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SUPPLY CHAIN IMPROVEMENT (SCI) of the NATIVE CHICKEN INDUSTRY in REGION VI Joy C. Lizada1, Phd, Reynold D. Tan, and Joey P. Pedr

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SUPPLY CHAIN IMPROVEMENT (SCI) of the NATIVE CHICKEN INDUSTRY in REGION VI Joy C. Lizada1, Phd, Reynold D. Tan, and Joey P. Pedr SUPPLY CHAIN IMPROVEMENT (SCI) OF THE NATIVE CHICKEN INDUSTRY IN REGION VI Joy C. Lizada1, PhD, Reynold D. Tan, and Joey P. Pedrajas College of Management, University of the Philippines Visayas, Iloilo City Keywords: Supply chain improvement, Native chicken industry, Region VI, Philippines INTRODUCTION The Philippine chicken industry significantly contributes to the country’s economic growth and food security. In terms of volume and value of production, the chicken industry is second to the hog industry in the animal husbandry sector. Approximately 40% of the total volume of combined livestock and poultry production is credited to the chicken industry. The total per capita consumption of chicken meat in 2008-2009 in urban areas was 9.32 kilograms while that in rural areas was 6.14 kilograms. It placed second to pork with total per capita consumption of 10.66 kilograms and 7.90 kilograms in urban and rural areas, respectively (BAS, 2011). The scale of operation of chicken production in the country is either commercial or backyard. Backyard raisers are those who have less than 100 birds while those with flocks more than 100 are categorized as commercial. On the other hand, chickens are commonly categorized as broiler, layer, or native. Layers and broilers are imported hybrids with foreign strains. Broilers are grown for the meat carcasses while layers, for egg production. Native chickens are of a local breed as well as the so-called “improved” breeds that are crosses of local chickens with foreign traits. They are used both for meat and egg production. While the broiler and layer production can be said to be tied up with large scale production and major food industry, the native chicken industry is linked through local markets to low-income networks of small enterprises (Heft Neal, S. et al., 2008). Native chicken production is a viable investment option for small and medium enterprises (PCARRD, 2007) and an important component of the Philippine economy especially in rural families (Abamo, et.al., 2010). Generally, the native chicken industry is characterized by backyard production which utilizes very little resources resulting in low productivity and high mortality rates (Chang, 2007). The main reason for raising native chickens is more for subsistence than for commercial purposes. According to Haitook and Zoebisch (2003), in the case of Thailand, local chickens present a typical “niche” market that is not attractive to large businesses given the fact that demand exceeds supply. This, however, provides an opportunity for small farmers to augment their income. As far as production is concerned, Conroy et al. (2005) noted that the productivity of the scavenging system tends to be low with high mortality rates and low hatchability rates. On the other hand, there is a wide scope of opportunities where the scavenging system could be improved with low-cost interventions in the sector. A full integration of the industry is needed to benefit more from the economies of scale and scope (Chang, 2007). While the commercial sector has received much attention in terms of production and marketing issues, the backyard sector has been marginalized in terms of research and development. There have been few studies which directly address specific issues in backyard production particularly with the native chicken. It is therefore imperative to investigate the native chicken industry, considering its significant impacts primarily on the food security of the country. Thus, to make the most of its potential in the agribusiness sector, the bottlenecks in producing native chicken and up-scaling their production and marketing would necessitate certain S&T interventions. This study will provide the bases in formulating the supply chain interventions needed in successfully creating an S&T – based enterprise. 1 Corresponding author, College of Management, UP Visayas, Iloilo City, e-mail address: [email protected] 1 The study is comprised of two levels. The first level is the assessment and analysis of the supply chain of native chicken in the province of Iloilo in general. In the second level the STBF for Darag Native Chicken is contextualized in the local industry supply chain. CONCEPTUAL FRAMEWORK2 The conceptual framework of the study is shown in Figure 1. The S&T- based enterprises are viewed as the interphase of two systems, namely, the R&D system and the enterprise system. The former is technology centric, being focused mainly on the generation and transfer/commercialization of technologies. The latter is market centric as the viability/ competitiveness of enterprises depends entirely