A.

BASIC INFORMATION
Project Title SMART FOOD VALUE CHAIN FOR CORN IN REGION X
Proponents Project Leader : Hazel E. Soliven, DBA
Project Staffs : Anabelle B. Beronio, MAM
Sheila C. Poonon, MAM

Collaborators : Teddy E. Colipano

Anecil Q. Pagutayao
Maryjoy S. Bacus

Implementing Agency Central Mindanao university

Collaborating Agency Department of Agriculture Regional Office 10
Provincial Agriculture of Bukidnon
NMACLRC
Local Government Units
Project Duration 2 years
Project Area Bukidnon, Misamis Oriental, Misamis Occidental, Lanao
del Norte and Camiguin
Total Project Cost Department of Agriculture -

B. TECHNICAL DESCRIPTION

I. PROJECT BACKGROUND AND RATIONALE

The Department of Agriculture in partnership with farmers’ cooperatives and

associations (FCAs), local government units (LGUs), and key industry players – is bent
on enhancing the production of corn, the country’s second main staple and more
importantly as an integral part of the meat value chain or food system. Much is yet to be
done, however, as the country’s sufficiency level, particularly of yellow corn, currently
stands at only 59 percent (%).

Essential to attaining food security and reducing poverty are strong food supply
chains. However, supply chain inefficiencies, value creation restrictions, and other
concerns on inclusivity and sustainability still persist for most of the agricultural food supply
chains. With the emergence of the COVID-19 pandemic, these existing issues have been
amplified and a new reality brought along with it new threats to address.

These new threats arise mostly from policies rightly imposed to curb the spread of
COVID- 19 virus. Mainly because interpretation and translation of these policies to local
settings vary according to sub-national governments and to some extent, convergence
and conformity across different departments took a while to be settled. In some cases,
quarantine rules imposed by the sub-national governments are even more stringent than
the rules set by the national government thru the IATF. This eventually led to accessibility
and mobility restrictions that disrupted the agricultural food supply chains, especially those
that have cross-border coverage. As a result, it was observed that there is an (a)
increased food waste due to spoilage of highly perishable commodities; (b) lower
farmgate price of agricultural/fishery products; and (c) higher retail price of food
commodities.
 For instance, during the imposition of enhance community quarantine, activities of
14% of the respondents of the Business Survey for Agriculture and Fisheries Sector were
disrupted and this is equivalent to 1,169 hectares (ha) not planted (NEDA, date).
Moreover, 35% of the respondents were not able to sell their produce. In value terms,
CALABARZON recorded the highest income loss at PhP 12.29 million followed by CAR
with PhP 5.64 million and Central Luzon with PhP 12.29 million. By crop sector, high value
crops recorded the highest income loss at PhP 36.82 million. At the consumer side, food
consumption of 60% of the respondents was reduced and difficulty in accessing groceries
and wet markets was noted.

This clearly illustrates that there are still a multitude of improvements needed to
make the food value chains agile such that it would withstand, immediately recover from,
and adjust or adapt to such disruptions.

This project would then conduct a value chain analysis and develop intervention
models to build a smart food value chain. The first part would embark on mapping and
properly diagnosing the root causes of the problems. Building on the findings of the value
chain analysis, the second part would design a mix of interventions that will address not
only pre- existing issues but also new threats in the new normal. The mix of interventions
shall emanate from the point of production and post-production technologies, technology
diffusion modalities, processing innovations, smart technologies, and other solutions.
Examples are the integrated crop management and smart farming solutions for the
production-related problems, vacuum packaging machines and immersion freezers for
post-production needs, S&T Community- based farms as means to diffuse technology,
among others. All throughout the project implementation, different DA agencies (Research
shall be onboard to participate in the design of intervention models. The private sector,
taking major roles at the downstream part of the value chain, shall also be engaged at the
onset of the model development.

II. REVIEW OF LITERATURE

Supply Chain Management Concepts and Objectives

A supply chain is a network of facilities and distribution options that performs

the functions of procurement of materials, transformation of these materials into
intermediate and finished products, and the distribution of these finished products to
customers. Supply chains exist in both service and manufacturing organizations, but
the complexity of these chains may largely differ among various industries and
various firms (Ganeshan and Harrison, 1995).

