SamenMarkt, a disruptive innovation in Food Markets Big Data in ...

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SamenMarkt, a disruptive innovation in Food Markets. Big Data in Horticulture. MS 20150119. Authors: Olaf van Kooten13, Frances Brazier2, Michel Oey2, Coen ...

SamenMarkt, a disruptive innovation in Food Markets Big Data in Horticulture MS 20150119 Authors: Olaf van Kooten13, Frances Brazier2, Michel Oey2, Coen Hubers2, Gerry Kouwenhoven1, Caroline Nevejan2, Luuk van Koppen2, Bob Dijkhuizen2 1

Inholland University of Applied Sciences, Rotterdamseweg 141, NL-2628 AL Delft, The Netherlands

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TU Delft, University of Technology, Systems Group, Technology, Policy and Management, P.O. Box 5015, 2600 GA Delft, The Netherlands 3

Wageningen University, Horticultural Supply Chains Group, P.O. Box 16, 6700 AA Wageningen, The Netherlands

Abstract: Today's networked economy is changing the way food markets are developing. SamenMarkt is an initiative, a platform with which stakeholders in the Netherlands are exploring new (emergent) market systems, within which all stakeholders have equal access to market information, to be prepared for the future in a distributed networked world. Keywords: Multi Agent Systems, Agent Based Modelling, Value Supply Chain, BigData 1. Introduction In the recent past, the Dutch horti- and floricultural system, owned and run by the growers (in cooperative organisations), was both lean and transparent, effective and efficient. In a primarily supply driven market that started just after WWII up until the 1990's, the Dutch system, with its unique auction system, helped the Netherlands to become one of the largest world-wide exporter of agricultural goods second only to the USA. The situation, however, has changed, as has the nature of the market. The market has transitioned from a supply driven market to a demand driven market1, in which auctions and transparency have virtually disappeared. Middlemen - wholesale traders - determine the price together with retailers: growers are no longer in direct contact with their very dynamic markets. At present (2015) more than half of the vegetable producing glass house companies in the Netherlands are in serious financial problems. Knowing a market - consumer needs and desires, quality, demand, supply, prices - is of utmost importance to all suppliers in a market. This option is clearly no longer available to growers in today's horticultural market in the Netherlands. This paper explores the design space for new distributed market systems (Blos et al, 2015) in today's networked economy, connecting growers to consumers (Ge et al, 2015), using distributed multi-agent system technology, in particular multi-agent system technology, with situational awareness (Kurapati et al, 2012). Multi-agent systems make it possible to represent the behaviour of individual stakeholders and their interaction in a dynamic system, locally, to explore and understand the behaviour of the system as a whole - interdependencies and effects of individual actions. Software agents (Wooldridge and Jennings, 1995) represent each of the individual stakeholders, as autonomous entities, capable of interaction with each other and their environment, and performing "intelligent" behaviour (capable of

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This, however, does not hold for the floricultural system. It too, is in transition, but the system itself is still mainly intact as of 2015.

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learning, have knowledge, can perform complex tasks, and can reason about and with this knowledge) (Wijngaards et al, 2002). Multi-agent systems have been designed and deployed in many different types of applications ranging from e-business applications (e.g. transaction management, Gradwell et al 2008) and supply chains (Holmgren et al, 2015, Zambonelli et al, 2003) to chemical auctions.

2. Motivation and Objectives This paper explores the possibility of creating a new distributed market structure, in which the strengths of the earlier auction systems are reinstated in the present century, based on multi-agent 2 ® system technology, AgentScape , and data awareness. This market, the SamenMarkt is to be designed to re-create trust and transparency in the market. To this purpose the questions to be addressed include: •

Which information is needed by the stakeholders involved, and how will this influence trade and logistic distribution?



How will the roles of the individual stakeholders change?



Which market mechanisms should be supported, including quality and financial arrangements?



Which conditions will foster trust in the system?

