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DYNAMIC OF INFORMATION IN THE MEAT SUPPLY CHAIN: THE
ARGENTINEAN CASE
Ing. Agr. Carlos Manuel Méndez Acosta. M.B.A.
Universidad Catdlica Argentina
Dra. M2 Isabel Alonso Magdaleno
Universidad de Oviedo
Key words: System Dynamics, Supply Chain, Meat, Argentina, Delays
This work analyzes the bovine meat chain in Argentina. The following parts form this
supply chain: production, process and commercialization. In turn, the production is subdivided in
breeding (production of calves) and hibernation (it puts on weight of the animals until weight of
task). The process consists on the task of animals, a cooked treatment, frozen or cooled, and
the commercialization in the export, or internal distribution, for its sale for consumption.
In the operation of this chain the price has a great weight. The same one coordinates
the actor’s decisions. They make their decisions using the current price and their expectation of
future price. Events as the hormones employment, the appearance of aftosa fever (foot and
mouth disease), or the Bovine Spongiform Encephalopathy (BSE, sometimes known as "mad
cow" disease), alter the Argentinean exports; and consequently the expectation of prices.
Using system dynamics a model was elaborated. This model picks up the operation of
the supply chain coordination of bovine meat. This model picks up delays, feedback and non-
lineal relationships to explain the coordination mechanisms among the different actors.
The chain works with a mechanism of market coordination. The delays in the
transmission of the price are common. These delays are confuses with the shortage of
information inside the production and distribution system.
That lack of information is typical in the incentive mechanisms based on the prices
inside the agricultural systems. That lack punishes asynchronously to the producers and the
down-stream industry participants because it breaks into fragments the coordination of functions
and it limits the endogenous assignment of resources that generate value inside the system
(Cloutier et. al., 1998; Cloutier et.al., 1999).
In the pattern we can observed the effect of different delays, in the transmission of the
price, in the production-distribution chain. The Argentinean bovine meatis a “commoditie”. That
is to say a barely differentiated product. The exploitation of the bovine livestock for meat
production is carried outin function of obtaining a rich food in proteins, extremely appropriate for
the human diet; mainly in developed countries.
Diversity of production methods and product qualities exists. In the Argentina the
pastoral system is used. The flavor, high quality, and low cholesterol, among other things,
characterize the obtained meat.
The market of this product is for the most part domestic: 2,200,000 tons of meat are
dedicated annually to the consumption by this country; and only 440,000 tons are dedicated to
export (that is to say 20%). This implies that of a total of $6,200(USA) millions marketed only
$1,600 millions are exports.
This implies that the price achieved internally in the Argentina determines the price of
chain coordination. The daily market is very important in this country. Every day this market
offers in sale among 10,000 and 15,000 bovine for task. The price achieved in this market, ina
transparent way, is the main indicator of the alive livestock price, and it is the indicator of the
private operations.
The international trade of the meat is centered in types of specific meat products that
agglutinate in certain commercialization routes. F or that reason, a definable world market for the
meat doesn't exist although. In general, the exported meat corresponds to the quality “Hilton
Beef” dedicated to developed countries (Font y Costa, 1993). The refrigerating offerers in the
local market can improve its offers but alone for capable lots for export.
The role of the price is extremely important in the operation of the chain. For that, it
should be described it completely their operation to be able to reflect him appropriately in the
pattern.
The material and information flow it is picked up next —figure 1—.
Production —————g» Task and processing
- Genetics - Weigh of the stocking head
- Age of task - Termination grade
- Operation - Prosecution capacity
- Precocity - Etc.
- Fertility
~ Ete. 4
»
Consumption
® Quality
- Alimentary security
~ Etc.
FIGURE 1. BOVINE MEAT SUPPLY CHAIN: PHYSICAL FLOW AND INFORMATION FLOW
Wiazowski y Barbosa da Silva (1999)
If the producer and the processor obtain quicker (and more purified) the consumption
information, the supply chain will be able to work more coordinately.
To explain the operation of this agricultural chain, using system dynamics, it is used the
“commodities” production cycles pattern developed by Goodman (1974). The same one, a
model of third order, is presented in the figure 2.
rc
oS. i)
Production rte consumption rate
per eapita consumption
‘expected price change rate
productiof capacity prc
‘capacity adquisition rate
expected price
Oo
capacity adquistion delay
desired production capacity
FIGURE 2. “COMMODITIES” GENERIC MODEL
Goodman (1974)
The flow denominated “production rate” and the stock “distribution inventory” were
modified according to the pattern elaborated by Sterman (2001) —figure 3—.
