Development Informatics Working Paper Series

C. Findings on Mobile Telephony and the Supply Chain

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C. Findings on Mobile Telephony and the Supply Chain

C1. Access to Mobile Telephones

The licensing and launch of GSM mobile operators in Nigeria in 2001 represented a significant liberalisation compared to the previous domination of telecommunications provision by the government-owned monopoly, NITEL (Smith-Hillman and Braithwaite 2004). The years since 2001 have seen very strong growth in subscriber numbers and reach, particularly for mobile phones, along with falls in prices and improvements in service quality.

In the area under study, no interviewees had fixed-line telephones, and access to functioning fixed-line public payphones was negligible. Instead, all accessible telephony was mobile – either using GSM (location-independent) or using wireless local loop (WLL: where the mobile phone is restricted to the area around one particular exchange). There were three access models found, listed in descending order of reported prevalence.

i. Private Ownership of Mobile Phones

All interviewed buyers and intermediaries owned their own mobile phone, and this was regarded as a norm for the aso oke sector. Ownership of a mobile phone by the weavers was, by comparison, less common – field data suggested about one-quarter of weavers had a phone. This occurred via one of two observed and reported models.

In some cases, an intermediary was operating their own vertically-integrated supply chain, working always with one particular group of weavers who produced exclusively for that intermediary. These intermediaries would provide a mobile handset complete with Subscriber Identity Module (SIM) card for the master-weaver of the group. The phone was still owned by the intermediary but the master-weaver was responsible for purchasing air time.
Alternatively, the intermediary would sell a mobile phone to the weaver and then recoup the cost by deducting an agreed amount from each completed order. The intermediary was thus likely to keep sending orders to that weaver until the debt was repaid. However, the intermediary determined the price of the mobile phone and the deduction, and the debt was seen to increase their leverage over the weaver.

ii. Access to Commercial Third-Party Mobile Phones

Since GSM licensing, a number of "phone shops" have sprung up around Nigeria. These may be physical premises or so-called "umbrella people" who sit outside under an umbrella selling use of their mobile phone. They were particularly used by weavers. Outgoing calls were charged at the advertised tariff rate of the operator to whom the phone shop owner subscribed. For incoming calls, the weaver would have to pay a small one-time "registration fee". They could then give the phone shop number to intermediaries or buyers. When a call arrived, the message would be noted down by the phone shop owner. Either their employee would then go to tell the weaver, or the weaver would periodically go to check for messages. Alternatively, the caller might ask for the weaver to be summoned to receive a call, in which case they would call back after a few minutes while a message was sent to the weaver to come to the shop to receive the call.

ii. Access to Non-Commercial Third-Party Mobile Phones

A few weavers gained access to a mobile phone through family or friends. This was not often used for outgoing calls (such weavers would more often use a phone shop for this). Instead, the number was given out for incoming calls. As with the phone shop, either a message would be taken or the weaver would be summoned to receive a call-back after a certain time interval. No financial charge was made.

C2. Supply Chain Process Impacts of Mobile Telephony

Two main process-related benefits were reported for mobile phones: their impact on the time and on the financial costs of transacting. Phone calls were particularly used for the following elements of the trading process: checking initial identity and possibility of ordering (buyer -> intermediary/weaver); seeking orders (weaver -> intermediary); initial confirmation of order (intermediary/buyer -> weaver); searching for and confirming presence of raw materials (intermediary/weaver -> supplier); confirming credit arrangements and pick up of raw materials by a representative (intermediary <-> supplier); checking if changes to order or delivery were possible (all main actors); communication of minor amendments or minor issues related to order or production details (all main actors); checking and confirming presence of completed parts or whole of orders (all main actors); setting up and confirming presence for physical meetings (all main actors).

