Transaction Cost and Supply Chain Management:

The Case of Export Mango and Small-hold Banana Marketing in the Philippines
A.P. Aquino, E.O. Brown and R.B. Daite
PCARRD-DOST, The Philippines

International Workshop on Opportunities and Challenges in the World Markets for Fruits and Tropical Products Guangzhou, China, 29-30 November 2007

Introduction
A myriad of issues confronts the agricultural marketing in the Philippines Low value addition, improper product handling, inadequate post-harvest facilities, poor infrastructure, and inefficient marketing information flow are some of these issues. Logistics-related remedies are the usual prescription but they fall short in improving the efficiency of the supply chain.

Introduction
There is a need to frame these issues and solutions in light of emerging developments in new institutional economics (NIE) and microeconomics of agricultural marketing. That frame is the Supply Chain Management (SCM) approach.

This paper
Focuses on the relationship between Transactions Cost Economics and Supply Chain Management. Highlights the human and institutional dimension of the present logistics focusedsupply chain discourse and empirical works. Case studies: Philippine export mango and small-hold banana marketing

Sections
SECTION I: The Philippine Tropical Fruit Industry: An Overview SECTION II: Supply Chain Management and Transaction Cost Economics: The Concept SECTION III: Supply Chain Management Issues Related to Philippine Fruits: The Case of Export Mango and Small-hold Banana SECTION IV: Coordinated Supply Chain: An Option to Minimize Transaction Cost Conclusion

The Philippine Tropical Fruit Industry

Tropical fruits contribute largely to the Philippine economy:
Banana, pineapple, and mango are among the top crops in terms of area, quantity, and value of production Also among the countrys top agricultural exports in terms of volume and value

The country also figures well in the international trade of major tropical fruits; esp. in world trade in banana, pineapple, and mango

The Philippine Tropical Fruit Industry

Table 1. Agricultural crop areas, 2003-2005.

ITEM
in 000 ha

2003
% of TOTAL in 000 ha

2004
% of TOTAL

2005
in 000 ha % of

TOTAL CROPS PALAY CORN COCONUT BANANA PINEAPPLE MANGO OTHERS

11,930.0 4,006.4 2,409.8 3,216.5 408.0 47.7 155.9 1, 685.7

100 33.6 20.2 27.0 3.4 0.4 1.3 14.1

12,231.0 4,126.6 2,527.1 3,258.6 414.5 48.2 158.9 1,697.1

100 33.7 20.7 26.6 3.4 0.4 1.3 14.6

12,034.2 4,074.4 2,441.8 3,243.3 417.8 49.2 164.1 1,643.6

100 33.8 20.3 27.0 3.5 0.4 1.4 13.6

The Philippine Tropical Fruit Industry

Table 2. Agricultural Production by type of crop, Philippines 2003-2005
(quantity in thousand metric tons; value in million pesos at current prices)

CROP
TOTAL PALAY CORN COCONUT BANANA PINEAPPLE MANGO OTHERS

2003
QUANTITY VALUE

2004
QUANTITY VALUE

2005
QUANTITY VALUE

71,311.9 13,499.9 4,615.6

330,702.3 117,989.0 32,540.2

75,150.7 14,496.8 5,413.4 14,366.2 5,631.2 1,759.8 967.5 32,515.8

383,803.1 73,725.9 409,506.8 136,994.6 14,603.0 155,668.1 47,204.8 51,718.2 35,476.9 8,869.4 16,137.6 87,401.6 5,253.2 40,291.7

14,294.2 39,023.2 5,369.0 1,698.0 1,006.2 30,829.0 30,066.2 10,510.3 14,660.0 85,913.4

14,824.6 52,775.5 6,298.2 43,520.8 1,788.2 984.3 9,334.5 16,647.7

29,974.4 91,268.5

The Philippine Tropical Fruit Industry

Table 3.a Volume of top agricultural exports, Philippines, 2003-2005

ITEM
VOLUME OF TOP EXPORTS (000 MT) Coconut Oil (Crude and Refined) Banana, fresh Pineapple & Products Desiccated Coconut Mango, fresh

2003

2004

2005

1,186.36 1,829.38 500.53 106.80 35.78

959.40 1,797.34 527.56 105.83 33.66

1,152.32 2,024.32 536.72 125.54 31.27

SOURCE: Bureau of Agricultural Statistics, Philippines

The Philippine Tropical Fruit Industry

Table 3.b Value of top agricultural exports, Philippines, 2003-2005

ITEM
VOLUME OF TOTAL AGRICULTURAL EXPORTS (FOB in Million $) VALUE OF TOP EXPORTS (FOB in Million $)

2003

2004

2005

2,311.02

2,506.70

2,691.19

Coconut Oil Banana, fresh Pineapple & Products Desiccated Coconut Mango, fresh

504.86 333.00 169.18 95.74 31.01

577.79 326.40 176.65 99.74 28.74

657.22 362.58 204.28 127.14 26.63

SOURCE: Bureau of Agricultural Statistics, Philippines

The Philippine Tropical Fruit Industry

Table 4. Percent share of selected Philippine exports in world market, 2004

COMMODITY
VOLUME OF TOTAL EXPORTS (000 MT)

TRADE World Philippines

Philippine Share

Coconut Oil Banana, fresh Pineapple & Pineapple Products Mango, fresh

2,032.53 16,262.61

959.40 1,797.34

47.20 11.05

3,532.25 908.44

527.56 33.66

14.94 3.71

SOURCE: Bureau of Agricultural Statistics, Philippines