Case Study One: Dried Shiitake Mushrooms in Oita Prefecture

Oita Prefecture produces the largest quantity of dried shiitake mushrooms in Japan. In 2005, Oita's production was 1,395 tons, about 35% of the total 4,095 tons produced domestically. An additional 8,375 tons were imported in 2005, mainly from the People's Republic of China. There are over 4,000 dried shiitake producers and over 100 packers in Oita and nearby areas, which conduct transactions in five district markets. Most of the packers procure materials from more than one market. Therefore, there was a need for a traceability system for all the district markets and packers, including packers outside Oita.

Around 2002, place-of-origin labeling fraud was discovered on various food products in Japan, including dried mushrooms. Some dealers were caught selling dried mushrooms produced in the People's Republic of China as either “domestically produced” or without any labeling of place of origin. Thus, it became necessary to establish a system to ensure the accuracy of labeling by packers in order to gain the trust of purchasing operators and consumers.

Because the system would cover many operators along the chain, it was necessary to get the input from all the major stakeholders. In 2004, the Oita prefectural government set up the Oita Shiitake Traceability System Examining Committee, consisting of representatives of the industry including retailers and consumers. The committee commissioned the Food Marketing Research & Information Center (FMRIC) to design a traceability system for them. The Oita Dried Shiitake Traceability Council was established to implement the system, which became operational in 2006.

As shown in Figure 2 [ PDF 50.2KB | 1 page ], the scope of the traceability system covers from the point at which the materials (dried shiitake mushrooms) are received from the producers to the point at which the materials are sorted and packed. The system is estimated to cover about 20% of all the dried shiitake mushrooms produced in Oita.

With the introduction of the traceability system, producers affix shipping labels on the boxes of shiitake for shipping. Producers follow a producer ID system, specifying their names and location code (district/prefecture) on the shipping cards. Most producers had already been doing this, so this requirement did not result in a significant cost increase for them.

At the next step in the chain—the district market— the introduction of the new system required district market staff to input information such as the date, packer ID, weight, and place of origin of the product into the Oita Shiitake Database. The new system required newer models of computers and software to allow the information to be accessible through the Internet (FMRIC 2004). The new hardware and software cost about two million yen (about US$20,000) for each district market and the cost of the new computer operating system was about five million yen (about US$50,000).

5.1 Costs and Benefits of Oita's Production System

To evaluate this system as a model, we look at the major costs incurred by the key stakeholder in the chain—the packers.¹⁰ The packers' incremental costs from introducing the new system are mainly due to the labor costs involved in the system's detailed documentation system, specifically (i) recording internal traceability, such as tracking which materials come from which boxes and what products they are then made into; (ii) setting up the printing machine and recording the necessary data to issue serial numbers for each product; (iii) recording the product's weight and quantity and entering it into the Oita Shiitake Database; and (iv) fees due to the Oita Shiitake Traceability Council.

Regarding (i), many operators simply improved existing internal documentation materials, so this step did not incur a large expense. As for (ii) and (iii), it depended on the scale of the operation, but no actual data for these added costs was surveyed. However, it is estimated that operational time increased by 10 to 15 minutes per person per day. Regarding (iv), in addition to the 50,000 yen (US$500) fee per year per operator, the packers also have to pay the Council three yen/kg of Oita dried mushrooms they process. The revenue generated covers the costs and expenses to the Council for auditing the traceability system and managing the database.

The initial costs also involved five million yen (US$50,000) paid entirely by Oita Prefecture for studying and evaluating the pre-traceability system situation and creating a basic plan for a new system. In addition, around 10 million yen (US$100,000), half of which was subsidized by the central government, was spent for developing the database and setting up a server.

In general, in auditing this type of proof-of-origin traceability system, the most timeconsuming activity is the verification of changes in the weight or quantity of food products before and after processing or packing. In the Oita shiitake system, however, the main computer program was able to perform these calculations automatically, contributing to efficient auditing.

The benefit of the traceability system was that it increased confidence in the “Made in Oita” label. The price of Oita shiitake had already been rising during the previous years, from 2,532 yen/kg in 2000 to 3,449 yen/kg in 2005. However, in 2007, due mainly to the increasing mistrust of made-in-China food products, demand for domestically produced shiitake increased and the market price for Oita shiitake rose to over 4,000 yen/kg. The district market benefits directly from increases in prices, as it receives a certain percentage of the mushroom selling price as commission. While the Oita traceability system itself did not directly affect prices of shiitake, its creation allowed the Oita shiitake industry to take maximum advantage of the increased demand for domestic mushrooms by providing an authenticated, traceable domestic product.

5.2 Role of the Oita Council

The Oita Dried Shiitake Traceability Council is charged with being the organizational body for a large number of operators in the shiitake food chain. It is supported by the staff in charge of promoting dried shiitake mushroom production at the Oita prefectural government office. The Council represents five district markets and 34 packers (as of March 2007) and has five responsibilities. These are: (i) auditing place-of-origin labeling, (ii) managing the “Oita Shiitake” logo and operator ID number, (iii) training participating operators, (iv) publicity, and (v) reception of inquiries regarding traceability. All of this work is managed exclusively by the Council staff. The following explains each of these responsibilities in more detail (FMRIC 2007).

