Kromco Value Chain Case Study
The fruit value chain starts on the farm, with the planting, cultivation and harvesting of fruit. The fruit then gets delivered to Kromco who will be responsible for the storage, packing, marketing of the fruit, from where it will be shipped to clients’ distribution centres globally and distributed to the point of purchase. Kromco will handle all documentation in the value chain and producers will be paid as payments for fruit are received from the customers. Producers measure returns back to them in terms of Rand per ton delivered to Kromco. These payments gets compared with payments in the rest of the industry, and the threat exists that producers can move their volumes to more lucrative packhouses if their payments are perceived as substandard. …show more content…
Looking at the primary activities in the value chain, it can be seen that the the biggest costs are allocated in the bin cold storage and handling, packing and carton cold storage and handling. Although Kromco has an alliance with their suppliers of the fruit, and do give technical assistance to the growers, Kromco is not directly involved on the farms, nor has a direct impact on the fruit delivered by the producers.
Primary Activities:
Purchasing and raw material:
Kromco has an on site pallet manufacturing department, providing 100% of their pallet demand. Together with this, Kromco has a 20% share in APL, providing 90% of their corrugated carton packing material at very competitive prices. All savings on pallets and packing materials are given through to the nett payments back to the producer. Currently these two components makes out the majority of the cost of the bill of material for fruit packaging. Because of the company’s volumes, economies of scale comes into play with the purchasing of raw material. Opportunities exist for Kromco to buy packing material in bulk volume in the low demand period at reduced cost, and act as a depot for smaller packhouses in the area, thereby even further reducing the cost of packing material by subsidising from
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