Shortening Supply Chains : Experimental Evidence from Fruit and Vegetable Vendors in Bogota
Small trading activities are a prevalent form of self-employment in developing countries, but their integration into supply value chains is not efficient, especially when it comes to perishable produce. This study tests a novel approach to improve...
| Main Authors: | , |
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| Format: | Working Paper |
| Language: | English |
| Published: |
World Bank, Washington, DC
2019
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/728681565630010702/Shortening-Supply-Chains-Experimental-Evidence-from-Fruit-and-Vegetable-Vendors-in-Bogota http://hdl.handle.net/10986/32270 |
| Summary: | Small trading activities are a prevalent
form of self-employment in developing countries, but their
integration into supply value chains is not efficient,
especially when it comes to perishable produce. This study
tests a novel approach to improve their efficiency by
reducing the time and cost of sourcing produce by
aggregating purchases through the use of an app and
centralized distribution system. Fruit and vegetable vendors
in Bogotá currently travel most days to a central market to
purchase produce, incurring substantial time and monetary
costs. A social enterprise attempted to shorten the supply
chain between farmers and vendors by aggregating orders from
many small stores, sourcing directly from farmers, and
delivering them to the stores. The introduction of this new
service was randomized at the market block level. Initial
interest was high and offering the service reduced travel
time for users by almost two hours a week, reduced travel
costs, and increased work-life balance for store owners.
Firms offered the service saved an average of 6 to 8 percent
on purchase costs, and although some of this passed through
into lower prices for consumers, there was incomplete
pass-through, so that markups rose. However, stores reduced
their sales of products that were not originally offered by
this new service, and their total sales and profits appear
to have fallen in the short run, with service usage falling
over time. The results highlight the potential for new
technologies to solve firm coordination problems, offer a
window into the nature of competition among small retailers,
and point to the challenges in achieving economies of scale
when disrupting centralized markets for multi-product firms. |
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