Research method The research method deployed in this study, is that of design through research, including literature study, data analysis, and workshops with focus groups and extensive interviews with entrepreneurs and experts who have practical and scientific experience. Simulations are used for knowledge acquisition, situational awareness, and exploration of new market systems. Results and implications The goal of this project is to develop a market system with very low transaction costs, a high flexibility to changes in supply and demand, and a free flow of information between consumers and producers. This innovation is disruptive, changing the entire structure of operation of the fresh food market chains and networks, both locally and globally, inducing more sustainable and flexible production, distribution and consumption of fresh food globally, leading to a “level playing field” for high diversity of fruit and vegetables products. Current status The tomato supply chain is the current focus of our research. An agent-based simulation of today's tomato supply chain, is currently being developed in close cooperation with a large number of stakeholders in the current market, branch organizations, and knowledge institutes, for the first two purposes depicted above - knowledge acquisition and situational awareness.3

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http://www.agentscape.org The simulation shall also be used as an educational training tool for BSc and MSc students to increase their understanding of fruit and vegetable supply chains. 3

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3. The Future Perspective of SamenMarkt •

Which information is needed by the stakeholders involved, and how will this influence trade and logistic distribution?

Supply chains in fruit and vegetables are currently transaction driven with little interaction between the parties involved. Current systems focus primarily on trading. There is no information exchange between producers and consumers. The concept of SamenMarkt proposes a system that reconnects the supplier to the consumer, with no interference by other entities in the supply chain withholding, or transforming information for their own interest. SamenMarkt is expected to disrupt the way food networks are organized, in the same way as the transformation from small grocery stores to supermarkets has taken place, shaping food cultures globally, limiting diversity of produce, and consumer influence, and AirBnB and Booking.com are changing the way the hotel market is organised. SamenMarkt will create complete new options, increasing awareness and diversity. Logistics in the consumer food market are already changing. Consumers are buying more fresh products online and new, dedicated food shops arise (Vereecken et al, 2015). The concept of food boxes makes it possible to deliver specific products to end-users (Greenwald, 2015). The limitations of the current supply chain in case of limited articles are being surpassed locally by individual delivery options. The horticultural market, however, is considerably larger: 90% of all Dutch tomatoes, for example, are exported to other countries. SamenMarkt will provide, with respect to privacy, relevant data on supply, demand, and services, to stakeholders and their agents, including price, quantity, and quality, to enable new market systems to emerge. Conceptually, an unlimited amount of information can be processed by agents in a system. For example, information concerning supply cultivar, growing method, growing conditions, social conditions, but also the specific contents of the produce. With an increased focus on health and personal DNA profiles, a demand for specific contents of produce can be expected to arise (O’Donovan et al, 2015), most likely changing the concept of quality information, relating to consumer needs and desires.

4. Actors in SamenMarkt •

How will the roles of the individual stakeholders change?

To support interaction between providers and consumers, current thinking is that SamenMarkt will support providers (i.e. growers), consumers, retailers, service providers, and certifying bodies. As new markets emerge so will the new roles: growers will adapt their produce to the needs identified, new types of certification of safety and quality will be needed in the new world markets, new services will be needed to orchestrate the emerging networks. The aim of SamenMarkt is to create a real supply and demand driven supply chain. Consumers are used to food based on their current experience. To quote, Henry Ford, “If I had asked people what they wanted, they would have said ‘faster horses’ ”. For consumers a new world of food will open up. Based on price, quantity, quality, personal taste, and other preference, e.g. local for local, health related issues, environmental social involvement, consumers inform their own representatives in the market, their own agents. These variables should not be limited, by current supply chain characteristics, but should represent real consumer (wildest) wishes. Consumer needs and desires become known to the other actors within SamenMarkt, who can either act directly, or rethink their product strategy.

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Initially, SamenMarkt is being designed for business-to-business coordination, from primary producer to retailer, including retailers such as Hello Fresh or Blue Apron. Sourcing by agents can customize retailer's provisioning, creating new options for value creation. Local food networks based on SamenMarkt can arise. Or a further expansion of home cooked dinners. In the near future newcomers to the market will organise consumers in other ways, connecting to growers in ways not yet envisioned. SamenMarkt only functions if service providers are linked to the network. A transaction between buyer and growers, for example, can only be made, if physical product flow is possible. Without logistics there are no transactions. New broker and category management services, including certification services, are expected to emerge, changing the current status quo, providing many new possibilities and options. For example, health is more and more becoming an attention point for consumers. A service provider combining information of DNA technology, metabolism, and food can support new consumer markets. (O’Donovan et al, 2015) For the growers the first aim of SamenMarkt is to create a transparent market. By having control over their own produce they can decide with whom they wish to do business, at what cost, and which services they wish to deploy. Agents make it possible to handle both smaller quantities of produce as well as collections of different products, creating new categories of produce, and market combinations. Growers can start innovation based on the information they receive from SamenMarkt.

