Efficiency and Integration in the Food Supply Chain

Abstract

Due to the nature of the food supply chain, an increase of the integration's degree in the chain may be an important aspect in the context of increasing the efficiency of agri-food companies. Therefore, exploring the relationships among these variables was found as an important research area and adopted as the goal of the paper. The paper is focused mainly on the theoretical background showing the relationship between integration and performance. A description of the theoretical and methodological aspects of performance measurement and its extension (including the integration aspect) was also made within the framework of the paper.
For an empirical illustration of the analyzed relationships two steps were made. Firstly, the integration's degree in the food chain was measured. Secondly, the efficiency of the companies from the cereals processing industry in Europe was assessed. The SFA models (e.g. Translog and Cobb-Douglas functional form) were used for assessment of efficiency. By using stochastic method (e.g. the SFA, Stochastic Frontier Analysis), one may show the influence of external variable (the integration in the supply chain) on the efficiency performance of enterprises. Efficiency of economic entities is not an unambiguous term. There are several different concepts of efficiency, its measurement and expressions. Within the framework of efficiency, many terms of similar meaning may be applied. However, these concepts are not identical. The actual concept of efficiency is derived from the structure of the production function, therefore it is conditioned by changes in the productivity of production factors and their remuneration and refers to the allocation of production factors in the most technically efficient way.