“A Supply Chain Analysis of Canned Pineapple Juice in Philippine

Fruits International Corporation”

1 INTRODUCTION
1.1 Background of the Study
The fruits industry in the Philippines is part of the high-value
crops sector. The Philippines is among the leading exporters of
pineapple in the world and is acclaimed to be the second largest
exporter next to Thailand. Pineapple is also one of the main agricultural
exports of the Philippines and one of the most demanded and
consumed fruits in the world. Because of this, Philippines’ export
industry has increased and has a great influence on business activities,
especially in the era of trade liberalization. Supply Chain (SC) has
become a key business process model for organizations to be able to
compete favorably in the market place, both locally and internationally
(Otchere et al., 2003; Ou et al., 2010; Baharanchi, 2009).

According to Philippine Statistics Authority, in 2018,

the production value of pineapples in the country was about 27.2 billion
Philippine pesos. In the quarter of 2019 there’s an increase of 702.25
thousand tons in the production value of pineapples and during the
quarter of 2020, production of pineapple then increased to 712.26
thousand metric tons or by 1.4 percent from that of 2019. Northern
Mindanao, which contributed 50.5 percent to the total production this
quarter, was the top pineapple producer with 359.72 thousand metric
tons. This was followed by SOCCSKSARGEN with 184.41
thousand metric tons or 25.9 percent share. This statistical data shows
how important Supply Chain is, its role includes the coordination in the
supply network, alignment with customer satisfaction and sustainability
of the overall competency throughout the supply chain (Faisal and
Banwat, 2006; Chopra and Sodhi, 2004).

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1.2 Issues and Problems
Although PFIC has been producing and manufacturing canned
pineapple juice which is exported to USA and Canada for 20 years, yet
there are still problems and constraints arising in the production of this
product. These include technical, technological, cultural, financial,
input, production issues.

1.3 Significance of the Study

This research aims to identify some of the major issue

concerning the PFIC’s canned pineapple juice supply chain and
establish solutions for these issues to either resolve or mitigate them.
The SC mapping that will be developed from this study could serve as
a management tool that could be applied in the production of fresh
canned pineapple juice.

The findings of this research analysis will be beneficial to the

PFIC management for improving their productivity and efficiency. This
may also enable them to further validate, assess and evaluate the
supply chain of the canned pineapple juice.

1.4 Scope and Limitation

This research analysis will mainly focus on the supply chain

management of canned pineapple juice manufactured by Philippine
Fruits International, Corporation which is exported to USA and Canada.
This research is also set out to evaluate PFIC canned pineapple juice
production processes and activities and to graphically map the various
stages of the value stream involved.

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2 LITERATURE REVIEW

2.1 Supply Chain Management (SCM)

Supply Chain Management (SCM) has had impacted a lot of

companies in terms of productivity and customer satisfaction. It is in this
sense that the growing demand for understanding the SCM of a company is
prominent not just in literature but as well as the industrial practice (Stadtler,
2004). Aside from that, it has become an integral part of any company for
competitive advantage locally or globally and as a whole, studying the SCM of
a certain company makes an impact in the overall success. According the
Beamon (1998), the process and movement in a supply chain is simplified as
illustrated in figure 1.

Traditionally, this chain has been characterized with forward flow of

movement of products/ services and a backward flow of information. Flow of
information can either be one of the two levels as identified by Cachon and
Fisher (2000) which are traditional information where the supplier only
observes the retailer’s orders while in full information sharing, the supplier has
immediate access to the retailer’s inventory data. It is assumed that the full
information sharing can be used, not just from the company to the retailer but
also from the upstream perspective where the raw material suppliers will have
access on the inventory data of the company. Information sharing like
inventory data was found to have the ability to reduce costs up to 2.2% on
average and reduce lead time by nearly half which can lead to better
customer service (Cachon and Fisher, 2000). Advanced modelling

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approaches is also now being widely adopted and developed to improve the
efficiency of a supply chain.

2.2 Agro industrial Supply Chain

Agro-based supply chains are rapidly becoming the dominant means of

organizing production, markets and trade for food products and product
groups (Maertens and Swinnen, 2015). Food processing industries as part of
the agro-industrial sector converts raw materials into value added products or
transforms food to improve storability, facilitate transportation, and enhance
the overall quality, palatability and/or nutritional value (FAO, 2010). In fruit
processing industries, it is very important to know that good management of
upstream sourcing can help in the overall success of the company. One of the
benefits of good upstream sourcing is the continuity of production where it
was found to have very strong relationship with the total performance of the
company. Raw material handling, storage, scheduling, inventory, capacity and
organization were also identified as strong indicators of total performance
(Suryaningrat, 2016).

