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Consulting
SmartMix -
Commercial
NOVEMBER / 2016
CPN Consulting CONFIDENTIAL. This document contains trade secret information. Disclosure, use or reproduction outside Cargill or inside
Cargill, to or by those employees who do not have a need to know is prohibited except as authorized by Cargill in writing. © 2014 Cargill, Incorporated. All rights reserved.
www.cargill.com © 2013 Cargill, Incorporated. All rights reserved.
Introduction I
There are so many possibilities for dismantling a chicken and choose which
markets/customers/products are advantageous meet and which ones are
not profitable, that only a powerful planning tool can take into account all the
variables and lead to the best decision.
Whole
bird
Middle
East
Breast
Leg Europe
Wings
Japan
Feet
China
Giblets
Final Products
The poultry industry has the potential to generate a large amount of final products through a single
1 raw material, with different types of chicken and average weights.
A planned production mix becomes a critical success factor for the business, considering its
3 characteristics of production diversity and interdependence, along with the production structure.
The adoption of a clear methodology and tool for defining the production mix is required to
accelerate the industry’s response to realignments ahead of the market trends and other
critical uncertainties.
After the initial point of division, the products will have added value through
the different production processes, independently.
In the poultry industry, the correct determination of unit production costs is a
difficult or impossible task, regardless of the costing principle used.
To abandon the concept of "individual cost of goods" becomes the only
way to manage profits and, consequently, the real contribution of each
product to the composition of the overall profitability of the company.
Number of birds
Peso
Weight
Peso
Weight
Demand
Product weight range
Wog Feet
Domestic
Feet B
Feet Export
Yields Feet A
(AW, costs, CV)
82.00
82.00 8.86
8.00
81.00
6.00
80.00
EBITDA / 80.00
4.00 Sales turnover(%)
Price 79.00
3.57 3.41
3.01 3.22
2.00
78.00
0.00 77.00
Current 20% Flexibility 30% Flexibility
In other words, the shadow price associated with a specific resource tells you
how much more profit you would get by increasing the amount of that
resource by one unit.
Positive shadow price means: more sales leads to an increase of the mix profitability.
Negative shadow price means: more sales leads to a decrease of the mix profitability.
In this example, it´s clearly better to try to sell more frozen
breast in food service market instead of fresh breast for auto
service
14 CPN Consulting © 2014 Cargill, Incorporated. All rights reserved.
What’s the impact of knowing shadow prices of
different SKUs and product mixes in promotions?
Shadow
Process Current Usage Max Capacity
(USD/kg)
Tray 15.000 15.000 0,281
Cut 400.000 400.000 0,104
Understanding and
1 production data collection
First trip*
Third
3 Economical Scenarios
trip*