Supply Chain Management for

Food Security and Trade Facility

-Thai and South African Broiler

Supply Chain

ARCHANA R. SATHYAN

JLU 1

Outline

• Introduction

• Supply Chain Management (SCM)

• Global Broiler Production

• Thailand Broiler SCM

• South African Broiler SCM

• Case study analysis

• Conclusion

2

Plan, do, check,

understand, act &

shrink the time!

3

SUPPLY CHAIN MANAGEMENT

Supply chain management isdefined as management of all activitiesinvolved in delivering a product from rawmaterial to customer : procurement of rawmaterials, manufacturing, warehousing,inventory tracking, order management ,distribution and delivery across differentchannels.

(LUMMUS, 1999)

4

Food supply chain

• An Agri -food supply chain is a supply chain which produces and distributes an agricultural or horticultural product.

2 Kinds

1. Fresh Agricultural products

2. Processed food products

( ARYAMAN, 2006)

5

1950-1970 1970-1980 1980-1990 1990-2008

Initiated

Logistics 1950SCM concept

1980

Initiated SCM in service

industry 1995

Educational

SCM 2007

SCM in

manufacturing

industry 1985

Evolution of SCM

Concept coined by KEITH OLIVER (1982)

Matured Logistics

1970

Modification of HABIB & JUNGTHIRAPANICH, 2010 6

CustomerRetailer DistributorManufacturerSupplier

FLOW OF GOODS

FLOW OF INFORMATION

ELEMENTS OF SUPPLY CHAIN

(Modifictaion of CHOPRA AND MEINDL, 2001)

FLOW OF FUNDS

7

1. Production(What, How, When)

3. Location(Where is the best)

4. Transportation(How & when to move)

2. Inventory(How much to make &

store)

THE DRIVERS

GANESHAN et al, 19958

5. Information(Basis for all decisions)

VALUE CHAIN

• The term ‘Value Chain’- MICHAEL PORTER in

"Competitive Advantage: Creating and

Sustaining superior Performance" (1985)

• Value chain analysis describes the activities

within and around an organization, and

relates them to an analysis of the

competitive strength of the organization

(PORTER, 1985) 9

Firm infrastructure

Human resource management

Technology development

Procurement

Inb

ou

nd

log

isti

cs

Op

era

tio

ns

Ou

tbo

un

d

log

isti

cs

Ma

rke

tin

g a

nd

sa

les

se

rvic

es

Su

pp

ort

ac

tiv

itie

s

Primary activities

VALUE CHAIN

(PORTER, 1985)10

Broiler SCM

Funds flowFunds flow

Goods flow

Own compilation11

Problem statement

• Broiler - Fastest growing and flexible livestock sector

• Satisfy the nutritional need of SSA (59%) & SA (34%) (FARRELL, 2013)

• Price competitiveness & convenience

• Effective tool to alleviate poverty

• Major contributor to GDP(24% of Agri. Production in

SA)

• South Africa becomes an importer and major

consumer?

• Thailand – Emerging exporter?

12

BRAZIL

M.EAST1/3rd

•Annual Growth Rate–3-4%

•Growing exporters-China,

Argentina and

THAILAND

SOUTH AFRICA

•84.6 Million tones

•USA, Brazil & China (53%)

GLOBAL BROILER SCENARIO

(USDA, 2013)

USA

13

Growing exporter’s market share

Neal et al, 2008 14

Per capita consumption

19.8 kg/yrProduction -1.6 Million T

(9th)

Export- 0.54 MT

(3rd)Growth rate - 6.67%

Thai Broiler chain- ‘Kitchen of the world’

(www.index mundi.com)

(NFI, 2013)(USDA, 2013)

3rd largest exporter

15

Sl. No Year Production

(Million T)

