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S.Krieger, G. Schiefer, C. A. da Silva (2007) Costs and benefits in food quality systems: concepts and a multi-criteria evaluation approach

Paper, AGRICULTURAL MANAGEMENT, MARKETING AND FINANCE
FAO, Agricultural Management, Marketing and Finance Service (AGSF) Rural Infrastructure and Agro-Industries Division

Document:
Krieger_et_al.pdf

Abstract
The implementation of quality systems of various kinds has become a universal necessity in the agrifood sector. Indeed, in many countries the adoption of food quality and safety systems by enterprises is no longer a matter of choice, but a legal requirement. They all differ from traditional product-based food quality control, with their focus on processes, process organization, process control and process improvement. Today’s quality systems incorporate a variety of different quality viewpoints, usually integrating ISO 9000? and HACCP aspects.
A given mix of requirements characterizes a particular quality system. Apart from HACCP, quality systems are usually established and managed by non-governmental bodies and implemented by enterprises in the agrifood sector with the goal of achieving improvements in process management and quality production.
Quality systems are also implemented as enablers of market access. Indeed, in recent years, a major driver for the adoption of quality systems in enterprises has been the set of standards promoted by retail groups. Retailers, particularly those of the Western world, demand quality system implementation from their suppliers on a global scale, irrespective of country borders.
Enterprises wishing to become suppliers in the more demanding retail markets, either locally or globally, need to evaluate whether the costs of complying with the quality system requirements can be offset by the added benefits provided by the access to such markets.
Yet, measuring benefits and costs within the context of quality system adoption decisions is by no means a simple task. Both conceptual and operational difficulties make the calculations complex and invariably cumbersome. Often, the decision choice involves the option of complying with more than one particular system, a fact that ompounds the challenge of assessing costs and benefits in this context.
This working document has been developed as a reference source for professionals seeking guidance on conceptual and methodological frameworks for the consideration of costs and benefits in decision-making processes related to the adoption of quality systems.
It discusses fundamental concepts, reviews an extensive range of bibliographical sources and provides some indications about alternative approaches to assess costs and benefits of alternative choices regarding quality system adoption. It also discusses a multiple-criteria decision approach for the evaluation of benefits and costs.
Following this introduction, a discussion of cost-benefit issues concerning quality system implementation in the agrifood sector is presented. The subsequent section analyses legal requirements as a basis for ‘quality’ actions in enterprises and provides insights into the
structure of quality and safety systems. The existing literature on the impact of methodologies and approaches for cost-benefit-estimations for agrifood quality and safety improvements is then reviewed. The text proceeds with a section dealing with the discussion of costs and benefits which could arise in quality and safety improvement processes at the level of the enterprise, value chain, market and public sector. Further, a methodological concept for the estimation of cost and benefits of quality and safety standards is presented and a case study illustrating the estimation of costs and benefits under the proposed approach is provided.
Finally, the document concludes with recommendations for public policy to improve the actual and the future situation of quality and food safety

Keywords: Food quality systems, costs and benefits,

Relevance to our study:
That is an important study that helps enterprises to decide if it’s worth to apply a food quality system and which one. It proposes a methodological approach to guide decisions on the choices of quality systems, that can be applied also to the organic certification system. Based on a multiple criteria decision-making analysis framework, the approach draws from cost and benefit considerations to derive a ranking of decision alternatives.
At the end, there are also some important recommendations based mainly on the harmonization and integration of the different standards and corresponding certification systems.
Retailers in particular are increasingly requiring the adoption of quality systems by their suppliers, as evidenced by the recent proliferation of so-called private standards that apply to many agrifood products (BRC, IFS, Eurep GAP?). In principle, the adoption of such systems implies in costs for supplier enterprises and could be viewed as a trade barrier to enterprises or to entire countries that are not prepared or able to comply. The decision to comply depends thus on a consideration of these added costs vis-à-vis the potential benefits.
Yet, the consideration of cost and benefits is by no means a simple matter. Enterprises are increasingly faced with the necessity to consider multiple alternatives represented by the quality demands of different markets, different buyers within a given market and different
legal environments. To remain in business, enterprises might have to either comply with many different quality systems or to restrict themselves to one or few market alternatives. Enterprises in developing countries are particularly affected by these developments in quality systems. The increasingly stricter requirements of quality systems established by enterprises from the end of the chain, especially from retail groups from the northern hemisphere, force them to adapt to quality demands determined by one or several quality systems.
In closing, it should be mentioned that beyond cost and benefit considerations, some additional recommendations for sector initiatives to achieve improved agrifood quality and safety might be taken into account, including:
• Improvement in the cooperation between public and private initiatives in quality management and food safety control that could offset deficiencies and costs of control.
• Integration and coordination of private and public control systems through standardized checklists for quality and safety control.
• Intensification of capacity building activities.
• Promotion of an ‘optimal’ combination of systems that minimize efforts for reaching compliance with the most pressing requirements and reach a level of benefits that could realistically be expected within a predefined period.
• Specification of a clear system on sanctions and rewards linked to the fulfilment of quality and safety requirements.
• Improved communication between consumers, industry and policy makers on agrifood quality and safety initiatives

Relevancy on a scale from 1 to 5 = 4

Review status: Finished
Review started on 2009–01–21
Reviewed by Samanta Rosi Bellière?

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