Bacalao two supply chains for two markets Bacalao is fish that has been salted and dried,…

Bacalao two supply chains for two markets
Bacalao_ is_fish_ that_ has_ been_ salted_
and_ dried,_ traditionally_in_ the_ open_
air_ on_ rocks;_ today_it_is_done_in_a_drier._It_has_been_produced_in_Norway_since_about_1640,_can_be_
kept_refrigerated_for_several_years,_and_is_said_to_improve_over_time._It_has_developed_
a_strong_position_in_the_food_cultures_of_many_Latin_countries__such_as_Brazil,_the_Dominican_Republic_and_Portugal__where_consumers_often_follow_the_Catholic_tradition_of_
eating_more_fish_on_Fridays_and_in_the_run-up_to_Easter._Marketing_over_many_years_has_
created_the

Bacalao two supply chains for two markets
Bacalao_ is_fish_ that_ has_ been_ salted_
and_ dried,_ traditionally_in_ the_ open_
air_ on_ rocks;_ today_it_is_done_in_a_drier._It_has_been_produced_in_Norway_since_about_1640,_can_be_
kept_refrigerated_for_several_years,_and_is_said_to_improve_over_time._It_has_developed_
a_strong_position_in_the_food_cultures_of_many_Latin_countries__such_as_Brazil,_the_Dominican_Republic_and_Portugal__where_consumers_often_follow_the_Catholic_tradition_of_
eating_more_fish_on_Fridays_and_in_the_run-up_to_Easter._Marketing_over_many_years_has_
created_the_association_with_Norway_as_the_land_of_bacalao,_or_bacalhau
da Noruega,_ as_it_is_called._It_is_a_matter_of_great_pride_amongst_consumers_
to_master_a_variety_of_ recipes_for_serving_bacalao._
The_overall_supply_chain_is_illustrated_in_Figure_7.5._It_takes_at_least_four_weeks_to_make_
the_end-product._The_best_fish_is_wild_and_taken_by_line,_but_trawled_fish_is_also_good,_
whilst_nets_give_the_lowest_quality_because_the_fish_can_be_dead_for_a_while_before_being

hauled_up._Today,_the_fish_is_farmed_increasingly_as_well._The_raw_material_is_the_major_
cost_item:_prices_are_set_by_the_R_skelaget_(the_Norwegian_raw_fish_association)._Prices_
can_vary_a_lot__for_example_from_NOK26/kg_to_NOK15/kg_within_a_year._Electricity_and_
insurance_are_the_other_two_major_cost_items._The_fish_is_slaughtered_(and_bled_on_the_
boat_for_the_best_quality),_then_matured_in_salt_for_two_to_three_weeks._After_salting,_it_is_
dried,_sorted,_packed_and_distributed._There_are_no_reliable_ways_of_measuring_salt_and_
water_content,_so_manual_methods_of_touching_and_feeling_the_fish_during_each_stage_
are_used_to_ensure_consistent_quality_and_weight._
Bacalao_is_produced_mainly_from_cod,_which_is_preferred_by_Portuguese_customers._
But_consumers_in_the_Dominican_Republic_prefer_pollock,_which_is_a_darker-fleshed_fish_
that_is_more_abundant_in_the_North_Atlantic._Cod_is_up_to_three_times_more_expensive_
than_pollock._The_Norwegian_fish_industry_is_highly_fragmented,_with_many_small-scale_
fish_farmers,_fishermen_and_producers._Marketing_activities_are_coordinated_by_the_Norwegian_Seafood_Export_Council.
Consumers_ are_ very_ quality_ conscious_ when_
buying_ bacalao._ Quality_ is_ determined_by_colour,_texture_and_firmness,_as_well_as_water_content_and_size._Portuguese_
consumers_ prefer_ smaller_ cod,_ around_ 2.5_
kilos,_ whilst_ consumers_ in_ the_ Dominican_
Republic_are_less_concerned_with_size._Note_that_quality_here_refers_to_grade_of_fish_rather_
than_to_conformance_quality:_both_grades_are_fit_for_purpose_in_the_markets_they_serve.
Bacalhau da Noruega Company_Noruega_(CN)_has_150_employees,_and_built_its_bacalao_production_facility_in_
1997_in_the_Port_of__esund__which_has_one_of_the_largest_harbours_in_Norway_and_one_
of_the_most_modern_fishing_fleets_in_Europe._The_company_focuses_on_volume_in_order_
to_ benefit_from_ the_ economies_ of_
scale._ Production_ is_ stabilised_ through_ the_
year_ by_ ensuring_a_stable_supply_of_fish_through_sourcing_a_combination_of_frozen_and_fresh_fish,_
creating_a_buffer_of_some_three_to_four_months_supply._The_company_trades_only_in_full_
truckloads,_which_are_distributed_via_Hamburg_or_Rotterdam._Product_is_sold_under_the_
generic_brand_name_of_Bacalao da Noruega_in_standard_transport_packaging._Whilst_CN_
serves_most_Latin_markets,_80_per_cent_of_its_sales_go_to_the_Dominican_Republic_as_pollock_bacalao._This_market_is_relatively_stable_throughout_the_year,_which_matches_CNs_
stable_production_policy._CN_is_experimenting_with_pollock_farming_further_to_improve_
supply_reliability. Bacalao Superior Company_ Superior_ (CS)_
is_ also_ based_ in_ the_ _esund_ area,_
and_ accounts_ for_ 1520_per_cent_of_Norwegian_bacalao_exports_to_Portugal._Only_cod_bacalao_is_exported_to_this_market,_which_commands_a_1015_per_cent_price_premium_over_other_
Norwegian_bacalao._The_product_is_popular_with_consumers,_which_creates_a_strong_
relationship_with_the_single_supermarket_chain_that_sells_it._Fish_are_sold_whole,_with_
a_ CS_ tag_ showing_ guarantee_ of_ origin_
from_ fresh_ Norwegian_ cod,_ which_ was_
an_ idea_that_came_from_the_supermarket_customer._This_ensures_that_CS_bacalao_stands_
out_from_other_offerings._Joint_marketing_campaigns_are_funded_by_both_CS_and_its_
supermarket_customer,_and_include_TV_promotions._Only_fresh_cod_is_used_in_bacalao
superior,_caught_by_the_coastal_fleet_in_small_boats._During_the_winter,_supply_is_heavilydependent_on_quotas_that_are_permitted_in_the_famous_Lofoten_fishing_field_in_the_far_
north._CS_buys_from_three_fresh_cod_suppliers,_and_from_1520_suppliers_of_salt_fish._
Processing_follows_traditional_routes,_but_some_technology_has_been_introduced_into_
cutting_and_drying._Finished_product_is_
transported_ to_Portugal_in_22-tonne_ truckloads_three_times_per_week._Storage_of_finished_product_is_in_Lisbon_at_the_customers_
warehouse.