Growth rate

1 2008 1.170 11.43 %

2 2009 1.200 2.56 %

3 2010 1.280 6.67 %

4 2011 1.350 5.47 %

5 2012 1.550 14.81 %

6 2013 1.500 -3.23 %

7 2014 1.600 6.67 %

Broiler meat production in Thailand from 2008-2014

Source :www.indexmundi.com 16

Percentage of Thai poultry production and

producers by farm type

Percentage of poultry production

Integrated commercial farms

Large commercial farms

Small Commercial/Backyard farms

70%

20%

Percentage of poultry producers

98%

NEAL et al, 200817

Charoen Pokphand, Betagro

Breeding companyUS/UK

Breeding farm

Hatchery

Company farm Contract farm

Abattoir

Processing

company Wholesaler

Super

markets

Other

outlets

Wet

markets

Export

33%

G. Parent stock

Parent stock

D.O.C

Live birds

Slaughtered birds

Extra parts

Whole birds/parts

Premium/pre cooked

Do

me

sti

c m

ark

et

Vertical

Integration

Modification of NEAL et al, 200818

Integrated Firm

Land

EVAP

Holding facilities

Farm labour

Firm veterinarian

Farm feed company

Broiler

production

farm

Firm processing

Firm hatchery

Infrastructure

Services

Vaccine

D.O.C

Finished

Birds

Modification of NEAL et al, 2008

Flow of inputs and information to a broiler farm

19

1. Production

• Feed-cassava

• 30 years of experience

• Tropical climate & plains

• Intensive farming

• Regular evaluation

• HACCP

3. Location

• Concentrated in middle

Thailand

• Closeness to importers

4. Transportation

• Good (80.8%)

• Shipment to Japan

(2 weeks)

2. Inventory

• Well equipped slaughter

houses and processing

• 3.4% increase in

consumption

5. Information• Tax relaxation –ASEAN

• Favorable Govt. policies

• Forecasting

•)

THE DRIVERS- Quality and quantity at right time

20

BACKYARD POULTRY

21

Why do small holders go far

behind???• Can not compete!

• No contracts! no loans! high interest rates!

• HPAI outbreak, changed farm standards

• Moving to duck/livestock sector

• Native chicken no export! Limited Supply Chain

• Household consumption/income/cock fight

• Scavenging types

• 73% no vaccination!

• No veterinarian, only volunteers

• Home consumption/Aggregator/Consumer

(SUDSAWASD, 2008)

(NEAL et al, 2008)22

South African Broiler chain

39kg/yr

•Production - 1.4 million T

•Consumption - 1.7million T (9th)

•Expected increase in consumption-

7%•Importers- Brazil (53%) and The

Netherlands

•Export - 0.01 Million TJOUBERT et al, 2013

SAPA, 2012

Per capita consumption-

23

Genetic material (imported)Cobb 500, Ross 308

Grandparent operations

Parent rearing farm Breeder house Hatcheries

Integrated

farmsContract grower farms Independent producers

Abattoir processing

Imports

33%Distribution

Exports

2.2%

Retail

50.87%

Wholesale

25.91%

Restaurants

15.19%

Domestic consumption

Comm

ercial

feed

indust

ry

Others

5.83%

7 companies

24

Broiler meat export and import quantities in SA from

2003-12

DAVIDS, 2014 25

Brazil USA SA

(DAVIDS, 2014)

Broiler efficiency benchmarks-Comparison

with major players and SA

26

Lack of day old chicks!

Transaction cost very high! Long distance! (Lovell, 2014)27

Lack of

abattoirs and

freezers!28

Olden days

Small growers supply

12% of broiler

production

29

Transportation

is expensive

(JOUBERT et al, 2014)

(LOVELL, 2014)

Poor condition of roads!!!!!!!

30

(JOUBERT et al, 2014)

(Louw, 2011)

1. Maize is the major feed-import from Brazil!

2. A few feed companies dominate the market

3. Increased price of maize

31

% Change in broiler and feed price (SA)

(DAVIDS, 2014)

Feed cost - 157%

Price of chicken - 61%

32

(LOVELL, 2014)

(JOUBERTet al, 2014)

Thailand

• Vertical Integration

• Entry barriers to competitors

• Soy & Maize feed(cassava )

• Greater imports of feed (biodiesel)

• Antibiotic stress development

South Africa

• Vertical integration

• Limited share for small

holders

• Maize price & dominator

feed companies

• Day Old Chicks supply

• Weak infrastructure

support

(NEAL et al, 2008)

(NARANONG, 2007)

Comparative analysis of Broiler supply

chain

33

Thailand

• Bio security concerns

• pharmaceutical and

vaccine free chicken

• Fuel price high

• Antibiotic resistant

bacteria from the farms

• Government support

South Africa

• Lack of abattoirs

• Dumping of Brazilian poultry

• Poor condition of roads

• Poor extension and market information service

• Government support less

(NEAL et al, 2008)

(NARANONG, 2007)34

1. Production• Day old chicks

• Infrastructure

• Feed supply

• Vaccine supply

2. Inventory• Freezers

• Diversification to processed

products

5. Information• Demand forecasting

• Good government policies

• Farmer’s organisations

• Training on marketing and

veterinary

• Extension services

• Credit facility

• Antidumping tariff policies

4. Transportation

• Good conditioned roads

•Import to neighbouring

countries

3. Location

• Concentrate big farms near

to service centres

Recommendations

(Joubert et al, 2014)35

Thank you!

36