3. Develop Vertical Co-operation ñ Demand Management
If a dedicated chain were established, it would be possible to link
the supply of animals to the demand for meat products, at least in
terms of the base load of demand. The dedicated farms could be
used to supply say 85 or 90% of the retailersí requirements, with the
remainder being sourced from the open market to meet the
variability in end-user demand.
This approach would allow consistent and level scheduling of
production in the dedicated farms and processing plants, which in
turn would lead to further cost reductions and permit the
development of efficient standard processes.
Linked to this would be simplification of information systems to give
visibility of consumer demand throughout the chain and the
transmission of pure demand signals with no noise or amplification
effects.
Currently many producers decide on when to send their animals
based on spot market price, delivery batch and convenience with
other farm activities. As a consequence some animals will go either
slightly too early or slightly too late in their growth cycles. Therefore
producers to a large degree operate a push system, leaving
processors to sort random batches of animals for manufacture and fit
to consumer specification.
Retailers and producers are active in developing producer groups,
but often the farmers within these groups will alternate to other
supply routes. To introduce a pull system, dedicated Supplier
Associations would be required to ensure continuity of supply.
Processors could then become responsible for collecting livestock
from farms, reducing logistics costs through better consolidation.
These collections could be planned to pull animals most closely
aligned to consumer value at a particular point in time.
To make this happen, producers would need to estimate weight,
conformation and fat levels on an information exchange for each
electronically identified animal. The processor could then use
visibility of the whole producer groupís stock when creating a
collection plan.