Sustainable Supply Chain Approach for Farm Produce through Hub Chain Model

Introduction

Several essential business sectors were disrupted during physical movement restriction orders amid the pandemic outbreak. Agricultural-based business, for example, has experienced the dumping of farm produce due to disruption of the supply chain resulting from the closure of transportation and retail services. The incessant logistic restrictions have led to instability of the supply of farm produce to the market and caused the farmers to lose their daily income. The conventional distribution channel is typically developed by a longer chain that involves several intermediaries which consumers do not see or interact with the producers throughout the chain. The choice of distribution approach for the product is typically influenced by the cost involved in transferring the products from supplier to consumer as well as the environmental tolerance of each market operating channel (Yagana et al., 2014). Agricultural products, depending on the particular product concerned, often change hands up to six times before reaching the customer (Adekanya, 1989). Three transactions are often involved in fruits and vegetables, with consumers buying from retailers after the commodity has been transferred from producers through assemblers and wholesalers (Yagana et al., 2014). It is believed that this kind of multi-level distribution channel might be less cost-effective for farm produces due to perishability and locality reasons, especially during the uncertain situation. Thus, finding an innovative supply chain approach for farm produce has always been the most critical challenge in agricultural-based businesses. It is believed that not all agricultural-based businesses can adopt a technological or digital approach or employ private runner as an alternative strategy in distributing their produces, as this can be influenced by firm resources and locality factors. For instance, distributing farm produce through a single or independent channel can be less economical for small farmers due to the unfair pricing of the middlemen or distributors (Kim & Frazier, 1996). In addition, the adoption of an online distribution strategy for small farm-based businesses in rural areas can be less effective due to poor internet reception.

In Malaysia, for example, the farmers in the rural area of Sabah have been encouraged by the Ministry of Agriculture and Food Industry (MAFI) to market their farm products through the farmer’s market, which serves as a collection centre for farm produces. Nevertheless, some primary producers, especially small farmers, might be unable to personally sell their product in the farmer’s market while working on the farm. In addition, during uncertain situations, such as the pandemic, the government might not permit active physical and logistic movement for safety purposes. Despite the logistic disruption, some farmers strive to survive by embracing several strategies as an alternative to sustaining their business. This includes opting for online business through low internet bandwidth mobile applications like WhatsApp and Facebook or undertaking business from home (Halim, 2020; Dzulkifli, 2020; Aling, 2020). For instance, some farmers in Ranau, a rural district in Sabah, shorten the supply chain through an appointed agent who distributes their farm produce directly to customers or to one-stop collection centres in several city areas. This approach complies with a hub distribution model, which integrates all players in the supply chain in a network form (Liu, Kasturiratne, & Moizer, 2012). Under this concept, a hub acts as a central store that caters to various destinations where customers, stores or smaller warehouses are generally located (Manikas, Malindretos, & Moschuris, 2019).