FPI Cluster Farming Model.   

​

​

The Great Value of Agricultural Clusters

​

Key characteristics of cluster farming include:

​

• Coupling economies of scale with sales of differentiated food products that are designed to attract consumer demand and obtain premium prices in the marketplace

• Using cooperative strategies to achieve competitive advantages and the capacity to adapt quickly to market changes • Emphasis on high levels of performance, trust, and responsiveness throughout the network

• Emphasis on a shared vision, shared information (transparency), and shared decision-making and problem-solving among strategic partners

• Commitment to the welfare of all participants in the value chain, including providing adequate profit margins to support the business and its owners, fair wages, and business agreements of appropriate and mutually acceptable duration

​​

Additionally, farmers, ranchers, and other agricultural producers in food value chains:

​

• Know their production and transaction costs and are able to negotiate prices based on acceptable profit margins above those costs.

• Perceived contracts and agreements as fair, having been freely agreed to, providing equitable treatment to all partners, and including appropriate timeframes.

• Are able to own and control their own brand identity as far up the supply chain as they choose. This may involve co-branding with other strategic partners.

• Participate fully in the development of mechanisms to resolve conflicts, communicate concerns about performance, and alter directions within the value chain.

​​

Preparing to Enter a Cluster Arrangement:

 

Look Before You Leap

 

Before a farmer or business decides to enter into a cluster partnership with other businesses, it is critical to perform due diligence. Conducting thorough assessments of the market, the strengths and weaknesses of prospective partners, and one’s own capacities will go a long way towards making good decisions and building strong, long-lasting partnerships. Know Yourself, Know Your Market Entering or building a value-based food supply chain requires an understanding of how each business fits into the chain and why they are part of it.

 

Questions that should be considered by the cluster leaders and partners include:

​

• How does each partner organization contribute to the chain, and how does it help the chain support its core operating principles?

• What motivates each partner organization to work within the chain?

• What does the chain require of each partner organization?

• What does this food value chain look like structurally, and how do the organizations’ structures mesh with this? By coordinating business planning and operational strategies, businesses within the value chain can maximize the benefit they receive from natural synergies resulting from their overlapping scope of activities, needs, and interests.

 

Know Your Collaborators

 

The best cluster collaborators are those that have similar values, different competencies, and compatible business structures and scales. They also need to be willing and able to participate fully in information sharing, decision-making, and investment. In short, are collaborators willing to be forthcoming and engage with questions, conflicts, and new perspectives? To answer this question, businesses building value-based food supply chain relationships should determine if potential collaborators have these characteristics:

​

• Commonalities and mutual interests

• Compatible values

• An understanding of the rights and benefits of each partner

• An appreciation of the obligations and responsibilities of each partner

• The capacity to interact and consult extensively with others in the chain

• A willingness to consider new collaborators and perspectives

• Equal risk exposure

• A willingness to share brand identity or allow for a separate identity (carrying the farmer’s story through to retail packaging, for example, can be important for the farm’s business but difficult for the marketer’s business to accommodate)

 

Potential collaborators should be prepared to make the investments and commitments required by answering questions such as:

 

• What resources, infrastructure, or products is each party willing and able to contribute?

• How much time is each party willing and able to invest? It is important that all parties are honest and realistic about their schedules and are able to balance available time with the work of maintaining and building the relationship.

• How committed is each party to the cluster-based food production supply chain?

 

Value-based food supply chains require reliable collaborators, the kind who will stand firm by their commitments even when another opportunity or better price beckons.

​

Do Research To Protect Assets

 

In a value-based cluster, the greatest asset is business reputation. Customers want to trust that what they see is what they get. Researching business partners is a necessity, just as an individual who is hiring a new employee would perform a background check on the potential employee. Checking into a potential collaborator’s past can uncover warning signs. Sample issues to investigate might include looking at the prospective partner’s record on:

​

• Upholding agreements

• Meeting orders and coming through with products

• Paying suppliers on a timely basis

• Reputation for fair business dealings

​​

​The time may come when the relationship is clearly not working. One way to prepare for that possibility is to plan for failure—that is, develop an exit strategy upfront for all collaborators. A third-party mediator can also help parties reach a mutually acceptable arrangement. Another option is to identify other, more beneficial, ways in which the relationship might evolve.

​

Strong Cluster Relationships: Some Indicators for Success

​

• The business collaborator keeps the triple bottom-line (economic, social, and environmental outcomes) in mind and is consistent with the value chain’s criteria.

• Collaborators are able to offer and accept constructive criticism.

• Collaborators with more economic power do not wield and abuse it, but check their power in favor of balanced relations with value-chain partners.

• The cluster enterprise is flexible enough to quickly make business decisions, adjust to market downturns, and capture new market opportunities.

• The cluster scale, structure, and locale fit its purposes (big enough, nimble enough, close enough to key suppliers or buyers).

​

Weak Cluster Relationships:

 

What To Avoid

 

• Unmeasured goals and expectations of collaborators

• Switching loyalties, such as to outside buyers

• Inability to make effective decisions

• Inability to accept criticism

• A lack of trust, can build resentment and an adversarial relationship

• Unwillingness to share risks and benefits

• Unbalanced distribution of work, risk, and benefits.

​