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Figure 3: Location of the three districts included in the present study Figure 4: Diagram showing the structure of the PhD dissertation document presented in the form of a Publication-based thesis Figure 5 Dairy supply channels at Mantaro Valley. National industries and formal small and medium processors provide products to formal markets (dotted arrows); whereas informal dairy processors deliver to informal markets (solid arrows).

Figure 6 Processors’ strategies according to the period of a year, considering average level of dairy products commercialized at national level and milk price, milk production in the area and seasonal effect (precipitation) at Mantaro Valley.

Figure 7 Methylene blue reduction test (hours) and total solids at farm level (%). Dry season = no rain and low temperature; rainy season: rainfall and high temperature Figure 8 Variation in hygienic milk quality at Mantaro Valley. Milk samples were analysed at three times separately: At farm level, during milk collection after almost 12 hours under Mantaro Valley’s conditions, and at plant gate; using methylene blue reduction test (minutes). Black line: minimum recommended value (Suggested values based on Norma Técnica Peruana 202.001 – INDECOPI and R.M. 591 – 2008/MINSA).

Figure 9: Different reactions about the use of UMA according to the scale of the dairy farmers Figure 10: Use of UMA by dairy processors in Mantaro Valley Figure 11: DairyPlant processing model showing milk supply and transformation processes Figure 12: “Plant scenario” sheet

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1.1. Study rationale 1.1.1. Small-scale dairy farmers and dairy supply chains in developing countries Despite the worldwide expansion of large-scale industrial dairy production, more than 80 percent of milk produced in developing countries comes from small-scale producers. Small-scale dairy farmers practice a mixture of commercial and subsistence production. They combine crops and dairy production with off-farm activities (McDermott et al., 2010), which contributes to higher food production and farm income (Babatunde and Qaimb, 2010). Dairy production plays an important role in providing food security, essential nutrients to child growth (Bennett et al., 2006), and a source of income and employment to millions of smallholder families (Martínez-García et al., 2013). In addition, it enhances the livelihoods of smallholders, promoting regular monetary earnings to farmers; providing high profit margins, low production costs, low liabilities, limited liquidity risk, and relative resilience to rising feed prices (FAO, 2010).

The rapid economic growth and the higher consumption of dairy products in developing countries have created new opportunities for improving dairy production both quantitatively and qualitatively. This situation has also provided facilities for the possible inclusion of smallholder farmers in remunerative dairy markets. However, involving small-scale farmers in supply chains requires governments’ clear understanding of supply processes in order to develop mechanisms that guarantee smallholders’ access to these markets (Omore and Staal, 2009).

We can delineate a dairy supply chain as a group of stakeholders linked to achieve a more effective and consumer-oriented flow of dairy products. It starts with raw milk production and ends when other processors, institutions and consumers utilize the products that were created in the value chain. Dairy supply chains comprise six core activities such as production, transportation, processing, packaging, storage and consumption (Muhammad et al., 2014). In developing countries, the weak coordination process between milk producers, traders and retailers (Seifu and Doluschitz, 2014) makes difficult the optimization of the delivery of goods, services and information from one supplier to another.

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developing countries, especially in contexts where various forms of organizations work simultaneously in the same area and influence the way milk is produced, processed or commercialized. Dairy supply chains may vary from dairy farmers delivering raw milk directly to consumers (Thorpe et al., 2000) to an industrial plant collecting milk through collecting cooperatives (Sraïri et al., 2009) or cheese processors collecting milk by themselves (Brokken and Seyoum, 1990).

Moreover, dairy sectors are composed by formal and informal markets, increasing the complexity of these supply chains. Formal markets consist of supermarkets and retail stores buying from dairies and selling to wealthy urban consumers. These markets demand a constant quality of products and a guaranteed safe product based on HACCP hygiene labels. Only companies constituted as dairies can respond to these specifications including milk pasteurization and labels on the products that indicate ingredients, track and trace data and an expiration date. Payment is made with receipts and payment of taxes. Informal markets mean that operators do not follow official regulations to produce standard dairy products; work in an environment without any tax regulation, strict or permanent quality controls and labeling of dairy products; and target consumers with a lower purchasing power. Formal and informal markets may differ according to criteria such as existence and application of official quality standards, contracts between stakeholders along the supply chain, or public tax charges on transactions.

The national balances between formal and informal markets vary greatly from one country to another, from mostly ‘informal’ countries in the developing world to Western countries where the informal sector is almost non-existent (Table 1). In that respect, Peru represents an intermediate situation, where the two markets occupy a similar position in terms of milk quantities processed and in some cases, share the same area of milk collection or commercialization of dairy products. Therefore, identifying advantages and disadvantages small-scale farmers and dairy processors face supplying milk these formal and informal markets can help those improving their supply management in order to increase their benefits.

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1.1.2. Dairy supply chain management as response of market demands Milk is a bulky and heavy commodity which requires high-cost storage and transportation and it spoils quickly without cooling (Knips, 2005). Each segment of the dairy supply chain is composed of stakeholders that make decisions based on their own interests (Wang and Zhao; 2007). At the farmer level, supply chain management is based on providing a rather constant flow of milk to dairies and receiving a financial flow in the opposite direction. In the downstream part of the supply chain, retailers and manufacturers are more concerned in functional points such as production specificities and required technological parameters (Hanf and Pieniadz, 2007), whereas price, freshness, taste, and animal welfare are highly relevant to consumers.

