The Ideal Middleman business
Some may be wondering what the middleman has to do with the export industry.
Some may classify them as an intermediary who offers no real value to the supply chain.
Some classify them as an integral part of their business as they take on the marketing role, facilitate trade and logistics, acts as a match maker but in the process builds a margin in terms of a profit.
Understanding the middleman business is the best way to ensure one knows where their products end up and at what cost at the point of sale. Most deal with a middle man because it is cost effective for them in terms of transportation to the markets or distribution costs are not footed by them.
As stated in last week article, the transactions between farmers and middleman up to the point of sale at the markets on a daily or weekly basis are a major economic activity in the rural sector. The downside for most farmers is that they do not know what becomes of their produce after they offload to the middleman.
Impact of the ideal middleman
But the ideal middleman has an important function in the economy in helping bridge the gap in the market network.
His existence helps to provide more resources or "to economise" on costs of bridging the supplier-customer gap, for instance lowering transaction costs.
This way, the farmer is left to concentrate on the quality of his yield, labour and harvesting with the transportation, distribution and marketing aspects now out of his hands.
Ideally, when highlighting the roles of a middleman, it can be divided into three categories.
These roles include middleman as a trader, as a distributor and as a provider. As a trader, the middleman has many assorted products for customers to choose from. These all come from various sources. Many of these types exist in areas like Nausori Market, where middlemen source their produce from farmers in the three provinces from Rewa, Tailevu and Naitasiri.
As a distributor is a slight shift from trader, where the middleman gets from one source then markets to various consumers. In this manner the middleman depends solely on his supplier to supply him with a certain produce. The middleman as a distributor has been seen as his main role for a long time.
As a provider, the logic of the middleman's function here is derived from customer/user perspective.(Bucklin, 1965). In this view the middleman is part of the user's supply network, rather than a manufacturer's or suppliers channel. Here the middlemen are in good position to exploit the closeness to users. If the ideal middlemen were to forego their focus on the margins and focus more on quality, the repercussions will be greatly felt in the supply chain.
* This will force farmers to improve on quality produce if they continue to demand it.
* This way they are helping to prepare the farmer to set the standard required at export level which is the next process.
* If prices were reasonable this will drive consumers to purchase more fresh produce, thus forcing vendors to improve packaging, farmers will also be planting more due to the increase in demand thus resolving the issue faced by exporters which is the inconsistency in supply.
* Improve supply chain distribution, due to economy of scale deliveries will be much faster and more produce will be bought to consolidate runs for pick up and delivery.
* Since the Ministry of Agriculture is trying to help farmers with best methods to produce quality all this will be rewarded if middlemen play a more positive role by doing the above mentioned activities, this will in turn strengthen full commercial farming utilising the credit facilities available and reduce imports.
Sam Foy, the head of the Fresh Produce of Fiji Association says it is time that legislations are put in place to define the operations of all middlemen.
"Just imagine if everybody played their role, I think our export processes would be much better if things get off the ground from point A the ideal way."
In conclusion, it must be stated that the middleman is one of the main actors in the market, though at times their functions may be vague or overlap depending on the market they serve.
This may depend a lot on the best business opportunity they can identify. Try for a moment to be present when a middleman offloads his produce at the markets around 4am every morning.
What will of course stand out is their negotiating and marketing skill with buyers.
This is a trade which those who go into business must understand whether they want to supply locally or export.
* This is a weekly contribution from the Fiji Export Council.