CONTINUATION FROM LAST TUESDAY LOGISTICS IN FOOD AND AGRIBUSINESS

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

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

FUNCTIONAL COMPONENTS (LEVEL 3) Warehousing Transportation Materials management

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

IMPLEMENTATION (LEVEL 4), ORGANIZATION Structure Roles and responsibilities Performance measures

LOGISTICS STRATEGIC PLANNING PROCESS Visioning Analysis Planning for change Managing change

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

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

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

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

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

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

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

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

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.

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