As Lambert and Cooper (2000) would place it, supply chain management is
the integration of key business processes from end user through original suppliers that
provide products, services, and information that add value for customers and other
stakeholders. Its objective is primarily to create the most value, not only for the
company, but more importantly, for the entire supply chain network including the end
customer.

According to Mentzer (2001), the term supply chain management has become
prominent over the past decade. The rising popularity and importance of supply chain
management as a concept to companies could be attributed to several factors which
include
(1) increasing global sourcing of corporations, (2) increasing time- and quality-
based competition among companies and distribution channels, and (3) rising
 marketplace uncertainty due to all these global orientation and competition combined
with rapidly changing technology and economic conditions.

Stevens (1989) stated that the objective of managing the supply chain is to
synchronize the requirements of the customer with the flow of materials from
suppliers in order to effect a balance between what are often seen as conflicting
goals of high customer service, low inventory management, and low unit cost.

Harland (1996) stated that supply chain management can be used to refer to four main
concepts:

1. the internal supply chain that integrates business functions involved in the flow
of materials and information from inbound to outbound ends of the business.
2. the management of dyadic or two party relationships with immediate suppliers.
3. the management of a chain of businesses including a supplier, a supplier’s
suppliers, a customer and a customer’s customer, and so on.
4. the management of a network of interconnected businesses involved in the
ultimate provision of product and service packages required by end
customers.

Food Supply Chain Amidst the Pandemic

The National Economic Development Authority (NEDA) estimated that the

country’s real GDP growth is bound to decrease by 0.6 to 4.3% because of the
pandemic. This is roughly PhP428.7 to PhP1,355.6 billion gross value added (in
current prices) or 2.1 to 6.6 prevent of the nominal GDP in 2020 (NEDA, 2020).

To slow down the spread of the corona virus, border closures led to
disruptions in the food supply chain (FAO, 2020). The slow down in economies
because of port closures and logistics hurdles significantly affects the vulnerable ones
especially farmers struggling to meet the needed resources for food and income.
Both lives and livelihood are at risk because of the pandemic.

Restrictions of movement, as well as fear of infection by workers, impede

farmers and food processors from producing. Production economics is also directly
affected by availability of inputs creating a level of uncertainty for our producers. FAO
(2020) highlights the importance of an efficient food supply chains that strikes a
balance to keep the production going and the need to protect the workers. Among the
recommendations developed by FAO included giving smallholder farmers support to
enhance productivity and market the food they produce, also through e-commerce
channels. The government could implement core measures to avoid losses of fresh
produce in the form of establishment of collection centers and food banks, horizontal
and vertical coordination mechanisms with farmers’ association, increasing access to
finance and development of e-commerce, among others.

PCAARRD provided some recommendations to achieve a pandemic-

resilient agricultural supply chain, from production to consumption, and institutional
support (DOST-PCAARRD Policy Note 01-2020). It emphasizes the need for a
resilient agricultural food production and distribution system that is agile and able to
adapt to this kind of scenarios. In terms of production, the need to diversify and
develop reliable intra-region production base as well as promotion of urban
agriculture and backyard farming were among the key recommendations. Investment
in build-up, management and analysis of localize data on agriculture and farmers and
in the development and diffusion of smart technologies were highlighted even more.
The use of smart technologies in agriculture may help avoid crowding and direct
contact among farmers while keeping the production in progress, increasing
productivity, and reducing environmental impacts. Some examples are unmanned
aerial vehicles (UAV) or drones, pest and disease detection tools, moisture sensors,
GIS-based technologies and decision support, etc. As the production base is being
diversified and developed, it is equally important to support continued operations of
input suppliers and ensure that raw materials are available in the regions. In
processing, the processors can take advantage of biofortifiation technologies and
“designer” foods which are enriched with nutrients to make food not only available but
also nutritious. Moreover, as consumers shift to pantry stockpiling, it is also important
to develop technologies to make agricultural produce “shelf-stable” like in the form of
new sustainable packaging, biopreservation, edible coatings, etc. In distribution and
retail, farmers produce can be linked to relief operations for emergency food
assistance. The government can directly purchase agricultural produce from
smallholder farmers which will then be provided as relief goods. Bringing the market
closer to consumers through mobile markets and online food delivery options was also
highlighted as effective ways to avoid crowding in public markets and grocery stores
and reducing risk of virus exposure.

