The Research on Building Supply Chain in Soybean Industry

Transcription

1 The Research on Building Supply Chain in Soybean Industry SUN Hongling, GAO Zhan School of Economy & Trade, Henan University of Technology, Zhengzhou of P.R.China, Abstract: Due to China s highly liberalized soybean trade, import soybean has great impact on the development of China s soybean industry. The author proposes that the building of the supply chain of soybean industry is an important way in improving the competitive capability of China s soybean industry through analysis of the status quo of the development of China s soybean industry. The definition of soybean supply chain is presented, and the structure, node functions of the supply chain, as well as the construction of relevant support systems are analyzed. At the end the game theory is applied in the analysis of the stability condition of core node enterprises. The paper puts forward a new viewpoint for the research of the development of China s soybean industry. Key words: soybean industry, supply chain, game theory, alliance, node Introduction Soybean is a bulky agricultural product whose trade liberalization was implemented earliest in China. With the open market, there is a remarkable change in Chinese soybean industry. China turned from a net export country for soybean to a net import country in 996. The large amount of import soybean has caused tremendous impact on China s domestic soybean industry. In China many scholars take interest in this issue. They put forward many industrial policies to improve the competitiveness of China s soybean industry, which focus on increasing soybean research investment, setting up development fund, establishing the soybean industry association, developing non-gm soybean in preference, applying the rule of WTO, etc ( Wang Jimin,2000; Ma Dengpin,200; Xia Youfu,2003; Cheng Guoqiang,2005; Ding Shengjun,2006; etc) The study of the development of China's soybean industry using supply chain method is seldom found in literature. 2 The Changes of Soybean Industry under Trade Liberalization China has a history over 5000 years in soybean cultivation, soybean industry is one of the most important industries in China. The development of soybean industry has effect on macro-economics and society stabilization closely. Under trade liberalization, soybean industry has undergone some new changes, details are as follows. () The amount of import soybean rises increasingly The amount of import soybean has increased markedly from 995 to China has become the biggest import country of soybean in world. The amount of import was million tons in 2006, with an increase of million tons over the year of 995(as shown in table ). Table The amount of import and export of soybean in China from 995 to 2006 Year Import Export Data from China Customs (unit: million tons) On the other hand, the amount of import soybean has exceeded the amount of domestic production. The crush processing industry depends on import soybean largely. The amount of import soybean was.75 times that of domestic production, and the number of import soybean accounts for 77.03% of the whole capacity of crush in 2006 (as shown in table 2). (2) Foreign investment entering soybean industry largely In the face of huge market potential, large amount of foreign capitals has flowed into the soybean processing industry. By the end of April 2006, the number of foreign invested enterprises accounts for Funded by: National Soft Science Project (2005DGS3B023),(2006GXS2B060) 974

2 66% of the whole soybean processing enterprises in China, and the capacity of crush is 5 million tons per year, accounting for 73% of the domestic crush capacity. Table 2 Import Percentage, crush and domestic production of soybean in China Domestic Year Import (A) Crush (B) A/B A/C Production (C) % % % % % % % % % % % % % % Data from China Customs and USDA (unit: million tons) (3) Domestic soybean losing competitiveness Compared with import soybean, domestic soybean has some disadvantages, such as high cost of logistics, output of per unit area is low, and quality is not steady. By reason of the above, many farmers cultivate other grain rather than soybeans in Northeast China. For example, the income of farmers in cultivating corn is twice as much as farmers cultivating soybean in 2006, which causes the cultivating area of soybean to be reduced nearly 6 million unit area in Heilongjiang province. Domestic soybean lost competitiveness under the impact of import soybean. Under trade liberalization, implementing the method and theory of supply chain is a good way to enhance the competitiveness of China s soybean industry. In order to reduce the effect of import soybean and improve competitiveness, it is wise to choose supply chain management which can ensure soybean can be imported at right quantity, right time, right price and right quality. 3 The supply chain of soybean industry of China 3. The concept and structure of supply chain of soybean industry of China The supply chain of soybean industry is a network of organizations that are involved, thought upstream and downstream linkages, in the different processes and activities that produce value in form of products and services in the hands of ultimate consumer. The organizations include farmer, country s, terminal s, logistics center, alliance of soybean processing enterprise, retail enterprise and ultimate consumer in the supply chain (as shown in figure ). The alliance of soybean processing enterprise is the core node in the whole supply chain, and it plays an vital role in materials flow, fund flow and information flow. farmers country country terminal logistics center alliance of soybean processing enterprise manufacture enterprise retail enterprise ultimate customer Figure The structure of supply chain of soybean industry of China 975