5. SamenMarkt Features •

Which market mechanisms and systems should be supported, including quality and financial arrangements?

SamenMarkt aims to be a fully independent, low entry barrier platform for consumer, producer – market connections, supporting emergent market developments. SamenMarkt is designed to be a disruptive innovation, which combined with innovations in the field of e.g. plant sciences, will enable medical diagnosis to transform the way food is perceived. A (direct) connection between producer and consumer will take financing of production to a different level. At the moment financial methods are mainly, own capital, long term, and short term bank loans. The financial risk of producing is mainly that of growers. In the previous auction system growers are paid at the moment of delivery of the product. In commercial trades a payment term of 30 days or more is common. By creating SamenMarkt different ways of financing are to emerge and be supported. Recent societal developments, have embraced crowd funding, for consumers to fund crops on a limited scale. Differentiation in contracts is emerging: Consumers are now buying food boxes in single transactions, with long-term contracts. Long-term contracts may become more common within SamenMarkt. In the future SamenMarkt can connect growers in developing countries to the world market and to venture capital4. But even from a small-scale farmers perspective, the distribution of smart phones is becoming more common. An entry barrier will be safety, quality and logistical capabilities, and certification, but this can also be a trigger in the development of production. •

Which conditions will foster trust in the system?

A fundamental characteristic of any market system is how trust is organized. Trust defines how actors interact, how much regulation is necessary, how much judicial support intervention is common. Trust is 4

The authors realise that SamenMarkt requires internet connectivity. The authors, however, do not expect this requirement to be a barrier in the near future given the exponential growth of the Internet world-wide.

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the result of a trade-off in which four dimensions are key: time, place, action and relation (Nevejan, 2007). Demand supply systems can be seen as participatory systems in which the design of trust is key (Rezaee et al, 2015). In the Netherlands, trust in the auction clock was very high. The assumption among producers in the Netherlands used to be that “the auction clock is always right!”. Having abandoned the collective auction clock, today the fluctuation in prices of fruit and vegetables resemble stock markets, in which speculation is most common. Growers are disconnected from market development and price formation. SamenMarkt is designed to be a participatory demand supply systems, in which the role of growers is key. To this end, data of the grower, the trade, the retail, and the consumer are made available to a system to support emergence of 'fair prices'. The YUTPA framework is used to design and maintain trust in the new SamenMarkt, a participatory system (Nevejan & Brazier, 2015). In a later phase, special attention will need to be given to the legal aspects concerning SamenMarkt. For now, these aspects are outside of the scope of this endeavour.

6. Simulation of the Tomato Chain SamenMarkt is in the phase of modelling and building the simulation of the current tomato value chain in the Netherlands. Interviews have been conducted with trading actors in the Dutch tomato supply chain, concerning their trading strategies and trust in the supply chain. Growers indicate that the supply chain, the process of pricing, and the destination of their produce, are all unclear. To them a digital platform like SamenMarkt is perceived to be desirable. Other parties also indicate that the process of trading tomatoes is indeed not transparent and that competition in the supply chain is contra productive for the market itself, and for the interest of growers. This conclusion can also be drawn based on the first simulations. Below is a visual representation of the simulation developed within this project.

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7. Conclusion The Internet, e-commerce and big data will have an influential position in the food supply chains in the coming years. The concept of SamenMarkt can create an independent platform in which trade can be explored, supported by distributed software: a platform that supports new connections between producers and consumers, enabling innovation and new product market combinations. SamenMarkt creates a breakthrough, with fewer hurdles. SamenMarkt creates an open platform with fewer limitations, the numbers of products can be limitless and order quantity can be close to zero. Emergence and differentiation become serious options. The transition in the food chain will be disruptive. The first steps taken in the simulation of the Dutch tomato supply chain show a promising perspective for SamenMarkt for many different markets.

References / Literature •

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Ge, H., R. Gray, J.Nolan. 2015. Agricultural supply chain optimization and complexity: A comparison of analytic vs simulated solutions and policies. International Journal of Production Economics, 159, 208-220

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Gradwell, P. Oey, A., Timmer, R.J., Brazier, F.M.T, Padget, J.A.2008. Engineering large-scale distributed auctions. AAMAS (3) 2008: 1311-1314



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