on its ability to satisfy market demand/ requirements. The enterprise system consists largely of three subsystems which embody the functions, activities, and processes necessary to make products available to the consumers. The production sub- system defines the A to Z of producing a given product. Organization and management refer to the way the enterprise is organized and managed either individually or by groups or clusters. On the other hand, linkages include the upstream and downstream player considered to be crucial in the successful operation of the enterprise. This covers the input providers, providers of support services (e.g., technical, credit, etc.) and logistics, and, most importantly, the product market. The Pinoy S & T Services for Farmers and Entrepreneurs (PSF) is situated clearly in the framework as a modality of technology transfer and commercialization. The modality is a synergistic combination of TechnoMart, STBF, and OSIS designed to create S&T based enterprise or transform an existing enterprise to one where S&T becomes a fundamental driving force. Supply chain analysis is depicted as an integral component of PSF. The analysis enables the identification of gaps in the enterprise system which should become the basis for the packaging of the intervention under the PSF. The gaps and the corresponding interventions may cover not only technical but also behavioral, institutional, market, and economic aspects of the enterprise/industry, among others. S&T Based Enterprise R&D System Enterprise System S&T Technology Packaging and Production Organizational Linkages Commercialization System Management Techno Interventions STBF Mart OSIS Supply Chain Analysis (Gap Identification) PSF Figure 1. Conceptual framework of the study. Supply chain analysis aims to utilize and capitalize on strengths, improve weaknesses, explore opportunities, and mitigate threats in the supply chains. As an analytical gap identification tool, the 2 This section was drawn from the SCI for PSF Program Proposal prepared by PCAARRD. 2 analysis draws contributions from various disciplines and scrutinizes these areas to determine how the supply chain of the various products can be developed to achieve competitiveness. OBJECTIVES OF THE STUDY The study is designed to assess the supply chain of the native chicken in general, and Darag Native Chicken in particular as well as to identify areas for improvement. Specifically, the study aimed to 1. Provide an overview of the current state of the native chicken industry in the Province of Iloilo and of the STBF program for Darag native chicken; 2. Map out the supply chain of the native chicken industry in the Province of Iloilo including that of STBF for Darag native chicken that will show the a) key customers and their product requirements; b) key players and their roles; c) activities and processes involved; d) flow of product, payment, and information; e) logistic concerns; and f) external influences; 3. Analyze the performance of the supply chain of the native chicken industry in the Province of Iloilo including that of STBF for Darag native chicken in terms of efficiency, flexibility, and overall responsiveness; and 4. Provide recommendation for improvement in the supply chain towards efficient and effective production and marketing of native chicken, subsequently improving the plight of the actors in the supply chain particularly the chicken raisers. METHODOLOGY Study Site The research study was conducted in the Province of Iloilo, Western Visayas. Notably, the locale has the highest chicken production in Western Visayas from 2001 to 2011. The province is located in Panay Island and comprised of 43 municipalities, divided into five political districts. Method of Data Collection Both primary and secondary data were utilized in the study. Secondary data such as production data and other relevant information were gathered from the Bureau of Agricultural Statistics (BAS), National Statistics Office (NSO), and other agencies through Internet and library research. Field survey and key informants’ interview were conducted to generate primary data. Considering the inherent characteristic of raising the native chicken in the Province of Iloilo, the entry point of the value chain analysis was at the demand side (i.e., institutional buyers). Eight supply chains were traced, consisting of four restaurants serving native chickens as specialty, Chicken barbecue kiosk, wet markets, a supermart and household consumers. An attempt was made to include a hotel and a hospital in the chain; however this was later excluded since no hotel and hospital is serving native chicken due to its relatively expensive price. Initially, four restaurant owners/managers were interviewed. Subsequently, the “snowballing” technique was used to identify the downstream chain actors who are vertically linked with buyers of native chickens. A query with the buyers of the native
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