III. OBJECTIVES

The project aims to map and assess the value/supply chains of corn products in
the region and develop key intervention models. Specifically, it aims to:

1. Provide an overview of the current state of the corn industry in the region;
2. Map out the supply/value chains showing the a) key customers and their product
requirements; b) key players and their roles; c) activities and processes involved; d)
flow of product, payment, and information; e) logistic concerns; and f) external
influences;
3. Analyze the performance of the supply/value chain, where possible, in terms of
efficiency, flexibility, overall responsiveness, and other indicators;
4. Design key intervention models towards development of resilient and inclusive
corn supply/value chains.
6. Integrate DA agencies and Regional Offices in the supply/ value chain
analysis and design of key intervention model

IV. METHODOLOGY

In response to both pre-existing and new normal threats and opportunities,

this project will adopt the Department of Science and Technology (DOST) smart food
value chain (Figure 1). There are three motivations behind this: (1) there is a need to
ensure continuous inclusive and efficient value chain operations—from input
sourcing to retailing; (2) the pandemic highlighted the need for a healthy diet that is
available and accessible to every Filipino; and (3) measures intended to restrict further
disease transmission need to be overcome by smart, innovative or new ways of
producing and distributing food like reduced physical transactions, while still
pursuing productivity and value creation. This project underscores the need to ensure
continuity of efficient and inclusive value chain operations by upgrading its processes
and functions, as well as developing new food products and making nutritious food
accessible.
 However, operationalizing the framework that has been developed is not yet
clear. This study then aims to support this program by providing a template that the
DOST Smart Food Value Chain Program can use to guide its successful
implementation.

Figure 1. DOST Smart Value Chain Framework

The project will have two stages: (1) value chain analysis and (2) value chain
development (Figure 2). The first stage will involve value chain mapping, i.e. tracing
from input sourcing to consumption, and desks assessment on corn data from
government agencies. In analyzing the chain, several indicators such as efficiency,
flexibility, overall responsiveness, and other performance indicators may be used. In
so doing, root causes of problems or threats, both pre-existing and as a result of the
new normal, would be determined.
Major part of the analysis is understanding who the end-users are and what
they value, and this would determine the production, processing, and distribution
choices to be made by the key players, and the intervention or support that would be
provided by the enabling players.
Moving on to stage 2, the value chain model shall be developed, integrating
a suite of S&T solutions that will address threats and tap into opportunities. Enabling
players and private sector partners shall already be engaged as early as the analysis
part and will play an even bigger role as the value chain model is implemented.
 Figure 2. PCAARRD Value Chain Development Operational Framework

This value chain study will cover the whole value chain from production to
consumption. The current proposal aims to determine the demand side or market
requirement and establish a supply chain management system that will ensure
demand and supply matching and manage the whole logistic requirements for a more
efficient farm-to-fork model of the supply chain.

A. Value Chain Mapping and Analysis

The study will employ the supply chain management framework to ensure
continuous, inclusive and efficient chain operations. Supply chain management (SCM)
refers to the management of the entire set of production, distribution and marketing
processes by which a consumer is supplied with a desired product as efficiently as
possible. SCM should always be from the customer’s point of view (Brown and
Aranas, 2011). The pandemic highlighted the customer’s preference for shelf-stable
food and demand for smart, innovative or new ways of producing and distributing
food like reduced physical transactions.
In agribusiness products, SCM implies managing the relationships
between the businesses responsible for the efficient production and supply of
products from the farm to the consumers to reliably meet consumer’s requirements in
terms of quantity, quality and price. For the consumers and other stakeholders, SCM
focuses on improving the performance of the supply chain to guarantee the supply
with the right volume, right quantity, right quality, at the right place and at the right
time (FAO, 2020).

