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