Supply Chain Management Analysis:

Agida Catadman Dantes de Leon Estanislao Lope Peralta

Objectives To observe a local, semi-integrated company comprised of

feed mill, poultry farm and trucking operations

To analyze the key Supply Chain Management (SCM) processes in the operations and give a sound rating of the companies performance in terms of SCM

To give recommendation on how to further improve operations through utilization of SCM

OutlineI. Video presentation: How the company’s

operations work.II. Company HistoryIII. Organizational ChartIV. Operations Flow ChartV. Key Supply Chain ProcessesVI. Q & A with the President VII. SCM Rating and AnalysisVIII. Conclusion and Recommendations

Company History

Late 1980’s – Mrs. Cecilia Picones- de Leon, a midwife, started chicken wholeselling in the local market.

Early 1990’s – Mr. Nilo M. de Leon, a seaman, accrued some capital and retired early to concentrate on trucking/trading of live chicken.

1995 – the couple explored the broiler growing business considering the market potential they established from trading.

- they started with 5,000 birds

1998 – they engaged in feed milling, mixing their own feeds for their farm

○ First feed mill was located beside their residence

Presently, the company has a feedmill capable of producing 10 metric tons of feeds per day, a total farm capacity of 100,000 birds per cycle and hauls 20,000 broilers to costumers in and around Metro Manila every week.

The Average Monthly Production/Sales from NDL Poultry Farm Could Feed

100,000 People a Delicious Chicken Meal

Or more than 1.2 Million

People for an Entire Year!!!

Did you know that…

Organizational Chart

Operation Flow Chart

Raw Material Suppliers

Yellow Corn, US Soy Bean meal, Feed Wheat, Fishmeal, Porkmeal, Coconut Oil, Enzymes, Amino Acids, Vitamins, Minerals, Toxin Binders, Antioxidants, etc Inspection

Loading

Delivery

Order

Feedmill

Delivery Schedule

Unloading

Fail QC Pass QC

Order request

Office

RM Inventory

Low inventory

Feedmill Supplies

Feedmill Feed Production and Delivery

Schedule

Final Feed Mixing

RM Inventory

Hummer Milling Premixing

Packaging

Finished Feeds Stacking

Loading and Delivery

Order requestLow inventory

FARM

Day-old-chick loading schedule

Office

Feedmill Production and Delivery

Feedmill Operations MapFeedmill

Hatchery, Day-old-chick (DOC)

Supplier

FARM

DOCs

feeds

Flock Health Monitoring

Loading schedule

WeighingHauling

Loading

Brooding

Cleaning & Disinfection

Growing

Weighing and inspection

Ready for next loading

Ready for harvest

DOCs

QC Pass

QC Fail

CUSTOMER

Delivery

Office

Unloading

excess feeds

Farm Operations and Delivery

CORN

Soy Bean Meal

Animal Proteins

MicroingredientsWheat

Rice Bran

Silo

Hummer mill 1

2-stage 1/4ton Mixer

Weighing Scale

Finished Feeds Stacking

Loading Area

Feed mill Map

Coco Oil

Hummer mill 2

Key Supply Chain Processes Customer Relationship Mgt

Main clients are chicken dealers from Pasig, Laguna, Antipolo, Binangonan, and other wet markets

Small clientele (less than 20 regular customers)

Individual/Personal client identification Sales secretary coordinates daily orders

Customer Relationship Mgt Payment terms are permitted for long time

clientsNetwork gives leverage – industry updates

available for customers Target is to keep long-term customers

Key Supply Chain Processes

Key Supply Chain Processes Demand Mgt – FARM

Farm supply is only 50% of market demandSlack is outsourced from other farms around

LuzonDifficulty in allocation since this is done on a

daily basis – volume of orders highly dependent on price and available sizes

Day-Old-Chicks(DOCs) are prebooked 3 months in advance

Demand Mgt – FeedmillAllocation and purchasing is often “in panic”No specified replenishment level for stocksA lot of unnecessary hoardingProduction allocation is done on a weekly

basis

Key Supply Chain Processes

Key Supply Chain Processes Order Fulfillment

No structured ordering system and supplier accreditation

Telecommunications – low tech! Purchase orders

Key Supply Chain Processes Supplier Relationship

ProcessSupplier identification

and selection with no formal structure

Cost management– always seek best prices

Industry leaders

vs. Strict evaluation – undergo testing, price evaluation, supplier accreditation and trials before actual purchase

vs. establishing long term supplier – informal tie up based on past experience (delivery speed, openness to returns, reliability, quality, price)

Key Supply Chain Processes Supplier Relationship Management

Pay on time!Follow transactional protocolsAs much as possible, do not lie! Trust is not a

cheap commodity.

Key Supply Chain Processes Product Development and Commercialization

Few personnel are given access to seminars, symposiums, higher education, etc.