The SCM then becomes an essential tool not only for integrating and/or
coordinating the various business processes and steps in the entire production and
distribution system (from the production of farm products to delivery of final products
to the consumer) but also in managing and mitigating risks and uncertainties so that
the end product meets the value expectation of the target market.
Supply chain maps will be developed using the cooperators as reference points.
The maps will constitute the set of information regarding members of the supply
chains, flow of products, information and payments, activities and services conducted
by supply chain members, critical logistic issues, key decision makers and external
influences. Key informant interviews will also be undertaken to answer the following
key questions, among others:
1. Who are the key customers and what are their product requirements (especially
quality standards)?
2. How do product, information and money flow through the supply chain?
3. What are the activities and services provided at each step in the supply chains?
4. What are the critical logistic issues?
5. Who are the major decision makers or drivers in the supply chain?
6. What external influences affect the performance of the supply chain?

Figure 3. Supply Chain Analysis Components

The six key questions will enable the study to understand the dynamics in
the chain and the behavioral and institutional features of the transactions involved to
develop the appropriate intervention model. The study will assess whether the
participants are using up-to-date smart farming and processing technologies as well
as communication and data technologies most effectively. The aim is to capitalize on
advances in agricultural production and information and communication technology to
make it easier for buyers, suppliers and traders to pass on information. This study will
assist the government particularly DA and its attached agencies, and private sector in
exploring and enabling market opportunities in the corn supply chain.

4.1. Key Customers and Product Requirements

For each supply chain, key customers and their locations and product
requirements will be identified. Product requirements will be tracked down in terms of
quality, volume requirements, chosen packaging, preferred schedule, and delivery
mode, among others.
The distribution of relief goods by the government agencies makes a good
market for food products. Increasingly, the local government units are turning to local
farmers for healthier, locally sourced relief goods. In a report by the Department of
Agriculture, more than 245 LGUs purchased an estimated PhP1.58 billion worth of
farmers 'yield in March and April 2020.
The recent outbreak of the COVID-19 has also greatly affected consumer
behavior. People are stockpiling shelf-stable food positively affecting demand for
canned and processed food. A consumer study by the American Frozen Food
Institute found that amid the pandemic, 7 out of 10 consumers prefer frozen food
products and that the demand will likely continue beyond the pandemic. Other
technologies that will make perishables more stable may be in the form of bio-
preservation, edible coatings, healthy meal packs, etc.
A study led by the US National Institutes of Health finds that the COVID-19
virus remains on plastic and stainless steel for up to three days and cardboard up to
one day which raises concerns regarding packaging as a potential vector for
spreading the virus. An abundance of precaution is necessary to ease the customers
with fear of infection. Food safety now highlights the assurance of undergoing
sanitation and handling protocols to ensure products are safe from viral infection.
The pandemic ramped up demand for affordable and nutritious food calling
for more innovative means of producing nutrient-rich foods especially in these trying
times where one’s health is most susceptible. This may be addressed by bio-
fortification and development of designer foods.

4.2. Product, Information and Payment Flow

This section includes the temporal and spatial flow of the product and
payment as well as mode of information flow along the chain.
Shelf-life constraints on food products create demand for storage
technologies showing significant potential for the cold chain industry particularly on
refrigerated transportation. This highlights the key feature of the Smart Food Value
Chain which is not only about competitiveness but also agility to ensure product flow is
unhindered by perishability.
In terms of information flow, the study will also give special emphasis on the
use of information and communication technology (ICT) that would enable frequent
exchange of huge amounts of information among chain participants. This is especially
important for agri-food supply chains because of shelf-life constraints and increased
consumer attention to safe and healthy production methods.
More and more, the payment flow can be characterized by the use of
“touchless” payment options to minimize physical contacts through cash handling and
credit card transactions. As we propose for food value chain to adopt software
solutions, migration to digital transactions like mobile wallet are being encouraged to
move towards financial inclusion.

4.3. Activities and Services along the Chain

The activities and services along the supply chain will be detailed. Cost
associated with the activities and services will also be discussed accordingly to derive
the cost efficiency of the supply chain.
Production economics is directly affected by availability of inputs creating a
level of uncertainty for the producers. As production base is being diversified and
developed, it is also important to support continued operations of input suppliers and
ensure that raw materials are available in the regions.
Similarly, the fear of infection by workers may lead to labor shortage
impacting availability of supply. Precautions to avoid contracting the disease entails
application of sound principles of environmental sanitation, personal hygiene and
established food safety practices.
Mobile markets and online food delivery options are effective ways to avoid
crowding in public markets and grocery stores and reducing risk of virus exposure.
Online shopping has already been the trend nowadays both for non-perishable and
perishable goods.
Meanwhile, for areas who do not have reliable internet access, mobile
markets would be a great help. Some LGUs including Pasig City, Valenzuela City
and Mandaluyong City, among others, have already deployed their versions of
mobile markets, or so-called ‘mobile palengke’.

