The prospect of chicken sales growth coupled with consumer taste change presents the suppliers with the interesting challenge of creating a strategy to manage the uncertainties. The strategy includes elements of investing in additional capacity, optimizing process parameters for various stages, and evaluating the possibility of changing product specifications. A prerequisite to strategy creation is gaining consensus from the system participants to base their confidence in the concept of total system-wide cost reduction, ‘benefits for all’, and the cost modeling methodology used to accomplish these goals.
The end result is a supply chain that is more aligned to a market driven product mix, and a capital investment plan on when, where and how much to invest to sustain the forecasted demand growth.
Changing market conditions and technology innovations in the poultry business capitalizes on the model’s re-usability to facilitate analysis on an ongoing basis. Contracts that are annually negotiated can be analyzed and revised based on the results from the supply chain model.
The poultry analysis evolved from a simple optimization model. Initial savings in the number of chickens suggested a more detailed analysis. The next model included the interaction
between the number of birds and bird size, “first” processing capacity, and commodity market prices. Subtleties of dependence of process yields on bird size were also introduced
into the model. Impact of various changes were analyzed to identify those that:
1. Had the greatest impact
2. Were easy to implement
A long-term strategy was created based on the results of the analysis. The strategy included forecasted commodity market prices as well as demand growth for each product category.