom some common immeasurable characteristics of each respondent being carriedinto the disturbance term of each equation. In these circumstances the appropriateprocedure is to replace ordinary least squares (OLS) estimation with a method such asseemingly unrelated regression (Zellner, 1962). Such methods produce efficientestimators by accounting for the correlations between the disturbance terms in the setof equations.

Second, most of the data from the survey are ordinal data (strongly disagree,disagree, neutral, agree, strongly agree). In these circumstances, an ordered probit orlogit method would be more appropriate than OLS (Greene, 2003). This is because OLSdepends on the assumption that the intervals between such preferences are constant,whereas an ordered probit or logit does not.

On pragmatic grounds it would be difficult to construct a model from our datasetthat was both a system of equations and based on ordered probit estimations.Consequently, we have resorted to the use of OLS and produced an approximatelycorrect outcome, leaving it to others to complete the more theoretically soundalternative, for publication in an econometrics journal.

ConclusionTo develop a competitive advantage in fast-changing competitive agri-food marketsneeds sound management of supply chains. In this paper we have developed a methodthat assesses which of a variety of supply chain management actions will lead toprocess improvements that contribute to competitive advantage. A simple, two-stageOLS regression model was estimated using the Australian beef processing industry asan example. The results showed that efforts to improve information quality along theparticular supply chain were the most important actions that management could take.In sequence, the next most important were enhancing trust, strategic supplierpartnerships and customer relationships.

The Australian beef industry was selected as a challenging testing ground for thismodelling framework. It is largely composed of small to medium-sized firms and isundergoing rapid change. In this business environment, close attention to detail relatedto supply chain management is required in order to achieve business success. In theAustralian beef industry context, the analysis revealed that management action toimprove information quality and trust would lead to enhanced food quality and

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responsiveness, and that these enhancements in turn would lead to competitiveadvantage. The paper also suggests practical methods by which the industry couldimprove information quality and trust.

Given that the underlying data are responses to questionnaires, the overallregression analysis amounts to a refined summary of the statistical results thathighlights the basis for successful management action. This type of analysis should beapplicable to other agri-food industries (both in Australia and in other countries)characterised by small to medium-sized enterprises, where various supply chainrelationships are paramount to business success.

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Appendix

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About the authorsFerry Jie holds a Bachelor of Industrial Engineering, a Master of Industrial Engineering and aPhD in Supply Chain Management from the University of Sydney. His PhD thesis was titled“Supply chain analysis of the Australian beef industry”. He has teaching interests in Logisticsand Supply Chain Management, Operations and Production Management, Quality Management,Project Management, Statistics and Business Strategy. His research interests include strategicsupply chain management, operations management and quality management.

Kevin A. Parton holds a PhD in Agricultural Economics from the University of New England,Armidale. He is a Research Professor with the Institute for Land, Water and Society, CharlesSturt University. He has many years’ experience in studying demand, supply and distribution ofAustralian meat products, both within Australia and in export markets. He is currently teachingMarket Research at the undergraduate level. He has held positions as chair of department at theUniversity of New England, University of Guelph, University of Sydney and Charles SturtUniversity. Kevin A. Parton is the corresponding author and can be contacted at: [email protected]

Rodney J. Cox is a member of the adjunct faculty of Charles Sturt University, Orange. He hasmany years’ experience working in the field of quality management in the Australian beefindustry. His expertise is the basis of many of the procedures adopted by the industry toguarantee quality in beef products as they pass to the final consumer and to export.

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