The mobile phone calls saved time and money by substituting for journeys. Time saved per call was typically several hours and, overall, this had meant that the turnaround time between first order and final fulfilment was reduced. Money saved was typically understood by comparing call costs with transport costs: for example, interviewees talked about a call rate of N50 (c.US$0.4) per minute being cheaper than a taxi cost for an average journey of, say, N1,000 (c.US$8) given that calls were normally completed in less than five minutes. There was some consideration of the opportunity costs of travel that could be recouped through use of the phone. For example, weavers could spend the time they would spend travelling on producing cloth; intermediaries could spend the time seeking orders or engaging in other business. There seemed to be little consideration of the capital cost of the mobile phone, which was regarded as a sunk cost.
Mobile phones seemed particularly to be valued because they were seen to substitute for unproductive travel. Examples were journeys by weavers to an intermediary only to find that there were no orders available, or by an intermediary/weaver in search of a particular colour of thread that proved out of stock, or other journeys where the intended visitee was absent from home.
Partly as a result, mobile phones were seen to have reduced some of the risks inherent in commerce. They had reduced the number of journeys required; journeys that were seen as sources of physical risk. They had reduced a number of information uncertainties: about the existence and acceptance of new orders; about availability of raw materials; about the behaviour of other actors, especially progress in fulfilling an order. And, where a journey was still needed, the mobile phone would greatly reduce uncertainty about the potential value and outcome of that journey. Thus, as one interviewee put it, "GSM gives me rest of mind".
However, as just hinted, it would be a mistake to see journeys and face-to-face interactions as having disappeared from the trading process. They were still required because physical inspection was still required. The need for inspection arose from a factor specific to design-intensive sectors like aso oke – the need to physically see particular items: the buyer's ideas (if any) for design; the types of cloth a weaver had previously produced and their design ideas; the weaver's design sample; the actual colour of a thread; the fit-to-design of cloth as delivered during an order.
But the need for inspection also arose from a much more generic factor – trust or, rather, the lack thereof between key supply chain participants. The potential for opportunistic behaviours was described above; an especial difficulty for aso oke given the staggered nature of the transaction. Mobile phone calls were used to monitor behaviour of other participants but their value depended on various criteria, described by one intermediary:

"'Who you are' in the industry and related to this, whether or not there already exists trust between you and the person you are dealing with, and lastly 'what you can produce' as an indication of the quality of your output. If these things are present then having a telephone results in faster order production. It makes the process of getting orders faster and also makes life easier in terms of movement."

But where these criteria were not met, phone calls would likely still leave information uncertainties. Monitoring of contract compliance, principally of weavers' progress in producing the cloth, therefore often continued to be conducted through a journey and physical inspection. This was despite (or perhaps because of!) the fact that all calls, save sometimes that of a buyer seeking a recommended intermediary in order to set up a pre-order meeting, were made between parties who already knew each other through physically meeting and transacting (often many times) prior to the phone call.
Finally, journeys were required to allow for physical movement of raw materials and goods and/or exchange of money, and sometimes because of the complexity of the interaction required, say, in order to discuss and agree the exact specification of a design and order. The relative "poverty" of communication by phone plus both parties' constant awareness of the cost of the call militated against complex communication by phone.
In terms of risk, then, there has been a reduction but not an elimination. There has also been some transfer. Where previously, for example, intermediaries had to travel to weavers to see if they could accept an order, now they summon the weaver by phone to come and meet them to discuss the order. Initial journey risk has thus shifted from intermediaries to weavers.

C3. Supply Chain Structure Impacts of Mobile Telephony

i. Intermediation

Far from leading to disintermediation in the aso oke supply chain, the advent of mobile telephony seems, if anything to have entrenched the role of intermediaries.

