A System Dynamics Model for Studying the Policies of Improvement of Chicken Industry Supply Chain

A System Dynamics Model for Studying the Policies of Improvement of Chicken Industry Supply Chain

Ehsan Gale Gafi (Department of Industrial Engineering, Mazandaran University of Science and Technology, Babol, Iran) and Nikbakhsh Javadian (Department of Industrial Engineering, Mazandaran University of Science and Technology, Babol, Iran)
Copyright: © 2018 |Pages: 18
DOI: 10.4018/IJSDA.2018100102

Abstract

The Iranian chicken industry has always been encountered to high and fluctuated chicken prices. The purpose of this article is to find the best choice to prevent chicken prices from increasing more by investments. System dynamics methodology has been used to modeling, evaluating and optimizing chicken supply chain. Considering the existing capabilities for improvement in supply chain and experts opinion, these strategies were proposed; “reduction of breeding period,” “modernization of production facilities,” “Increase in pellet feed production” and “energy conservation.” After implementing the model and testing various scenarios, strategies were prioritized based on key indicators. At last modernization of production facilities is introduced as the best strategy for the next three years.
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1. Introduction

Chicken meat is a high consumed agricultural product and the main source of protein in the world (Shoushtari et al., 2011). Five elements have increased the popularity of chicken meat:

  • Price compared with other foods

  • Good nutritional profile/low fat

  • Convenience of preparation

  • Versatility

  • And well suited for quick-service and casual dining menus (FAO, 2010)

Chicken meat industry is the third industry after petroleum and petrochemical, and has an important role in providing food and employment opportunities in Iran. According to FAO statistics Iranian chicken meat industry has the eighth chicken meat production rank in the world. Nevertheless, it is facing too many problems in that country which have been illustrated in high and fluctuated chicken price. Changes in the production cost, customer demand and production rate are causes for the fluctuations in chicken prices. Some of these changes can be due to: (1) Given that the most part of the chicken feed is imported, production cost can be fluctuated by the oscillations in the value of the dollar. (2) Before the national and religious festivals, demand for chicken rises and then it falls. (3) Fluctuations in day-old chick production rate, higher mortality rate in hot seasons and semi-activity of many production farms (due to old cooling facilities and lack of liquidity when feed and day-old chick prices are rising).

Chicken production cost in each country is depended on the weather conditions, production technology, feed costs, energy costs and management system. Calculations show, on average 60 to 70 percent of production costs of chicken meat is dedicated to feed costs. Corn and soybean is important because the most part of it is imported. Although Iranian agriculture sector is exempt from tax, receives a large subsidy in costs of power and natural gas and weather conditions for breeding is good (is not so hot or cool), chicken price is high compare with global prices. The causes of increase in price can be listed in three categories: (1) inflation and increase in the value of the dollar. (2) High feed conversion ratio (FCR) due to the long breeding period, using mash instead of pellets as the chicken feed in many farms, high feed waste. (3) Inactivity or semi-activity of many production farms, high energy consumption and old facilities of heating, cooling, feeding and drinking that can be considered as low efficiency of the production farms. (4) Inefficient management in the chicken meat industry, absence of integrated management in the production chain, independency of production units and lack of contractual system.

The complexity of chicken meat supply chain management grows due to the increase in the number of levels, so the managers has to be up to date in order to be effective in managing the increasing complexity (Darivandi Shoushtari, 2013). The critical elements of chicken supply chains are price and production rate for all members (broiler and Parent stock farms, incubation units, feeding units, chicken slaughterhouses and fridges) and the purpose of this study is to find the best investment procedure which in short-term (two years) could lead to price stability and productivity in the industry so the producer and costumer be satisfied. For study the behavior of a system without having to test on the real conditions a model of system must be made (Benedict et al., 2016). The complexity makes simulation the only practical way to test and optimize a model like chicken supply chain. Considering the continuous processes of chicken supply chain model that feedback significantly affects the behavior of a system, System dynamic (SD) is best suited methodology (Azar, 2012).

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