4.4. Key Players and their Roles

This validates the importance of the players in the supply chain and
determines the redundant players carrying out the processes. The relationships
between and among supply chain players in the context of network analysis are also
the focus of the study. These relationships may help unveil and explain several
emergent players along the chain.
The strategy to work with major players/decision makers will be crucial to
ensure that measures to improve the supply chains will be co-owned by the supply
chain members. Supply chain champions will be identified by looking at the structure
of power and influence and the relative interest of members with regards to
improvement in the chain (e.g. Philippine Chamber of Agriculture and Food, Inc.,
Mama Sita’s, Air 21, PhilFood Expo, etc). These champions are expected to ensure
that the identified interventions would be carried out.
Working with these champions, the DOST and its attached agencies can act
as enabler to develop a smooth, agile-functioning food supply chain by integrating
initiatives of different agencies with special emphasis on smart and innovative
technologies that can be applied throughout the chain- from agricultural production,
processing, packaging all the way to food waste management. It involves the
enhancement of the services and utilization of the existing DOST Technology
Business Incubators (TBIs), Food Innovation Centers (FICs), Complementary Food
Production Facilities (CFPF), and possibly for the development and deployment of
innovative, mobile food processing systems, and for the digital transformation at the
different stages in the food value chain.

4.5. Critical Logistic Issues and Concerns

Logistics is the management of flow of goods and information from the point
of production to consumption. Since logistics may have been heavily disrupted by the
COVID restrictions, several principles will serve as guide for the analytical assessment
of the logistics involved in particular supply chain: (1) simplicity; (2) responsiveness;
(3) flexibility; (3) economic, and (5) sustainability. Logistic arrangements in a supply
chain should prevent complexity and encourage efficiency in all activities.

4.6. External influences

External environment factors influence to a considerable extent the

performance of the supply chain. Such factors may be technical, cultural, political and
even a pandemic.
These factors must be fully understood so that the supply chain analysis and
the corresponding intervention models can be placed in proper context. Strict
adherence to product standards reduces the likelihood that harmful pathogens will
threaten food safety of the food supply. Safety measures, with emphasis on ways to
avoid contamination and exposure to coronavirus and the likes, at every critical point
in the food chain--from production and harvest to consolidation and storage up until
packaging and delivery shall be examined.

B. Value Chain Models Development

Using the insights generated from Stage 1, an overall goal of the chain
shall be established, and this will dictate the direction of model development and
choices of S&T solutions to be delivered along the corn value chain. Once set, the
S&T solutions like product, process, function, and overall upgrading shall be identified
and so are the key players that will make the delivery (enabling actors) and
implementation (value chain actors) of those solutions effective. The DA regional
office will serve as the supply chain manager who will oversee the planning, manage
implementation of interventions, coordinate with different players, among others. The
project will assist the Regional office in performing the roles of a supply chain
manager. The most crucial thing is that all the players have shared an understanding
of the overall value chain goal and expectations from the interventions and their
responsibilities.

Figure 4. PCAARRD Value Chain Development Components

C. Implementing the Value Chain Model

Establishment of Supply Chain Management system

The DA regional office will serve as the supply chain manager who will
oversee the planning, manage implementation of interventions, coordinate with
different players, among others. The project will assist the regional office in
performing the roles of a supply chain manager. The most crucial thing is that all the
players have shared an understanding of the overall value chain goal and
expectations from the interventions and their responsibilities.

The roles of supply chain managers include:

1. Forging market linkages and building relationships among players
2. Ensuring a reasonable and efficient flow of product, information and payment.
3. Production scheduling and management of inventory to avoid unnecessary
surpluses and deficits
4. Management of all necessary logistics
5. Ensuring a smart, inclusive, and sustainable supply/value chain
Software solutions developed by private sector (e.g. FOODLINK) which can
generate
supply projections for corn commodity will be used as input in supply chain
management.