We can break this down. First, mobile phones have done nothing to address buyer-side information absences or uncertainties. They do not help buyers in becoming aware of weavers' identities, so they do not substitute for the intermediaries' role as a contact node. They do not help buyers understand key aspects of the transaction such as price, quality and design, so they do not substitute for the intermediaries' role as a source of information and knowledge. They do not help buyers inspect key items such as design samples, finished cloth, and extent of order completion, so they do not substitute for the intermediaries' role in undertaking or arranging journeys and physical inspections. Overall, mobile telephony has not helped buyers know of, trust, manage or transact with weavers.
For the buyers, then, the uncertainties and the risks, including potential for opportunistic behaviour and adverse selection, remain much as they were vis-à-vis producers. However, personal 24/7 ownership of mobile phones by both buyers and intermediaries has made it easier for buyers to transact with intermediaries. Given that this is a buyer-driven supply chain, and that mobile telephony has made it no easier for buyers to deal with weavers but easier for them to deal with intermediaries, little disintermediation can be expected from this direction.
Second, mobile phones have done little or nothing to rebalance the asymmetric relationship between weavers and intermediaries. As with buyers, phones have not made it easier for weavers to identify buyers, so weavers remain normally reliant on intermediaries for their orders. Indeed, those with phones reported they now had more contact with more intermediaries than previously. Telephony has not changed the non-informational asymmetries, such as the ability of the intermediary to provide working capital and to arrange credit lines. And, for a few weavers, provision to them of a mobile phone by an intermediary had helped to embed their – unequal – relationship with that intermediary.
Third, mobile phones had facilitated the emergence of a new type of intermediary: the "coordinator-weaver" (outlined alongside other supply chain structures in Figure 5). In one case where a weaver had been able to invest in a mobile phone, other weavers had begun to align themselves with the phone-owning weaver. The latter would then coordinate the collection, distribution and management of orders from different intermediaries. Although akin in some ways to the role of "master-weaver", this was a new role within the supply chain that had not previously been seen. It pushed existing intermediaries towards a demand-side role of identifying buyers and managing the buyer—intermediary relationship. The new coordinator-weaver intermediary then took a supply-side role of managing cloth production and the weaver—intermediary relationship.
Through use of their mobile phone, the coordinator-weaver was able to build up a larger network of weavers than was possible for any master-weaver. They could therefore accept more and/or larger orders than had previously been possible; taking on a role for allocating work that had previously been undertaken by the single, now buyer-side intermediary.

Figure 5: Examples of Geographic and Structural Changes Following Introduction of Mobile Telephony

Lastly, presence of a phone has made it easier for intermediaries to use their financial power with thread suppliers. The earlier system of arranging credit with suppliers was seen as risky. It relied on written notes that were readily forged, as a result of which most suppliers would only operate on a cash-and-carry basis, slowing the thread-purchase transaction. Mobile telephony had changed this. Suppliers with a pre-existing relationship with an intermediary would now allow thread to be taken away (e.g. by a weaver) on the strength of a phone-based promise from the intermediary to pay at some short-term future date convenient to both intermediary and supplier.

By contrast, no weavers were reported as having established credit facilities with suppliers. Coupled with their more limited access to mobile telephony compared to the 24/7 access available to intermediaries, this had – if anything – strengthened the position of intermediaries.

ii. Location

There was limited evidence that mobile telephones were significantly changing the geography of supply chains in the aso oke sector. There were one or two reports that telephony had enabled a broader geographical spread in the search for raw materials, though this was constrained by a perceived need to physically inspect the actual colour and quality of thread, and by the need for physical procurement.

Likewise, in one case, a master-weaver was able to access a broader geographical spread of sub-weavers when a large order came in. Some who worked for him were Ghanaian and, following their apprenticeship, they had returned to Ghana. Where previously they would not have been part of the master-weaver's "mental map" of sub-weavers to draw on, his access to mobile telephony had changed that. What it meant, though, was not outsourcing to a distant location (Ghana). Instead, it meant that he would call up the sub-weavers in Ghana, and they would then travel to his workshop in Nigeria to help complete the order.
These examples – potential geographical extension of relation with thread dealers and with sub-weavers, plus the emergence of weaver-coordinators just described – are summarised in Figure 5. However, these were just individual cases and, save these examples, the evidence was that – because they were mainly reinforcing existing relationships and existing structures – mobile phones were also reinforcing existing geographies within this micro-enterprise sector.

iii. Competitive Advantage

One further structural consideration – not yet much reported in discussion of micro-enterprise and mobile telephony – is the competitive advantage that mobile phone access brings to those who have it over those who do not. This is likely to be a feature of micro-enterprise in developing countries in the short-term as a significant (albeit declining) proportion of the population lacks access to telephony (Overå 2006). Given the widespread ownership of mobile phones among buyers and intermediaries, they have become the preferred means of contact wherever feasible within the limits imposed by factors such as trust, the need for physical verification of information or physical exchange, and the need for complex interactions around issues of design.

Weavers who lack phone access will therefore lose out on orders. This, indeed, had been the experience of some weavers. They were able to recount incidents where they had travelled to an intermediary's premises in search of business only to learn that an order had just been given out to another weaver who had a mobile phone and who had been called as soon as the order arrived. This, of course, had acted as a strong incentive for weavers to arrange mobile phone access, and can be interpreted as a growing barrier to entry into the aso oke trade.
It can also be interpreted as a sign of growing inequality between weavers: a "competitive divide" deriving from the "digital divide". At one end, those without mobile phones were losing orders and income. At the other, one of those who had managed to obtain his own mobile phone was developing into an intermediary through his role as a coordinator-weaver.

