Food Supply Chains in Lagging Rural Regions of Finland : an SME Perspective

An essential component of the food production sector in lagging regions consists of small-scale enterprises located in rural areas. A high proportion utilise traditional production methods, emphasising local identity and distinctiveness, thereby differentiating products and servicing niche or segmented markets. Such enterprises frequently integrate with other sectors of the local economy, such as raw material suppliers, distributors, tourism and catering, thereby enhancing local activity. Thus, the assessment and development of food supply chains from rural small and medium sized enterprises (SMEs) is crucial, not only from the perspective of SME performance, but also for the economic health of the region. The development of marketing and distribution systems for products from SMEs is one of the most essential activities for business operations. A critical problem for many rural SMEs is market access. Distance from major centres of population, low output volume and the dispersed nature of enterprises add to the dilemma. Recent changes in the retail sector have accentuated the problems and may ultimately threaten the competitiveness and viability of many rural food SMEs in particular, and the regions in general. There is greater emphasis on supply chain management which involves the integration of business processes, from end-user through to the original product producer and their suppliers. Retail chains have increasingly recognised that integrated and highly managed supply chains can be a major source of competitive advantage. Competition between individual businesses within and between stages in the supply chain is being replaced by competition between chains. This now means dedicated suppliers and exclusive contracts ensure that the benefits of investing in machinery, people, systems and programmes designed to maximise consumer satisfaction are retained and distributed appropriately between chain members. Such developments tend to militate against the involvement of small enterprises with major retailers, thereby limiting access to major markets and having implications for rural development. The objective of this report is to review and evaluate factors influencing supply chain development and performance in Finland, their likely evolution and impact on small-scale food enterprises and rural development in terms of benefits and problems. The report starts by introducing the theoretical framework and methodology of the study and then the food supply chain environment in Finland. After that different stages of food chain are presented based on empirical findings. The empirical data of the study was collected by face-to-face interviews. Different stages of food chains include: SME processors, intermediate chain members, commercial customers and institutions. The report is concluded by a presentation of different supply chain strategies of rural food SMEs. Various case examples are given to better illustrate the great variety of strategies