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Optimizing Logistics in Food and Agribusiness: Strategies for Efficient Network Design and Management

This document outlines an integrated approach to logistics and supply chain management in the food and agribusiness sectors. It emphasizes the importance of channel design, network strategy, and physical infrastructure, focusing on factors such as customer demands, transportation services, and inventory levels to enhance operational efficiency. The text also addresses the implementation of information systems, organizational structures, and the interplay between logistics and marketing functions. By adopting a systems approach, businesses can better coordinate production stages, improve food quality, and manage costs effectively.

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Optimizing Logistics in Food and Agribusiness: Strategies for Efficient Network Design and Management

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  1. CONTINUATION FROM LAST TUESDAY LOGISTICS IN FOOD AND AGRIBUSINESS

  2. CHANNEL DESIGN/PHYSICAL NETWORK STRATEGY (LEVEL 2) • CD factors: customers demands, channel economics, channel power, channel players roles • Physical network strategy • How many facilities, where, and mission of each • Customers/product lines served from each • Inventory levels • What transportation services to use • Mgt of return flows • Any third party logistics services to be used

  3. DESIGN SYSTEM TO • Meet customer requirements while not ignoring • Cost • Risk • Flexibility • Cost/service tradeoff critical

  4. FUNCTIONAL COMPONENTS (LEVEL 3) • Warehousing • Transportation • Materials management

  5. IMPLEMENTATION (LEVEL 4)INFORMATION SYSTEM • Information system enables integrated logistics • Timely and accurate information • Carefully designed • Integrated software with full functionality • Advanced decision support • Network planning models • Optimization tools for scheduling • Order consolidation programs • Transportation routing and scheduling programs

  6. IMPLEMENTATION (LEVEL 4), ORGANIZATION • Organization • Structure • Roles and responsibilities • Performance measures

  7. LOGISTICS STRATEGIC PLANNING PROCESS • Visioning • Analysis • Planning for change • Managing change

  8. LOGISTICS AND THE MARKETING FUNCTIONS: REVIEW • Logistics objective--minimize total costs given the customer service objective. • Logistics interfaces with marketing at Place/customer service. • Marketing--Price, Product, Promotion and Place • Marketing objective--allocate resources to marketing mix to maximize log-run profitability

  9. TOTAL COST = • Transportation cost + Warehousing cost + Order processing cost+ Lot quantity cost + Inventory carrying cost

  10. SUMMARY • This model can be used with any firm or situation • Start with customer service and work down through the triangle • Strategic  Structural  Functional  Implementation

  11. INDUSTRIALIZATION OF AGRICULTURE • Manufacturing Processes • A systems approach • Separation and realignment of stages of production • Negotiated coordination • Risk: Sources and strategies • Power and control • Role of information

  12. MANUFACTURING PROCESSES • Differentiated products in place of commodities • Ask consumers what they want is replacing produce-then-sell mentality (Becoming demand oriented) • May require changes in how the raw material is produced and what it shall not contain • e.g., source verification, animal feed regulation, use of chemicals • Specialization • Facilitates systemization and routinization • increases efficiency and effectiveness

  13. MANUFACTURING PROCESSES, CONT. • Systemization and routinization • Understand and control biological process Tasks more programmable  regular work schedules • More efficient use of facilities and personnel • Less managerial oversight • Scheduling and utilization • Emphasis on facility utilization, flow scheduling and process control • Reduced uncertainty about biological production processes  need less excess capacity • Better prediction and control

  14. A SYSTEMS APPROACH • Focus on the entire food chain • Improved food quality and reduced costs • Improve coordination among stages of the value chain • Input packages for optimum quality and characteristics of the product • e.g. biological and chemical packages to farmers • Total cost approach

  15. SEPARATION AND REALIGN-MENT OF PROD. STAGES • Separation and production specialization • Non-market mechanisms to coordinate stages of the value chain--external integration • Consolidation (provides internal control) • Contract production • New generation coops • Strategic alliances and joint ventures

  16. NEGOTIATED COORDINATION • Replacing or changing the spot market • Marketing products with special qualities • IP grains • livestock quality and delivery timing • Branded products • Open spot markets less able to convey information about quality, timing and other product characteristics • Still: spot, futures and options markets have new uses.

  17. NEGOTIATED COORDINATION, CONT. • More rapid transmission of information • Helps to maintain profit margins • Extract innovator’s profits • Quick adjustment to mistakes help to assure survival and success

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