Shortening supply chains: experimental evidence from fruit and vegetable vendors in bogota

SHORTENING SUPPLY CHAINS: EXPERIMENTAL EVIDENCE FROM FRUIT AND VEGETABLE VENDORS IN BOGOTA Reducing the time and cost of sourcing produce by aggregating purchases through the use of an app

and centralized distribution system CONTENTS * Abstract * Citation * Link ABSTRACT This study tests a novel approach to improve their efficiency by reducing the time and cost of sourcing

produce by aggregating purchases through the use of an app and centralized distribution system. Fruit and vegetable vendors in Bogotá currently travel most days to a central market to

purchase produce, incurring substantial time and monetary costs. A social enterprise attempted to shorten the supply chain between farmers and vendors by aggregating orders from many small

stores, sourcing directly from farmers, and delivering them to the stores. The introduction of this new service was randomized at the market block level. Initial interest was high and

offering the service reduced travel time for users by almost two hours a week, reduced travel costs, and increased work-life balance for store owners. Firms offered the service saved an

average of 6 to 8 percent on purchase costs, and although some of this passed through into lower prices for consumers, there was incomplete pass-through, so that markups rose. However,

stores reduced their sales of products that were not originally offered by this new service, and their total sales and profits appear to have fallen in the short run, with service usage

falling over time. The results highlight the potential for new technologies to solve firm coordination problems, offer a window into the nature of competition among small retailers, and

point to the challenges in achieving economies of scale when disrupting centralized markets for multi-product firms This is an output of the World Bank’s Strategic Research Program CITATION

Iacovone, Leonardo and David McKenzie (2019) “Shortening Supply Chains: Experimental Evidence from Fruit and Vegetable Vendors in Bogota“, World Bank Policy Research Working Paper no. 8977.

LINK Shortening Supply Chains: Experimental Evidence from Fruit and Vegetable Vendors in Bogota UPDATES TO THIS PAGE Published 21 October 2020 Contents