Agricultural supply chains dynamics

Third Operations and Analytics Workshop, Esade Business School, May 19th-20th, Barcelona, SPAIN.

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Abstract

Pork products account for one-third of all meat consumed; half of all pork originates from China. Traded as lean hogs, fattened, four-month old piglets, exhibit a highly variable sales price, often fluctuating \(\pm 40\%\) within a few months. To pin-point the source of this dynamic uncertainty, we build a stylized model of the pig supply chain using difference equations and z-transforms to study the dynamics of the pork production system. The extended lead-times, where output (commercial pork products) occurs in five batches between 16 and 40 months after the initial decision (to grow a breeding sow), leads to some counter-intuitive inventory behaviour that is contrary to normal inventory theory.