Procurement and supply professionals can face implementation challenges for sustainable practices, especially when sourcing from the Base of the Chain (BOC)*. A recent study involving CEDGE Professor Sajad Fayezi, in collaboration with Dr Maryam Zomorrodi (University of Adelaide) and Professor Lydia Bals (University of Applied Sciences Mainz), explored this issue by examining five BOC sourcing programs in the Australian agribusiness sector.
The research team identified key obstacles Australian buyers face when working with these small-scale suppliers (or farmers) and their products.
Challenges with BOC Suppliers
- Finding the right farmers: Buyers struggle to identify and evaluate suitable farmers due to unreliable information, geographical distance, and varying skill levels.
- Training and communication: Farmers often face barriers such as low literacy and language differences, making training expensive and difficult. Despite efforts made, long-standing habits can be hard to change.
- Farmer loyalty: Even after significant investment in training, buyers struggle to retain farmers. Financial pressures and better offers from other buyers lead many farmers to switch, and weak contract enforcement worsens the issue.
Product Challenges
- Availability: Farmers often sell to middlemen for quick cash, disrupting supply consistency. Limited production capacity further complicates things.
- Quality: Meeting company standards is a challenge, as farmers may lack certification or regulated inputs, leading to inconsistent quality.
Beyond Logistics or Finances
The research team found that sourcing from the BOC requires a deep understanding of local conditions. These will often significantly differ from the buyer’s environment. These differences create gaps in business norms, regulations, and information—known as institutional voids.
These voids alone do not fully explain the difficulties. The unique social and cultural environment of BOC suppliers introduces additional complexities that often receive less attention or are overlooked by buyers, possibly due to cognitive framing heavily influenced by their experience with traditional global or local sourcing.
- Hidden Information: Buyers lack reliable data about farmers’ skills and production capacity, making decision-making difficult.
- Hidden Action: Farmers may resist adopting new practices, creating uncertainty and potential risks for buyers.
- Hidden Logic: Cultural values often drive farmers to prioritise community relationships over formal contracts, guided by a sense of duty to their local networks.
Bridging The Gap
The researchers suggest that buyers must adapt their sourcing strategies to enhance their capability for effectively addressing these issues.
- Improve Information Sharing: Collaborate with local organisations to gather and share accurate data about farmers.
- Flexible Contracts and Tailored Training: Create contracts that account for social dynamics and develop hands-on, field-based training programs.
- Cultural Sensitivity: Recognise and respect local traditions and community loyalty, incorporating these values into sourcing strategies.
For example, partnering with the right NGOs and local intermediaries (with local knowledge and network) can help bridge the gap between buyers and farmers, fostering trust and alignment with local customs.
A New Approach
In line with the core premise of the Bottom of the Pyramid business, this study shifts the perspective on BOC sourcing from purely economic motivations to one that includes social factors. Financial incentives alone are not enough. Buyers must also build trust and align their strategies with the cultural and social realities of small-scale suppliers.
By doing so, they can better integrate smallholder farmers into global supply chains, support social sustainability goals, and ensure long-term success in low-income markets.
For further information, please contact Associate Professor Sajad Fayezi > sajad.fayezi@unisa.edu.au
* The BOC refers to small-scale suppliers at bottom of the supply chain in low-income countries, often called the Bottom of the Pyramid.