Auditing place-of-origin labeling: Because building confidence in the place-of-origin labeling is the key function of the Oita traceability system, auditing of the system is critical. To do this, the Council records the packers' purchasing volume data (provided by the district market) with the final product volume data (provided by the packers) and compares the balance once a month. In addition, the volume of inventory held by the packers and the volume of sales among packers are recorded to confirm that all Oita shiitake can be accounted for.

The council sets a certain tolerable percentage of discrepancy between the wholesale markets' reported data and packers' data. As long as results are within that percentage, the operator passes the inspection. If results are not within this range, the Council office questions the operator concerned or visits the operator and checks to be sure there have been no mistakes in the recorded data. Also at least once a year, the Council office staff visit packers and district markets to conduct audits. For packers, they ensure that they have proper forms and documentation for internal traceability that meet the guidelines set for packers and that they keep records (ledgers, packing records, etc.) that are the basis for the amounts provided to the Oita Shiitake Database.

Managing the “Oita Shiitake” logo and operator ID numbers: Under the Oita Shiitake Traceability System, packers affix an “Oita Shiitake” logo sticker to each package. For consumers, this sticker indicates that the product's traceability is ensured through the Oita Shiitake Traceability System and it is therefore an important symbol. The Oita Dried Shiitake Traceability Council oversees the appropriate use of the stickers and logos by the district markets and packers and assigns participating operators with ID numbers that are used on the traceability documentation.

Training participating operators: Successfully tracing the movement of food products between food chain operators relies on each operator fulfilling all the requirements of the traceability system. This includes not only understanding how the overall system works, but also becoming comfortable with the new computer software and data input methods. This is particularly important in an industry such as the Japanese shiitake industry, which involves many smallholder farmers, many of whom are older and may have less experience with ICT. Therefore, training and support of the participating operators is important for maintaining the system. The Oita system is designed in such a way that the majority of the data entry is done by a small number of staff at the packing warehouse or district market. Individual producers, therefore, are not required to invest in ICT and if necessary can still submit their data on paper for market staff to input.

Publicity: Educating consumers and purchasing operators about the Oita Shiitake Traceability System is an essential part of building recognition of the “Made in Oita” brand. The Council uses leaflets and has its own website¹¹ to provide information about the traceability system, including the names of packers using the system, the scope of the system, and how the inspection system works. The leaflets are also given to the packers to distribute to their clients.

Reception of inquiries: The Council staff is available to handle telephone inquiries about traceability from consumers and traders. The availability of information supports consumer understanding and confidence in the system.

5.3 Conclusions on the Oita Shiitake Traceability System

The Oita Shiitake Traceability System is a successful example of a system that responded to several traceability challenges that will be familiar to food business operators in developing countries:

• Creating a place-of-origin verification system
• Creating a system that involves a large number of smallholder farmers as well as markets and packers up the food chain
• Creating a mechanism or organization that can gather feedback from all stakeholders and plan an appropriate system
• Creating a system that uses technology to increase efficiency with reasonable costs
• Creating a system that uses technology that can be adopted even by those with little ICT experience
• Creating a system that includes ongoing training and publicity, which are the foundation of consumer confidence in place-of-origin labeling

In this case, ICT allowed the farmers to efficiently accomplish the key goal of the system: to record and compare the packers' records of product volumes. Being able to effectively verify that all shiitake volumes were accounted for as they moved through the supply chain allowed the Oita farmers to prove the authenticity of their products. ICT allowed verification that was more efficient and transparent than a wholly paper-based system.

The implementation of the traceability system placed the Oita farmers in a solid position to benefit from the increased demand for domestic mushrooms driven by consumer suspicion of Chinese food products. For a product such as Oita shiitake, which cannot compete directly with Chinese shiitake on price, the traceability system provided the farmers with a way to compete on authenticity, quality, and safety assurance. The Oita case can be seen as a system that required minimal costs and ICT training, and yet supported the product reliability of a large number of small farmers who must compete in a very strict market.

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1. Prof. J. George
   (posted 10 June 2009 / 06:30:36 PM)
   
   A good study indeed to keep one updated with the new developments in the area of food safety. The authors have in a short and concise WP givena concise lessons fron the study. They need to be complimented on the effort. The authors must be encouraged to develop this WP into a full blown research paper. However, some comments that must find placein the full paper are as follows: (1) Can these lessons be generalised over different developing countries and production landscape where issues of livelihood and food security are paramount? (2) The public sector certainly needs to play a dominant role and hence the funding quantum and pattern needs a different exclusive treatment to make it more localised. Who will do it? (3) How do we get this traceability into a major concern as in Japan itself only 20% are following/participating in the ITES initiative for traceability.
   (4) Two case study products have certain limitations in other developing countries as they have a different definition of smallholder producer and these two products are not produced on an industrial scale dimensions. What adjustements are required or needs to incorported to the study to make it acceptable/practicable on wider spectrum of developing countries?