D. Conclusions

In terms of both numbers and reach, mobile telephony is the dominant form of telephony, and micro-enterprise is the dominant form of enterprise in the "majority world" of developing countries. Despite the global importance of both phenomena, few studies have so far investigated their intersection, partly because mobile phones have only recently penetrated micro-enterprise supply chains in developing countries. The research reported here focuses on this fast-growing trend, offering insights into something that has already – or will soon – impact the livelihoods of tens and then hundreds of millions of micro-entrepreneurs.

i. Mobiles and Information

In conceptual terms, this study confirms the need to understand mobile phones as devices for communication of information. That may seem an absurdly-naïve statement of the obvious but its implications are not always recognised – that one must therefore build analysis of a major part of mobile telephony's impact on an informational foundation; first understanding the role of information in the phenomenon under investigation, and only then moving on to study mobile telephony.

That was the approach used in this paper. It began by understanding how information and information failures have shaped the process of micro-enterprise commerce; and then by understanding how they have shaped the structure of micro-enterprise commerce. The selected sector – the aso oke cloth-making sector in Nigeria – exhibited the information, process and structural traits identified from the literature. It can therefore be seen as emblematic of the difficulties faced by traders within developing country micro-enterprise supply chains (and, of course, was selected partly for this reason).
Our focus on supply chains has left us saying little directly about the micro-level impact of mobiles on information. By substituting for some journey-plus-in-person meetings, we can see that phone calls have reduced the time and financial cost of information gathering; often by several hours and several US$ respectively per call (not to mention the opportunity cost gains). Improvements in the quality of information within any individual communication were not evident, if we are considering information quality in terms of accuracy and relevance. Where mobile telephony did have a qualitative impact was on completeness of information. Travellers could now know whether or not a journey was needed before embarking on it. More sources of information – about orders, about thread, about capacity to weave – could be interrogated. To (only) this extent, then, the informational impact of mobile telephony was helping make not just faster and cheaper, but also better, decisions.

ii. Mobiles and Supply Chain Processes

The research reported here partly supports the few studies that have been done before on mobile telephony and micro-enterprise. Based on the interviewee and other evidence it finds that mobile phones ameliorate – but do not eliminate – the three process challenges in micro-enterprise supply chains: speed, cost, and risk. In terms of objective evidence and also in the perceptions of stakeholders, mobiles were seen to reduce the delays, reduce the financial costs, and reduce the personal risks of involvement in commerce in this sector.

That reduction, though, was by no means to zero; in large part because journeys and in-person meetings remained an integral part of trade even post-mobile. Some of that can be explained because this was a manufacturing sector with physical materials to be exchanged in trade. Much, though, was explained by the nature of information and decisions involved.
Some supply chain decisions are structured – simple, standardised, and objective. In this case, they might revolve around questions such as "Do you have an order for me?" or "Is your design sample ready?" or "Are you at home tomorrow afternoon?". These are readily amenable to phone-based information gathering.
Other supply chain decisions are unstructured – complex, non-routine, and/or with degrees of subjectivity and uncertainty. In this case, they might revolve around questions such as "Can you produce a design that looks like this?" or "What would be the implications of introducing a gold thread into the cloth?" or "How far have you got in weaving the next part of the order?" These are not always readily amenable to phone-based information gathering, especially given the design-intensity and variable levels of trust found in the sector.

iii. Mobiles and Supply Chain Structures

So, there is some but bounded, support for earlier studies on the economising and travel-substitution effects of mobile telephony on supply chain processes. But there is as yet no support for those studies which saw a disintermediating effect. Rather, it was intermediaries who were driving the adoption of new technology in this supply chain. And it was intermediaries who found their roles consolidated, with a new form of intermediary even emerging.

