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by: Charles Kunaka
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Small scale producers in developing countries lack easy access to
efficient logistics services. They are faced with long distances from
both domestic and international markets. Unless they consolidate their
trade volumes they face high costs which diminish their ability to
trade. However, the process of consolidation is not without cost nor
does it occur on its own accord. As a result, the consolidation is
typically handled by intermediaries.
Using case studies of sisal and soybean supply chains in Brazil and
India respectively, this study explores the role and impact of
intermediaries in facilitating trade in lagging regions. The study
assesses the horizontal relationships between the small scale producers
in thin markets and the vertical connections between different tiers of
the same supply chain. The study analyzes the traditional approach to
linking producers namely through cooperatives and itinerant traders and
the relatively newer innovations using ICT.
The study finds that farmers linked through the different mechanisms
are more integrated to international supply chains or are able to
better manage supply chains longer than would otherwise be the case.
Intermediaries play several roles including providing transport
services and facilitating market exchanges, payments, risk sharing and
quality improvements. Generally, information technology driven
innovations make it easier to integrate adjacent steps in the value
chain.
This report on logistics performance at the sub-national level is an
on-going endeavour. Similar analysis is being carried out in some
countries in Africa to identify the evolving role of intermediaries in
low income regions. The results will be developed into a major
publication on this topic, with recommendations on how development
agencies, civil society and the private sector can improve the design
of strategies to reduce logistics costs in low income areas.
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