Manufacturing Cycle Time
Work it, Process Inventory aay
FS 50
Production Rate Shipment Rate
Ex—O>
Production Start Rate
Inventory Coverage
FIGURE 3. “COMMODITIES” GENERIC MODEL, SECTOR PRODUCTION
Sterman (2001)
In the same model the variable capacity acquisition rate and production capacity were
replaced by the flows and stocks just as it is indicated in the figure 4.
Discard Rate
Capital stock
Aequisitdp Rate (CC Capacity Acquisition Delay
By
Capital On Order [ ji
order Rate KC
a)
FIGURE 4. “COMMODITIES” GENERIC MODEL, CAPACITY PRODUCTION SECTOR
Sterman (2001)
The productive sector phases are the following ones:
A) Breeding of calves (Méndez Acosta y Alonso Magdaleno, 1999); where the production
capacity adjustment depends on the number of females to the lot of mothers.
B) Weight of young bulls; where the adjustment of its capacity is carried out increasing the
speed of growth and put on weight by means of improvements in the food quality (add
maize grain and employment of winter forages and prairies).
C) Processing; where the capacity adjustment is carried out by means of investment in plant
capacity and processor (refrigerators).
D) Distribution; where the capacity adjustment is made according to the equipment of new sale
positions, generally hypermarket, increase of the gondolas number, improvements in the
product presentation, etc.
Lastly the prices formation sector is formed by the interaction of the existent inventory in
each one of the chain links (producer, feeder, processor and distributor), and it depends it on
the future prices expectation of each one of them and the current demand. This demand could
be influenced by the producer (breeder or feeder), the processor and the distributor, improving
the product quality or the processes of each stage (increasing the consumer's trust who then
their probability of acquisition could increase (Wiazowski y Barbosa da Silva, 1999).
If the mechanisms of information transmission worked, coordinately, this information it
would arrive quickly to the producer who could improve the product quality by means of superior
genetics, quickly selection for precocity, fertility, speed of growth, feeding, sanity, etc.
The delays in the arrival of the information affect the correct offer chain coordination.
Mentioned literature
CLOUTIER, M.; DOEHRING, T. y SCHROEDER, R.C. (1999). The language of system dynamics:
creating a clear vision in a complex world. AEC - Ag. Education & Consulting. 83 p. (mimeo).
CLOUTIER, L.M. y SONKA, S.T. (1998). A System Dynamics Model of Information Feedback and
Activity Coordination in an Agricultural Value Chain. In: Sixteenth international conference of the
system dynamics society. Quebec City, QC.
COSTA RAN, L. y FON VILALTA, M. (1993). Commodities, mercados financieros sobre materias
primas. ESIC Editorial. Coleccion Empresa. Barcelona, Espafa.
GOODMAN, M. (1974). Study notes in system dynamics. Wright Allen Press, Inc. Cambridge,
Massachusetts.
MENDEZ ACOSTA, C.M. y ALONSO MAGDALENO, M. |. (1999). Analisis de la produccién de carne
vacuna en la pampa himeda argentina, desde las aportaciones de la dinamica de sistemas.
Revista de Ciencias Agrarias y Tecnologia de los Alimentos, U.C.A. vol. 16-17, pp. 24-39.
STERMAN, J . (2001). Business Dynamics. Ed. Mc. Graw Hill.
WIAZOWSKI; BORIS ALESSANDO; BARBOSA DA SILVA y CARLOS ARTHUR (1999). Coordenagao
da Cadeias Productivas: Uma Aplicacao de Sistemas Dinamicos ao Agronegocio da Carne
Bovina. http://www.agrosoft.com.br/trabalhos/ag99/artigo13.htm
CONTACTS:
Last Name: Méndez Acosta
First Name: Carlos Manuel
Organization: Universidad Catdlica Argentina
Complete Postal Address:
UNIVERSIDAD CATOLICA ARGENTINA
Facultad de Ciencias Agrarias
Paraguay 2669 3er. Piso
—1425 Buenos Aires—
ARGENTINA
Phone: +54 15 4052 8188
Fax: +54 11 4964 2057
E-mail address: cmanuelma@ ciudad.com.ar
Last Name: Alonso Magdaleno
First Name: M? Isabel
Organization: Universidad de Oviedo
Complete Postal Address:
UNIVERSIDAD DE OVIEDO
Departamento de Administracién de Empresas y Contabilidad
Facultad de Ciencias Econémicas y Empresariales -Campus del Cristo—
Avda. del Cristo, s/n —33071 Oviedo -Asturias
ESPANA
Phone: +34 985 10 36 99
Fax: +34 985 10 37 08
E-mail address: ialonso@ correo.uniovi.es
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