Can an Underachiever Become Competitive? The Case of the Romanian Food Industry


Author

Marian Liviu Mocan
Department of Management, Politehnica University from Timisoara, Timisoara 300191 Romania

Attila Turi
Department of Management, Politehnica University from Timisoara, Timisoara 300191 Romania

Gilles Goncalves
Department of Informatics and Automation, Univ Lille Nord de France, Lille 59000 France

Sorin-Ioan Maistor
Department of Management, Politehnica University from Timisoara, Timisoara 300191 Romania


Content

The paper outlines current challenges in Romanian food industry, its potential to overcome them and be competitive on both the national and international market using a key performance indicator (KPI) methodology. Although it has the capacity to assure internal consumption and competition on the market is high the Romanian food sector is struggling to meet internal demand, imports heavily exceed exports while food consumption is decreasing. The retail sector is an important part of the supply chain, but the harsh competition among the different stores has made them pass the risks only towards the upstream links which is straining food processors and producers and threatening the sustainable development of the food supply chain. High taxation, unfair competition and delayed payments towards food processors add extra pressure on the weaker links of the chain. Moreover authorities are inefficient in assuring duly market conditions whereas scandals further degrade industry image and cause important losses. The lack of synergic efforts within the industry and the scarce collaboration efforts between business partners affect individual company performance and thus global industry competitiveness. The research provides solutions that address its structural issues and develops performance indicators to improve the efficiency of companies in order to assure their sustainable development within the supply chain and become more competitive on the global food.

Keywords: food industry, competitiveness, colaboration, supply chain, performance indicators

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Romania has a population of around 20 million people and is ranked second in Eastern Europe in terms of consumer market potential after Poland. The above European Union (EU) average growth rates of its Gross Domestic Product (GDP) before the financial crisis brought significant increases in consumption, food consumption included, rapidly developing the food sector. In 2008, only 10 years after the establishment of the first hypermarket in Romania, local and multinational retailers opened 134 stores with an invested value of nearly 600 million euros. The majority of these investments came from multinational retail groups like Kaufland, Auchan, Metro, Carrefour, Selgros and Billa. Today Romania’s retail market accounts for more than 800 hypermarkets and supermarkets and is reaching saturation, with around 10 large retailers on the competitive landscape.

Food industry is an important sector in the Romanian economy, accounting for about a relatively stable 13.5% of industrial employment and 4.8% of total employment. The food and beverage industry employed more than 186,000 people in 2011 and generated a turnover of around 10 billion euros, representing a share of 8% in GDP.

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A performance indicator or key performance indicator (KPI) makes objectives quantifiable, provides performance measurement and is a simple and useful tool for monitoring the performance of a key result area important to the success of the organization. For the measurement to be effective the levels that have to be achieved must be set according to certain company standards and represent challenging, yet realistic goals. Therefore choosing the right indicators depends on having a proper understanding of what is important to the company and its objectives as stated by Reh (2009).

As for the generation of the proposed performance indicators the methodology used was the guideline of the PROS 10/10 Strategic Management Standards of the Public Record Office Victoria Standards which is concerned with strategic management of public records and consists of strategy formulation, implementation and evaluation. The first step consists in gathering a sufficient amount of information and data on the subject and analyzing it for topic relevance as shown in the upper half of Figure 1. After some main ideas are highlighted, they need to be transformed into performance indicators and they have to pass the reality check (relevant, achievable, measurable, etc.) from the lower half of the figure. After all the information is compiled a list of indicators emerges by following the two stated steps above. For them to be effective, the indicators must address responsibilities, requirements and risks, and prompt the executive to proactively assess performance and address issues of noncompliances of any kind.

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By capturing processor margins, retailers cut their risks and costs in order to assure their margins on short and medium term but add extra pressure on processors and producers, making their businesses less profitable, hampering their development and indirectly making the food supply chain unviable in the long term as underlined by Bowman (2013). Effective supply chain management requires careful consideration of multiple tiers of partners, especially with respect to sustainability issues as shown by Grimm (2013). Some recent events (VAT reduction for bakery products to 9%, reopening of pork meat market abroad, policies regarding mutual funds in case of critical situations, financial support for milk cooling tanks) offer a more optimistic perspective for the industry.

Shifting from national underachievement towards international competitiveness requires time and a thorough process of structural change, investments in infrastructure and a new vision which implies collaborative forms, benefits and risk sharing for those who work in the industry as suggested by Beske (2013) and Astuti, Arkeman, Poerwanto and Meuwissen (2013). Meanwhile all supply chain links must improve individual performance by setting up, measuring and analysing results achieved for the six proposed indicators in order to assess progress and performance development on economic and social level as well as within their own supply chain as confirmed by Garcia (2012).

Collaboration is essential throughout the food chain and only through long-term partnerships can all links of the chain benefit from its returns and improve performance as outlined by Thongrattana and Perera, N. (2010). Another way to achieve a sustainable partnership is applied by Transavia in the meat sector who operates an integrated production chain which ranges from the feed up to the distribution of poultry meat. Companies can only improve when they are fully aware of current performance, make efforts to improve and to collaborate within their supply chains as is implied by Prange (2011).

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About Author

Professor Marian Mocan, born on October 23rd, 1961 graduated from the Faculty of Mechanics in 1986. He obtained the Master Business Counselor title at Washington State University SBDC and a PhD in Economics from the West University of Timisoara. He is the Dean of the Faculty of Management in Production and Transportation of the Politehnica University from Timisoara, Romania. He teaches the Basics of management, Logistics, Strategic management and the Management of logistic systems. He collaborates with universities from Europe, Asia and North America. He is a PhD supervisor in the field of Engineering and management since 2010. He has written 14 academic books and over 140 scientific articles. Research areas of interest are Logistics and Supply Chain Management, Strategic Management, Operational Management.

Attila Turi, born on April 6th, 1987 graduated from the Faculty of Management in Production and Transportation in 2010 and obtained his Master’s degree in Logistics from the Faculty of Applied Sciences within the Artois University, France, in 2012. Within the same year he successfully completed the Basics of Supply Chain Management (BSCM) Module and obtained the certification after an exam hosted by APICS. He is currently a PhD student at the Politehnica University from Timisoara, Romania and teaches Industrial and commercial logistics since 2014 and has written 7 scientific articles. His research areas of interest include Performance analysis in the automotive industry, Management, Supply Chain Management and Logistics.

Gilles Goncalves, born on January 11th, 1956 is a full professor at the Artois University, France, since 1994. He studied Computer Science at the University of Lille1 and obtained his PhD in 1985. During 14 years, he was a lecturer and his works concerned parallel and distributed computing. His current research interests include Information systems, Security management, Simulation modeling, Discrete optimization and Metaheuristics. He has written about 20 papers in scientific journals, 5 book chapters and more than 100 scientific communications in conferences. He manages a research laboratory named “LGI2A”, whose main topics are the Organization and management of logistic processes. Sustainable aspects of the supply chain are taken into account in his works.

Sorin-Ioan Maistor, born on October 31st, 1985 graduated from the Faculty of Management in Production and Transportation in 2009. In 2011 he obtained the title of Master in Business Administration (MBA) at the Politehnica University of Timisoara, Romania and is currently a PhD student in the field of Engineering and management. He began his teaching activity in 2009, as an assistant teacher of Economic engineering, Logistics and Maintenance of production systems within the graduated faculty. He has published 15 scientific articles and is co-author of a guide for seminar activities for Economic and financial analysis. Research areas of interest are Logistics and Supply Chain Management, Production Management and Economic Engineering.