Today’s dairy supply chain management is orientated toward controlling milk quality and supply fluctuations. Milk quality is the primary factor determining the quality of dairy products, since goodquality milk products can be produced only from good-quality raw milk. Good-quality raw milk has to be free of debris and sediment; free of off-flavours and abnormal colour and odour; low in bacterial count; free of chemicals (e.g., antibiotics, detergents); and with an adequate level of chemical composition and acidity (FAO, 2009). The emergence of supermarkets in developing countries have led to structural changes in the way dairy products are inspected, processed, packaged and supplied

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has placed increasing pressure on milk producers to achieve higher product standards (Dong et al., 2012). This change has had an impact on producers and processors, particularly in determining who can and who cannot participate in the mainstream of these supply chains (Steinfeld et al., 2006). In fact, lack of compliance with food safety and quality standards may exclude smallholders from the quality-driven supply chains (Birthal and Joshi, 2007).

1.1.3. Main issues faced by management of milk quality in dairy supply chains based on small-scale farmers Management of milk quality along the supply chain remains as an important component for assessing the performance of dairy supply chains, particularly in developing countries where most stakeholders show limited labor and capital capacities (Sraïri et al., 2009). Many studies have highlighted the importance of farm and collecting management practices on milk quality (Elmoslemany et al., 2010).

For instance, a higher number of crossbred cows in a herd and using an adequate amount of quality roughage and concentrates in the diet would increase milk production and milk composition (Millogo et al., 2008). Clean cows provide the lowest somatic cell linear scores compared to dirty cows (Sant’Anna and Da Costa, 2011). Milking practices, such as fore-stripping after udder cleaning, premilking udder and teat cleaning by wiping, decrease the total microorganism counts (Kamieniecki et al., 2004). Furthermore, cooling milk after milking reduces the risk for the growth of milk bacteria (Sraïri et al., 2005). An increased level of hygiene and frequent cleaning of the milking buildings leads to a lower somatic cell count (Kelly et al., 2009). Increasing the number of milk collections per day reduces the total bacterial count in raw milk (Van Shaik et al; 2005), while controlling milk temperature and heating raw milk on arrival at dairy processing units prevents bacterial growth (Koussou and Grimaud, 2007; Millogo et al., 2008).

In most dairy industrialized countries milk quality is defined by the level of somatic cells (SCC) in the pre-pasteurized bulk tank. It is a key component of international regulation for milk quality, udder health and the prevalence of clinical and subclinical mastitis in dairy herds. High levels of SCC are

associated with poor milk quality because they have a negative impact on (i) farm profitability:

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curd firmness, decreased milk yield, increased fat and casein loss in whey and a reduction of its shelf life; and (iii) human health: indirect risks as a result of poor farm hygiene, antibiotic residues and the presence of pathogenic organisms and toxins in milk. The situation is still different in developing countries where most of the time there are not quality control structures and there are critical issues which need to be addressed first, like the dysfunction of regulatory and quality control systems.

Problems of public health related to the consumption of raw milk and traditional dairy products prepared from raw milk are common in these countries (Makita et al., 2012). Inadequate storage facilities and transportation systems, high hygienic contamination through the dairy supply chain and poor handling procedures in the market compound the difficulties of improving the safety dairy products (Delgado and Maurtua, 2003; Gran et al., 2002). These problems are aggravated by local climatic conditions and the lack of a cold chain (Faye and Loiseau, 2000).

Besides poor hygienic quality control, adulteration of milk composition is also an important issue that these dairy sectors face today. The addition of extraneous substances such as water to increase volume of milk, agents to counter the dilution and extend the solids content of the milk, chemicals to increase the storage period of milk, detergents to enhance the cosmetic nature of milk, or minerals for whitening of milk and giving it a genuine look cause major economic losses for the processing industry (Barham et al., 2014). Various physical techniques are used to detect these types of milk adulteration (Kasemsumran et al., 2007).

Farmers’ decision to apply or not apply quality management practices will depend on the existent pressure to commercialize their milk at a higher price and the presence of less or more demanding dairy processors buying raw milk. But it becomes infeasible for many dairy processors to test every milk sample collected due to high testing costs and the large number of small-scale dairy producers.

However, with quality problems receiving more attention from both society and the government and the increasing pressure to achieve higher product standards, dairy companies are pushed to improve their current milk quality status. In this respect, implementation of milk quality controls and incentive payment systems based on quality are widely used in industrialized countries. However, in developing countries these controls and quality-based pricing need to be better adapted to the reality of dairy

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context with a predominant presence of smallholder farmers.

1.1.4. Importance of milk quality controls and incentive systems for achieving high milk quality Despite the fact that many people are persuaded that “milk is milk” and that is the end of the matter, there is evidence of a significant variation in milk composition from cow to cow (Smit, 2003). These variations are explained by genetics, stage of lactation, daily variation, parity, type of diet, age, udder health and season (Kilic and Kilic, 1994; Haenlein, 2003). Part of this variation is reduced by a combination of milk from many animals at the farm level. However, if collections from various farms are accumulated in the same milk tanker and in the silo at the factory (Smit, 2003), it is technically impossible to identify which farms are producing milk with higher or lower quality. Hence, a milk quality test per farm helps dairy producers to correct methods and identify inefficiencies in their milk production (Tessema and Tibbo, 2009). Additionally, it also helps quality control personnel (in dairy plants and regulatory agencies) to monitor milk quality in order to reject milk which falls below the minimum quality requirements and avoid possible adulterations. The analytical method used to control milk quality depends on the objective of the analysis, the need for a fast result, the instrumentation available, the specialized personnel available and the cost (Tamime, 2009). These methods are divided into the following groups: organoleptic characteristics, compositional characteristics, physical and chemical characteristics, hygienic characteristics, adulteration and presence of drug residues (FAO, 2009). Reference methods have been developed and published by the major standard associations in order to have them as standard tests. Some of these methods are listed in Table 2.

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