2.3 Pineapple Supply Chain in Mindanao

Pineapple is among the major commodities exported by the Philippines

and Mindanao has been the highest contributor for the distribution of
pineapple production. The large amount of percentages as depicted on Table
1 could also indicate higher employment rate. In fact, nearly 40 percent of the
total employment in the Philippines was recorded for the agro- industry in
2015. However, a steady decrease on labor demand was observed on the
agriculture sector with sharper decrease for men than women (Henry &
Chato, 2019). Philippines along with Indonesia and Thailand make up about
80% of canned pineapple supply for world market and Philippines’ fresh
pineapple exports are mostly from Mindanao (Balito, 2011). Northern
Mindanao and SOCCSKSARGEN were two of the major producing regions
and a steady increase in production for Northern Mindanao was observed
from 2014 up to 2017 (See Table 1). Although it has been observed that

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Mindanao has steady supply of pineapple, challenges and constraints can still
be observed.

Table 1. Distribution of pineapple production by region, 2014-2019 (per cent)

REGION 2014 2015 2016 2017 2018 2019

PHILIPPINES
2,507.1 2,582.7 2,612.5 2,671.7 2,731.0 2,747.9
(‘000 mt)
Luzon (%)
9.80 9.97 10.28 9.86 10.53 10.5
Visayas (%) 1.22 1.17 0.82 1.12 1.16 1.2
Mindanao (%)
88.98 88.86 88.61 89.02 88.31 88.3
Zamboanga
0.08 0.06 0.05 0.05 0.04 <0.005
Peninsula
Northern
55.55 56.85 58.06 58.19 57.57 57.6
Mindanao
Davao Region 1.12 1.04 1.01 0.97 0.98 1.0
SOCCSKSARGEN 32.08 30.76 29.35 29.65 29.59 29.5
Caraga 0.11 0.10 0.11 0.12 0.11 0.1
ARMM 0.04 0.04 0.03 0.03 0.03 <0.005
Source: Philippine Statistics Authority (PSA): Selected Statistics on Agriculture (SSA) 2014-
2019 (ISSN-2012-0362).

2.4 Raw Material Sourcing Management

Raw material is one of the most important part of an agro-industrial

system and most of the time, it accounts for more than half of the cost of the
final product. In some industries, approximately 60% is allotted for the
procurement of raw material only (Suryaningrat, 2016). Pineapple normally
yields between 49.1% and 56.0% of pineapple juice, however, there are
reported lower yields of about 33.0% that may be influenced by variety, fruit
ripeness and fruit growth. Aside from these, there are also factors from the
processing side that affects the juice yield such as cell disruption, pressure
rate and duration of extraction (Carvalho et al., 2016). Pineapple fruit is a non-
climacteric fruit which means that it should be harvested as fully mature to
develop its organoleptic properties (Grandison, 2006; Hernandez et al., 2007)
and to achieve its maximum quality, pineapple fruit should be processed

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immediately after harvest. Fully ripen pineapple fruits are very perishable and
very susceptible to damage during transportation and process. With this, it is
very important that raw material inventory should be managed well.

It was mentioned in the study of Pujawan (2010) that there are three
facets in a supply chain mechanism that should be well managed. These
three aspects are material flow from upstream to downstream, financial flow
from downstream to upstream, and information stream from both upstream
and downstream. The information flow of raw material procurement activities
for both upstream and downstream can produce strong relationship that will
benefit both of the parties. The transparent flow of information such as
accurate data price, quality and availability can help reduce costs and lead
time for processing industries (Suryaningrat, 2016).

2.5 Planning and Inventory of Raw Materials

In today’s digital era, there are already a lot of different methods being
adopted on how to manage the raw material supply chain and yet one of the
problems/ weaknesses of some of the enterprises is still not adopting to this
new phase of information technology in response to the needs of the actors in
a supply chain. These technological advances are found to be cost effective
and helps address the markets’ demand more quickly (Tiwali et al., 2013).
One type of system that has been long used in a supply chain is the Vendor
Managed Inventory (VMI) which suggests that the supplier or the vendor
manages the inventories and gives responsibility of management on the
supplier (Joseph et al, 2010). There were studies that have assessed the
efficiency of VMI system to different enterprise but mostly focused on non-
deteriorating raw materials. However, there were only few studies related to
the use of VMI system as an integration to planning and inventory
management of perishable raw materials.

In this study, VMI system will be suggested as part of the planning and
inventory management of the raw materials used for pineapple products
processes in the chosen enterprise as subject. Collected data will be used to

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develop an integrated model for the VMI system of the pineapple production
in agro-industrial supply chain.

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