SUPPLY CHAIN AND THE LOCAL ECONOMY

supply-chain

(Photo credits to the owner)

 

Over a glass of SIU HOK TONG, I had casual conversation with my brother last night and we talked among others about my post on how LGUs could find an industry and position its niche in the supply chain. Although I’m not an expert in economics and supply management, I believe my raw knowledge on the subject can share minimal insights on the subject. I choose to illustrate the Cavendish Banana industry because I do have first-hand experiences with it since I’ve grown-up of it as my parents were workers at the pioneering banana company (Davao Fruits Corporation) in our town.

Here’s my take:

Majority, if not all, of the Japanese eat Cavendish banana. Our town is predominantly an agricultural town which has potentials to produce Cavendish banana. As far as the banana is concern, both the Japanese people and the agricultural lands in my town are the both ends of the chain, meaning there are, on the one hand, demand for the product, and on the other hand, potential supply of the product, respectively. However, the demand and supply ends will not meet automatically because there are procedures and activities in between. Thus, there must be chain links (connectivity) of procedures and activities in order to marry both ends. Mura nig UNSAON PAG PAG-ABOT SA KASILI UG LUWAG.

There are 2 givens here: demand for banana by the Japanese and the availability of agricultural land.

For the purpose of illustrating the relationship, I will start from the land going to the Japanese food table.

The land will be planted with Cavendish banana.

Chain Link 1: The land owner plants banana.
Chain Link 2: Farm workers prepare, plant and maintain the farm.
Chain Link 3: Bananas are harvested.
Chain Link 4: Bananas are processed and undergo quality control.
Chain Link 5: Bananas are loaded for transporting.
Chain Link 6: Bananas are transported to the port.
Chain Link 7: Bananas are ship from the port to Japan.
Chain Link 8: Bananas are distributed from the port in Japan to retailers.
Chain Link 9: Bananas are sold by retailers in Japan.
Chain Link 10: Bananas are brought and eaten by the Japanese.

Assuming that 70% of the Japanese population of 126,000,000 will eat banana, with a consumption of 1 box per month, 88,200,000 people will consume more than 88,000,000 boxes per month.
Assuming again that an LGU has a potential area of 4,000 hectares ready for banana plantation, by average it can produce 300 boxes per month per hectare, 1,200,000 boxes is chicken to the 88 million-demand.

At this point, the LGU now can proudly say that it can establish a niche in the supply chain of the banana industry.

With that niche, let us examine the labor component of the chain.
The niche established by the LGU will position atop on chain links 1-6.

Assuming once again that the labor components are 2 workers per hectare in all the 6 links, the direct employment now is at 8,000 (4,000 x 2) workers.

If each these workers are paid at P 250.00 per day, then P 2,000,000.00 of wages for a day, working in 26 days in a month – P 52,000,000.00-wage month, and P 624,000,000.00 direct wages in a year.

Assuming further that the MANAGEMENT (technical, administration, marketing and finance) workforce is at the ratio of 1 is to 20 workers, there are at least 400 (8,000/20) management workers.

If these 400 workers are paid at an average of P 500.00 per day (conservative estimate), then P 200,000.00 of wages for a day, working in 26 days in a month – P 5,200,000.00-wage month, and P 62,400,000.00 direct wages in a year.

Assuming furthermore that there are half of the direct labor who provides allied services/informal economy (tricycle, habal-habal, snack/meal vendors, manicurista, usher ug last 2, pautang –chorizo/ gadgets/ ug uban pa, among others) to these workers, there are more or less 4,000 (8,000/2) indirect workers.

If these 4000 workers are earning at an average of P 100.00 per day (conservative estimate), then P 400,000.00 of earnings for a day, working in 26 days in a month – P 10,400,000.00-earning month, and P 124,800,000.00 earnings in a year.

The assumptions above are just for labor, notwithstanding other components such as OVERHEAD COSTS (fuel, oil and lubricants, lights and power, water, supplies, among others) and FIXED ASSETS/CAPITAL OUTLAYS (building materials, equipment, vehicles, among others). These will no doubt accounts for hundreds of millions of pesos in a year. And all of these monetary values circulate in the local economy which are for sure benefit the constituency.

Again, going back to finding a niche in the supply chain, the examples above account only for banana industry. LGUs have various and numerous potentials aside from banana. There are lots of industries available and potentially accessible, really.

SUGGESTIONS:

LGUs must:

1. Give priority in their development planning the study and finding out which industries to develop. These industries include: other agri products, agro-forestry, mining, tourism, infrastructure, HUMAN RESOURCES, basta daghan kaayo.
2. Look and find demands, locally and internationally.
3. Establish the linkages and pursue connectivity.
4. Educate, organize and mobilize people to develop local resources.
5. Train, equip and optimize the work of LGU employee especially local economic managers.
6. Formulate and include among others that subject of niching of industries in the supply chain, Comprehensive Development Plan (CDP), Comprehensive Land Use Plan (CLUP), Sanggunian Legislative Actions, Executive-Legislative Agenda (ELA), and implement these without reservation and purposes of evasion. These must and should be aligned and consistent with the concept and practices of sustainable development

http://www.un.org/sustainabl…/sustainable-development-goals/

7. Establish strong political leadership and genuine people’s participation in the mechanism of effective governance.
8. Institutionalize anti-corruption strategy.
9. Form alliances with other LGUs.
10. Let the national government know to gain and optimize support and assistance.

Ug uban pa. If only serving the people politically, economically and culturally is not just a lip-service, then the right time to act is now.

I hope I’ve shared a little.

Just sharing!

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s