There is lack of empowerment among different levels of organization – decision-making highly centralized

Very few general and staff meeting

Purchasing Behavior

Feedmill Inventory

Order Lead time

# of SuppliersBehavior of Purchasing Frequency of Purchase

Microingredients

Acidifiers, Amino Acids, Antibiotics, Anti-Coccidials, Enzymes, Toxin Binders, Vitamin, Mineral Premix, etc

1-2 weeks multiple varies greatly in terms of allowable terms, delivery speed, price, etc. Some products like Vitamin premix is under a yearly contract.

once a month to once every two months

Purchasing BehaviorFeedmill Inventory

Order Lead time # of Suppliers Behavior of Purchasing

Frequency of Purchase

Raw Materials

Corn2-3days multiple adversarial, with

price bid every 2 weeks

Soya

3 weeks to 1 month 2 pre-booked, no

price bidonce to twice a month

Oil2-3days 2 pre-booked, with

price bid once a month

Animal Proteinmonthly 1 semi-contractual once a month

Purchasing Behavior

Farm InventoryOrder Lead time

# of Suppliers Behavior of Purchasing Frequency of

Purchase

Day Old Chickat least 1 month 1 semi-contractual once a week

Hatchery Vaccinesincluded in DOC deal 1 included in DOC deal included in DOC

deal

Farm Vaccines 1-2 weeks 2 to 3 quality/ efficacy driven once every two months

Farm Equipments and UtilitiesPlastic ware 1 month multiple bidding once a yearMetal ware 1 month multiple bidding once a yearWood and hardware 2-3 days multiple "suki" discounting as needed

Q&A with the PresidentWhy don’t you outsource your feeds?

“Savings on feed cost are too large to ignore. And it implies more employment to our fellowmen.”

Why don’t you produce your own chicks?“Lack of finances and technical know how limits integration.”

Why not simply buy and sell chickens instead of growing?“We are now expanding our market and outsourcing more . Maintaining a

growing inventory allows flexibility during shortages or surplus.”Why not dress and process your live chicken yourself?

“Because we fear going too far off our core competence which is growing and trading”

Are you looking for further integration or further outsourcing in the future? “We are looking at more tie-ups. Expansion requires more

capital and higher risks. Small operations want to maximize opportunity. No general rules, but instead we decide on impulse. The determining factor in any activity is whether we see more profit or not. In the long run this may not hold. We need more consistent supply flow to become more productive.”

Q&A with the President

Analysis Key Points

NDL vs World class poultry industry

World class poultry – Internal supply chain focus, supply focus and network mgt focus all working in parallel

Short Term Progress: Proactive - Cross-functional team orientation; emphasize the balance between customer satisfaction, inventory risk and investment; centralized data; improved procurement; development of suppliers; long term contracts

Analysis

Analysis Key Points

NDL vs World class poultry industryStage 1: Internal supply chain focus

Stage 1: Internal Supply Chain FocusTwo major process blocks: Feed mill and Farm

Focus its activities in ensuring that the two major process blocks above are operational, which means that the main focus is to be able to process the raw materials into the product that it will sell.

Analysis

Analysis Key Points

NDL vs World class poultry industryStage 1: Internal supply chain focus“Model 2” – Mechanical

“Model 2” – Mechanical

Transactional Focus, “Bull whip effect”, Relationship with some suppliers adversarial, Data historical present, Reports routinely done, very few organization meetings

Analysis

Analysis Key Points

NDL vs World class poultry industryStage 1: Internal supply chain focus“Model 2” – MechanicalPillars of SCM - DSL

Pillars of SCM – DSL

○ Demand Management – not focused on demand, sustaining the demand is the priority. Internal supply is only 50% of demand. Focus on client relationship is very crucial

○ Supply Management – no established long term suppliers and no formal supplier evaluation and accreditation. Relationship is generally adversarial with just a handful of regular suppliers

○ Logistics Management – poor communications system and poor data management/record keeping

Analysis

Analysis Key Points

NDL vs World class poultry industryStage 1: Internal supply chain focus“Model 2” – MechanicalPillars of SCM – DSL Efficient Supply Chain – Functional Products

Efficient Supply Chain

Broiler birds or broiler meat is primarily a functional product and therefore, the goal for the production process is to be efficient.

Competitive cost and quality gives tremendous advantage in commodities industry.

Analysis

Recommendations Over-all

Invest in technologyHire a few more technical personnel

capable of responsible empowermentMore tie-ups – consistency is the name of

the gameCapitalize on information network. This

may open doors to better customers and suppliers

FarmFocus on core competence, feed milling

requires a significant aggregate inventory value. Finances may be diverted to more trading sales or growing expansion.

Look for regular chicken supplier to guarantee consistent supply

Returns management protocol should be considered

Recommendations

FeedmillConsider a replenishment level for stocksFormalize supplier evaluationFacilities upgrading

Recommendations