Death of a salesman I
Updated: Feb 28, 2019
The fishing community of Thorupstrand. What can one possibly learn about supply chain management from a bunch of fishermen? Well, as it turns out – quite a lot. Like how to cut out the middle man.
"Thorupstrand Kystfiskerlaug" is something rare: A small collaborative of fishermen sharing a quota – fishing rights – in the North Sea. Using relatively small coastal boats which are being dragged up on the beach, the boats cannot carry the same amount of cargo as a modern trawler (as the hull would break when dragged up onto the beach).
Moreover, relying on traditional fishing methods, they do no harm to the seabed and using bigger net sizes they fish for bigger, mature fish only.
Buying fish from Thorupstrand is not just about fish: It's about hundreds of years of boatbuilding expertise (using the same techniques as Viking ships) and seamanship; it's about sustainability; it's about keeping a "periphery" community alive and thriving. So, what's the problem?
Well, before they decided to do something about it, the fishermen of Thorupstrand had 2 main problems:
Getting 20 DKK (a little under 3 Euro) per kilo at the auction – knowing the price paid by consumers is roughly 120 DKK (16 Euros) a kilo. The supply chain – cutting, fileting, transport and retail – eats up the difference. With only a small quota, making the most of it is key.
Quotas are like property: They are tied to specific boats and can be sold if a boat – for whatever reason – is taken out of the fleet.
Earning very little money as they fish smaller quantities, the Thorupstrand collective need to make the best of the quota they got. But earning little money within the existing system, they didn't even have the money to buy up a quota if one of the fleet boats was taken out.
Also, with smaller coastal boats going out of service, quotas were being monopolized by large-scale trawler companies.
Negative spiral. So, what to do? Well – the answer is "simple" even if the operation is not. And the whole thing is based on a known strategy: Take out the middle-man!
CONTROL EVERY STEP OF THE SUPPLY-CHAIN
In the old system, the Thorupstrand fishing collective would sell their fish on the local auction. Someone else would then process, transport and sell the fish to the consumer. So, from the "producer" there was at least 3 steps before the fish would end up at the end consumer. Thorupstrand’s fishermen have changed this.
Using the collective power of the tight community and storytelling, Thorupstrand has expertly secured funding and resources to build up a full-scale supply chain of their own.
Funding from (among others) world-renowned Danish shipping company Maersk, has enabled the building of a small facility for handling, cutting and preparing the fish. Deals are made with small scale transporters and Thorupstrand has even set up a shop in central Copenhagen using a re-modelled fishing boat (also funded by Maersk). The fish sold is landed the day before – adding new meaning to "fresh" in "fresh fish".
Also, tapping into a story about community, sustainability and high quality – and having established a great network at the very top of the "new Scandinavian cuisine" line of Michelin-star chefs – the Thorupstrand fishing collective has been able to communicate the story and market their product effectively. Finally, striking a deal with COOP – a main Danish retailer – they now also market their produce on a large scale. Implications:
All middle men are cut out of the supply line – full control is achieved
The fishing collective now earns the full amount paid by customers
All the money made by the collective/community stays in the community
The extra money made is used to keep exiting quotas and secure additional quotas
More sustainable fishing methods are promoted and expanded
Shipbuilding expertise in the area is maintained and re-vitalized
Customers gets fresh, high quality fish – "fresh off the boat" - in central Copenhagen
All in all, Thorupstrand has maintained a thriving community in what is otherwise considered "the outskirts" of Denmark. People stay instead of moving for possibilities and most young people stay in the city as jobs are handy – working in all parts of processing. A lot of the money made is saved and used for studying etc. providing them a good start. A positive ripple effect is created.
No matter what your business is, there are some key takeaways based on principle:
Death of a salesman: Surpass the middle-man In this instance, hard work and ingenuity paved the way. For most products, technology is shortening the distance between producer and end consumers. The end user does not have to be a person. It can be a sizeable unit.
Work to up-scale and differentiate your value proposition If you are a middle-man, you need to be VERY careful and extremely precise in stating the added value that you supply. Simply charging for "handling" or "transactions" no longer applies. Both are – by the way – "black box" processes. If it can't be explained, it can't be defended.
Collaboration beats competition The bestselling book "The Exponential Organization" speaks of using communities and crowd as a way to increase your resources (attention, time and money). A lot of the resources commanded by the Thorupstrand fishing collective are free – and ready, willing and able to provide high level expertise when and wherever needed.
Finally, shortening the supply chain often means that both producers and end users make more money or can use available resources better: With no middle men and no "mark ups" along the supply line, producers can lower their prices AND still make more money than they would otherwise. For any consumer, lower prices are a good thing – allowing for re-investment of scarce funds, additional use and larger quantities.
Technology is shortening the distance between producers and end users. Increased AI capabilities will enable even small-scale operations to handle immense complexity and handle any procurement process with ease. Even apply fully autonomous trade and negotiating agents.
So, if you are the middle-man, you might want to consider your value proposition and take extreme measures to convert all "black box" handling" to transparent service provision. In Acumex, we help to simplify the supply chain of procurement in complex markets. We can help producers, end users and middle-men alike with their business.