In financial terms, it is claimed that buyers should be able to use telephony to reduce their costs by purchasing direct from the producer. This could be true of aso oke: weavers charge less than intermediaries. The problem is that any mobile-enabled reduction in purchase price through disintermediation is, or is perceived to be, more than offset by an increase in transaction costs, an increase in uncertainty, and an increase in risk.
A further key claim for mobile telephony is that, by reducing the time and cost of obtaining information, it will impact the information asymmetries that have encouraged the emergence of intermediaries. Our finding was that mobile phones reduced the time and cost of obtaining some information but, in the main, not the type of information on which the value and existence of intermediaries is based such as identities and reputations of buyers and producers. Nor have mobile phones impacted the other asymmetries on which intermediation in this sector is based – unequal access to knowledge about design, supply mechanisms, costs, trading processes, mechanisms of redress; and unequal access to capital. Thus, by and large, asymmetries of information, knowledge and capital – overall, asymmetries of power – between intermediaries and other stakeholders were at least maintained and in some cases strengthened.
There were few signs, then, of mobile telephony levelling the playing field; and more signs that it had been a technology of inequality. In comparing the "haves" and "have nots", we find a gradient of access. Those who were most-resourced prior to the arrival of mobiles now have 24/7 access to a personally-owned mobile phone. Those who were least-resourced still have no access to mobile. Those in-between have some access. As with access, so with impacts. The most-resourced have gained through mobiles in terms of more orders, larger orders, faster turnaround, and better quality of final product leading to more customer satisfaction. The least-resourced are losing orders. Those in-between have seen some benefits though might also be characterised as "running in order to stand still".
In terms of other structural change, the picture is of a glass perhaps four-fifths empty and one-fifth full. There were (only a) few signs of mobile telephony building new relationships and new supply chain geographies; and more signs that it had acted to strengthen existing relationships and existing geographies. One or two examples of novelty – of calling on new, more distant thread suppliers or on far-off sub-weavers who otherwise would have been dropped from outsourcing networks – must be balanced against many more examples of a reinforced status quo.

iv. Mobiles and Development

At the broadest level, we noted earlier that information failures in developing countries constrain the emergence of markets, and constrain business activity and investment. Our fieldwork provided no direct evidence on this. However, we have seen that mobile phones reduced some information failures and their related costs and risks. Accordingly, they did help to make trade and markets in this sector operate somewhat more efficiently and effectively. To that extent, we may hypothesise that mobile penetration has encouraged business activity and investment in this sector.

We can now turn to the last issue raised in the literature review – our conceptualisation of mobiles in developing as opposed to industrialised countries. The picture here is mixed. The majority of mobiles encountered in this study were owned by one individual, as is the norm assumed for industrialised countries. But those mobiles were shared with others to allow a more dispersed access, and the access model used by most weavers was one of public or shared access to mobile telephony. We also found novel ownership models such as the loan or "hire purchase" type agreements between some intermediaries and their weavers.
By and large, the mobile phones in this study were valued for their connectivity – they represented the first accessible, reliable means of telecommunications for most of the stakeholders. They were not supplementary or complementary to existing fixed lines. Nonetheless, at least for some, the mobility of the mobile phone was valued. Those who owned, or had been given, a GSM mobile appreciated the ability to be in contact during those journeys they still required to make. And even those with WLL mobiles felt in contact as they moved about their local area.

v. Limitations and Future Research

Finally, we should note this as "work in progress". First, because it describes just one case study sector. Whether it is representative of production micro-enterprise more generally is an open question. Most likely, it does epitomise the type of production that lies at the intersection of the cultural and the functional; production where local taste, culture and custom still matter and, hence, where design matters. As developing countries are driven to liberalise their import regimes such relatively protected and design-intensive sectors – clothing, furniture and furnishings, handicrafts, even food processing – will likely become more important as sources of employment and income. How far we can generalise, though, is unclear because in some ways our method argues the need for micro-level study that uncovers the specific process, structure, context and impact in specific sectors.

Second, we have monitored the impact of mobile telephony in the early stages of its penetration into this supply chain. So far, we find, it has an economising effect on supply chain processes but no significant restructuring effect on the organisation of supply chains. Developing countries, though, have been sites of much innovation in business uses of mobile telephony. Thus, future study may show new patterns emerging in supply chain processes and structures. For example, intermediaries have so far used the technology to maintain and even consolidate their position. Further diffusion and familiarity with mobile phones may, however, change this.


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1 Development Informatics Group, IDPM, School of Environment and Development, University of Manchester, UK

2 Development Informatics Group, IDPM, School of Environment and Development, University of Manchester, UK. Corresponding author:

3 Management Science, University of Strathclyde, UK

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