3 3.2 The main function of each node () Farmers: cultivate and store soybean seasonal etc. (2) Country s: store soybean from farmers, inspect quality and transport soybean at right time and quantity, etc. (3) Terminal s: handle and storage soybean, export inspection, lade and discharging soybean etc. (4) Logistics center: responding orders from alliance of soybean processing enterprise, receive, store, pick and transport soybean. Import inspection and data collection. (5) Alliance of soybean processing enterprise: is the core node of the whole supply chain, plays an important role in the processes of procurement, storage, transportation, production and distribution, by controlling the materials flow, fund flow and information flow. (6) Manufacture enterprises: using soybean material, produce the value-add soybean production, such as soybean isoflavone. (7) Retail enterprises: sell the production of soybean, such as edible oil, bean curd, soy milk and soybean biologic products, etc. (8) Ultimate customer: purchase the production of soybean and feedback the information. 3.3 The supporting system of supply chain () Economic policy support To ensure the well operation of the soybean supply chain, the government must establish a series of relevant policies, for example, encouraging the diversity of investment entities, providing relevant support policy and favorable policy on credit loan for enterprises on the supply chain nodes, improving the collection and issuance of the information on the soybean industry and international soybean trade, enforce the cooperation of Chinese enterprises and foreign enterprises. (2) Transaction of soybean Futures One important reason for the high-buy-and-low-sale phenomenon of Chinese soybean transaction is that China does not have the power to control the market of the international soybean futures. The solution is that an increase the sort of domestic soybean futures, and encouraging the enterprises to make transactions using the tool of soybean futures to avoid the risk of international trade. (3) Information Technology The construction of information systems is the key part for the quick response and seamless link of international procurement soybean supply chain. Using the Internet, GPS, GIS, barcode, etc, the fast exchange of information within procurement, storage, transportation, production and distribution can be implemented. 4 Analysis on the stability of the core node of supply chain The alliance of soybean processing enterprise is the core node of supply chain of China s soybean industry. Compared with one enterprise, the alliance has many advantages, such as decreasing the transaction cost, improving the competitiveness and sharing resource together. While on the other hand there is a problem about stability in the alliance. Whether the alliance is steady and in what conditions the alliance is steady, are key issues in the whole supply chain. The paper applies the game theory to analyze the condition of stability of the corn node of supply chain. 4. Not repeated game Not repeated game is that the game is made only once. It can illustrate the stability of alliance under the finite assignment and short period cooperation. The alliance can be divided into enterprises cluster A and enterprises cluster B (short for A and B). There are 4 strategies during the process of game, as shown in table 3,according to practical condition H > C > D > L). 976

4 Strategies B Table 3 The benefit matrix about not repeated game A (C,C) (H,L) (L,H) (D,D) From the table 3, both A and B will choose strategy in spite of the other side s strategies, that is to say, strategy is their better strategy. The only Nash equilibrium is (, ), the benefit is(d,d)which is the lowest benefit in the game. According to the above process, we can conclude that the alliance is not steady in not repeated game, because each enterprise chooses itself the max benefit (H), resulting in the worst benefit of alliance. 4.2 Repeated game Repeated game needs a long period, and it can illustrate the stability of alliance under the infinite assignment and long-term cooperation. During the repeated game, enterprises will treat each other an eye for an eye, if some enterprise chooses non-cooperation at some time, than other enterprises will return like for like in the latter game. There are 4 strategies during the process of game, as shown in table 4). Table 4 The benefit matrix about repeated game Strategies B A (C,C) (H,L) (L,H) (D,D) During the repeated game, we assume that A and B will choose cooperation in the first stage, in the latter t stage, if the result is (, ) in the former t- stage, and then the game will continue; if A or B chooses strategy, than the other side will choose strategy for ever in the later game. From the table 4, the benefit of (, ) strategy during the repeated game is as follows: ' 2 C Ei = ωc= ( + ω+ ω +...) C= t= 0 ω is the all benefit of i enterprise in the repeated game with the strategies, ω is E i discount. If A or B chooses strategy, then the other side will retaliate at the latter game, and the benefit of the action during the repeated game is as follows: F i t t t+ i = + ω ω + ω + ω +... = F C C C H D t t+ t ω C + ω H + D is the total benefit of the i-th enterprise in the repeated game with the strategies. t t+ If Ei > Fi, that is C t ω > C+ ω H + D (),then the alliance is long-term stability. From the inequation (), ω > H C (2)(H>C>D>L)can be concluded. If H D 977

5 the term(ω > H C ) can be achieved, the alliance can be steady in long time. When C + and H D D 0, the probability of (2) holding is big. According to the above process, we can conclude that the alliance is steady in repeated game under the condition (2). It illustrates that in the long cooperation, using the supporting measure the stability can be maintained in the alliance, for example, increasing the cost of breach of contract, decreasing the income of non-cooperation and adding the benefit of cooperation. 5 Conclusion The main conclusions for the paper are as follows: () Under trade liberalization, soybean industry of China has undergone some new changes: the amount of import soybean increasing steadily, foreign investment entering soybean industry enormously and domestic soybean losing competitiveness. (2) Implementing the method and theory of supply chain is a good way to enhance the competitiveness of soybean industry of China. The alliance of soybean processing enterprises is the core node of the whole supply chain (3) In long cooperation, the core node is kept in stability, using some relevant supporting measure. References []Ket N. Goridin. Global Logistics Management. Blackwell,200: 8~47. [2]Gao Hongye. Economics. Beijing: People University Press,2000: 27~278(in Chinese) [3]Ronald Ballou. Business Logistics and Supply Management.Prentice Hall,2003: 36~47. [4]Zheng zhaohai,chu qingquan. The Present Situation, Problems and Countermeasures of Soybean Production in China.Review of China Agricultural Science and Technology,7(2005),43~46(in Chinese). [5]Ding shengjun. Imperative need of vitalizing soybean industry of China.China Oils and Fats,0(2006),7~3(in Chinese) [6]Gao zhan,sun hongling. Analysis of Resource Integration in TPL Based on Game Theory.Storage,Transportation and Preservation of Commodities,3(2006),3~5(in Chinese). Authors Brief SUN Hongling Professor, Dean, School of Economy & Trade, Henan University of Technology, China. Gao Zhan graduate student, School of Economy & Trade, Henan University of Technology, China. 978