CN_accepts_more_variation_in_its_raw_material_source_to_enable_continuous_supply._This_
applies_to_type_of_fish_as_well_as_where_and_how_it_is_caught._Farming_and_a_healthy_stock_
of_frozen_fish_help_to_reduce_further_supply_variations._On_the_other_hand,_CS_seeks_the_
best_quality_with_minimum_variation._The_only_inbound_stock_that_is_permitted_is_small_
quantities_of_salted_cod. Whilst_the_raw_materials_and_end-product_have_many_similarities,_there_are_substantial_
differences_ in_ inbound_ and_ outbound_
logistics_ as_well_ as_ processing_ and_
distribution_ strategies._These_differences_are_fundamental_
to_ the_need_ to_support_ the_brand_
(raising_consumer_expectations)_by_means_of_logistics_strategy_(meeting_consumer_expectations)._We_can_conclude_as_follows:

_ Two fundamentally different inbound
strategies:_CN_focuses_ on_ secure,_ continuous_
supply_and_accepts_greater_variation_in_terms_of_type_of_fish,_where_and_how_caught__
so_farming_is_encouraged._They_buffer_and_store_extensively._CS_goes_for_consistently_high_quality_by_not_accepting_much_by_way_of_variation:_size,_line_catching_
and_location_ are_ all_important_ requirements._They_do_not_
store_fresh_fish_or_use_ frozen.

_ Internally consistent marketing and
logistics:_CN_matches_ the_low_price,_continuous_
availability_marketing_mix_by_means_of_efficient_sourcing_and_continuous_availability,_
and_of_lean_production_and_distribution_methods._This_enables_high_and_consistent_
production_volumes_supported_by_a_flexible_product_mix._There_is_less_to_go_wrong_
in_terms_of_supply,_but_the_generic_nature_of_the_product_works_against_better_margins_or_customer_loyalty._CS_matches_the_high_price,_seasonal_availability_marketing_
mix_by_means_of_highly_selective_sourcing_and_by_focused_factory_production_that_
is_seasonal_and_relatively_inefficient._Production_is_possible_only_when_high-quality,_
line-caught_fresh_fish_are_available._Limited_and_sporadic_availability_mean_that_the_
product_has_ to_ reassert_itself_following_supply_interruptions,_so_
the_marketing_pull_ must_be_consistent_and_strong._Traceability_through_tagging_reinforces_the_superior_
quality_image_in_consumers_minds,_ supported_by_joint_marketing_with_
the_major_ retail_customer. The_way_ that_
the_ two_supply_chains_have_evolved_illustrates_
the_ trade-offs_at_stake:_ more_of_one_thing_means_less_of_another._The_CS_supply_chain_has_become_focused_on_
top_quality_(grade)_product,_but_at_relatively_high_cost_and_sporadic_availability._The_CN_
supply_chain_has_become_focused_on_the_opposite:_low_cost_and_continuous_availability,_
but_at_average_quality_(grade). (Sources:_Jahre_and_Refsland_Fougner,_2005;_Harrison,_2010)

Question

1 Discuss_and_evaluate_to_what_extent_Company_Noruega_(CN)_has_a_lean_supply_chain_
and_Company_Superior_(CS)_has_an_agile_supply_chain.

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