Input Management

AG BM 460

Supply Chain Management

• Implies working with customers and suppliers to get everything to work as well as possible with efficiency, quality, and cost control

• Requires recognition of system’s existence and everyone’s roles

• Must identify critical steps

• Jointly manage these steps, sharing gains

Input Management

• What are your inputs?

• Can you store them?

• Is it expensive?

• Are they perishable?

• Where do you get them?

• What problems do your have with them?

• Can you work together and do better?

Input Management

• Start with long-term goals - Profitability, market share, consumer satisfaction

• Then short-term goals – inventory costs, quality, price, product loss, efficiency

• Then identify critical control points

Vegetable Cannery

• Some inputs very perishable – peas

• Some more storable – carrots

• Growing season short

• Cost of idle plant high

• Other inputs – cans, boxes, sugar, energy – not a problem

Cannery (cont.)

• Scheduling of plant essential

• Scheduling of growing season also essential

• Also control of sprays, varieties, etc. essential

• So how do you manage your inputs?

• What could you do better?

Cannery

• Start with calendar

• Block out most important product – e.g., tomatoes

• What other seasons are there? Before tomatoes. After tomatoes

• What crops mature before tomatoes? If you can them, can you sell them for a profit?

Cannery

• Can you work with grower to risk an early season variety? – share risks, pay a premium

• If bad weather, who bears the cost?• The point here is to structure contracts to

help cannery get what it needs, while provide farmer with what he needs.

• This may be facilities use, profits, quality, food safety, other stuff – but work together

Milk Plant

• Milk comes every day

• Flows can vary

• Demand can vary – school year vs. summer

• Quality important, esp., bacteria, drugs, etc.

• What do you do?

• What could you do better?

Milk Plant

• Can you work with farmers to improve quality

• Premiums, financing a super-cooler to quick chill milk before it goes in tank

• Once again, input management involves working with suppliers to get exactly what you need on a long-run basis

• May pay more to get it – reliability has value

Beef Plant

• Plant most efficient at capacity

• Product not especially storable

• Holding live animals expensive

• Odd-sized animals hurt efficiency

• Individual suppliers small

• What do you do?

• What could you do better?

Feed Mill

• Limited storage space at mill• Limited storage space at most farms• Corn major ingredient• Many trace ingredients• Rail service has good rates, but handling

big shipment a problem• Lots of small farmer suppliers• Major sources elsewhere

Feed Mill (cont.)

• What do you do?

• What could you do better?

• How do you induce your farmer-suppliers to store grain and dry it and do other valuable things?

Chocolate Company

• Inputs sugar, cocoa, milk• Non-farm inputs – wrappers, other

ingredients, boxes• Cocoa from overseas – price varies• Sugar from domestic sources • Milk from local sources• What do you do?• What could you do better?

Hog Farm

• Buy feed

• Buy feeder pigs

• Feed formula changes with age

• Limited storage space

• Cost of running out very high

• What do you do?

• What could you do better?

McDonalds

• Limited storage space at store

• Perishable inputs

• Payoffs to large scale purchases

• Very rigid uniformity requirements

• What do you do?

• What could you do better?

Weis Markets

• Limited back room space at store

• Warehouse space, but inventory costs may be high

• Need mixed loads to store

• Want truckloads to warehouse

• Movement of trucks through warehouse productivity measure

• Don’t want stock outs

Weis (Cont.)

• Many perishable items

• Some fragile items

• Don’t want spoilage or old produce

• What do you do?

• What could you do better?

Concluding Comments

• Each firm has key measures• Bottlenecks • High cost items• Quality determining items• Space limitations• Just in time • Structure of suppliers important• Hot topic throughout food system