1. Agroindustrial Supply Chain Management
Yandra Arkeman

2. Basic Concepts: Supply Chain Supply Chain Management (SCM)
SCM for Manufacturing
SCM for Agroindustry

3. 1. Supply Chain
SCM is an advancement of traditional Operations Management
Traditional Operations Management
MAKE only
Supply Chain Management
SOURCE(n-1), MAKE(n) and DELIVER(n+1)

4. Industrial Eng, System Design, Business Mngt, OR, etc
Output
Input
MAKE
Processing Industry
A traditional Operations Management

5. SOURCE(n-1) MAKE(n) DELIVER(n+1) ..… ..…. …..
Supplier 1
Customer 1
Industry 1
..…
..….
…..
Supplier i
Customer k
Industry j
An Illustration of SCM Model

6. Supply Chain
All facilities, functions, activities, associated with flow and transformation of goods and services from raw materials to customer, as well as the associated information flows
Customers  Domestic and Overseas (Export)
An integrated group of processes to “source,” “make,” and “deliver” products (goods, services, information)

7. Supply Chain Processes

8. 2. Supply Chain Management
The design of a firm’s customer relationship, order fulfillment, and supplier relationship processes and the synchronization of these processes with the key processes of its suppliers and customers in order to match the flow of materials, services, and information with customer demand

9. Management: Objectives: Design Optimization Cost Quality Time
Flexibility

10. Variables: SCM Application: Materials (Supply) Information (Demand)
Cash
SCM Application:
Manufacturing
Agroindustry (Agro-SCM)
Service Industry

11. 3. Manufacturing Supply Chain Management

12. Supply Chain Illustration

13. Supply Chain for Denim Jeans

14. Supply Chain for Denim Jeans (cont.)

15. 4. Agroindustrial Supply Chain Management (Agro-SCM)

16. Agroindustrial Supply Chain Management
Agroindustrial Supply Chain Management (Agro-SCM) :
The management of the entire set of
production,
transformation/processing,
distribution and marketing activities
in agroindustry by which a consumer is supplied with a desired product
Agro-SCM is more complicated than manufacturing SCM  agricultural products are perishable

17. Description of Agro-SCM Model
Farming 1
Customer 1
Agroindustry 1
..…
..….
…..
Farming i
Customer k
Agroindustry j

18. Objectives First Objective: Second Objective :
Minimizing Total Supply Chain Cost (TSCC) that consists of transportation and inventory costs
Second Objective :
Minimizing Expected Number of Deteriorated Product (ENDP)  Maximizing quality
Very essential for agroindustry
As both objectives are conflicting :
No single optimum solution
Pareto-optimum or non-dominated solutions or trade-off solutions

19. The supply chain for an agroindustry can be very complicated because:
Many agroindustries have hundreds, if not thousands, of suppliers
Needs many distribution centers and transportation services
Flow of materials is very complex due to unpredictable demands and dynamic performance of numerous suppliers
Customer-supplier relationship is unique for each type of agroindustry

20. An Example of Agro-SCM  Mango

21. Middleman Local market Traditional growers (Broker) Green Mango
(Land, labor, capital, manure)
Middleman
(Broker)
Green Mango
Ripe mango
Collection center
(QC)
Processing
Industry*
QC, Time, Price, flexibility
Collection center
Export Market
Contract farming TG
Group of grower
Collection center
-Pickle,Juice, Jam,
Chip, Brine, Pure
Contract for 2 years
Harvested
buying
Insecticide
Technical assistance
Transportation
(food basket)
Local Market
Distribution
center
Flow of material
Flow of information
Flow of money

22. Current and emerging issues
Components
Current and emerging issues
Technology
Process, People (manpower)
Decisions
Information
Farmers
Plantation/cultivation
Grower
Post harvest
Quantity
Quality (size, ripeness)
Cost
Growing time
Weather
demand
Contract farmers
Technical Assistance
Pest control
Delivery time
Quality, Cost
Pricing
Transportation
Procurement
Collectors
Contract with farmers
Efficient Collection center
Delivery schedule
Target
Price
Demand,
QC, transportation
Processors
Food processing technology
QC, HACCP,
Quality (color, taste)
Exchange information
Institutional View
Demand
Quality of raw material
Process capability
Distributors
Distribution system (planning, transport, equipment, bar code…
- Location and quantity to be distributed
- Most efficient network
Exporters
Export regulation
GPS facilities
Export facilities
Banking facilities
Quality
Innovative

23. Events or Issues : Demand side: Supply side: SCM model:
Demand of fresh mango from Japanese Market
Quality, Cost, Timeliness and Flexibility
Supply side:
Farmer and grower
Quantity, Quality, Sustainability, Profitability
SCM model:
Non-collaborative SCM
Collaborative SCM
Integrative SCM (vertical integration)

24. Flow of materials vs. flow of money :
Materials some from farmer to broker, agroindustry and so on
However, in fact, the highest margin is received by exporters or distributors (up stream parties) not the farmers or agroindustry
This profit distribution must be improved in the future for the sake of poverty alleviation, economic development of a nation as well as building more efficient and responsive supply chain

25. Measuring Supply Chain Performance

26. Supply-Chain Process Measures
TABLE 9.1 SUPPLY–CHAIN PROCESS MEASURES
Percent of orders taken accurately
Time to complete the order placement process
Customer satisfaction with the order placement process
Customer
Relationship
Percent of incomplete orders shipped
Percent of orders shipped on time
Time to fulfill the order
Percent of botched services or returned items
Cost to produce the service or item
Customer satisfaction with the order fulfillment process
Order
Fulfillment
Percent of suppliers’ deliveries on time
Suppliers’ lead times
Percent defects in services and purchased materials
Cost of services and purchased materials
Supplier
Relationship
This side presents the process measures for Purchasing.

27. Measuring Supply Chain Performance
Key performance indicators
inventory turnover
cost of annual sales per inventory unit
inventory days of supply
total value of all items being held in inventory
fill rate
fraction of orders filled by a distribution center within a specific time period

28. Key Performance Indicators
Inventory turns =
Average aggregate value of inventory
Cost of goods sold
Average aggregate value of inventory = =
(average inventory for item i)
X (unit value item i)
Days of supply =
(Costs of goods sold)/(365 days)

29. Key Performance Indicators: Example
Cost of goods sold: $425 million
Production materials and parts: $4,629,000
Work-in-process: $17,465,000
Finished goods: $12,322,000
Total average aggregate value of inventory (2+3+4): $34,416,000
Inventory turns =
$34,416,000
$425, 000, 000
Days of supply =
($425,000,000)/(365)
= 12.3
= 29.6
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30. Other Measures of Supply Chain Performance
Process Control
used to monitor and control any process in supply chain
Supply Chain Operations Reference (SCOR)
establish targets to achieve “best in class” performance

31. Bogor, April 2009