Optimisation of the food dairy coop supply chain

In the European Union under the Common Agricultural Policy (CAP) milk production was restricted by milk quotas since 1984. However, due to recent changes in the Common Agricultural Policy (CAP), milk quotas will be abolished by 2015. Therefore, the European dairy sector will soon face an opportunity, for the first time in a generation, to expand. Numerous studies have shown that milk production in Ireland will increase significantly post quotas (Laepple and Hennessy (2010), Donnellan and Hennessy (2007) and Lips and Reider (2005)). The research in this thesis explored milk transport and dairy product processing in the Irish dairy processing sector in the context of milk quota removal and expansion by 2020. In this study a national milk transport model was developed for the Irish dairy industry, the model was used to examine different efficiency factors in milk transport and to estimate milk transport costs post milk quota abolition. Secondly, the impact of different milk supply profiles on milk transport costs was investigated using the milk transport model. Current processing capacity in Ireland was compared against future supply, it was concluded that additional milk processing capacity would not be sufficient to process the additional milk. Thirdly, the milk transport model was used to identify the least cost locations (based on transport costs) to process the additional milk supply in 2020. Finally, an optimisation model was developed to identify the optimum configuration for the Irish dairy processing sector in 2020 taking cognisance of increasing transport costs and decreasing processing costs.

Exploring alternatives for milk quality improvement and more efficient dairy production in a smallholder farming context – case study: Mantaro Valley (Peru)

Consumer demand is revolutionizing the way products are being produced, distributed and marketed. In relation to the dairy sector in developing countries, aspects of milk quality are receiving more attention from both society and the government. However, milk quality management needs to be better addressed in dairy production systems to guarantee the access of stakeholders, mainly small-holders, into dairy markets. The present study is focused on an analysis of the interaction of the upstream part of the dairy supply chain (farmers and dairies) in the Mantaro Valley (Peruvian central Andes), in order to understand possible constraints both stakeholders face implementing milk quality controls and practices; and evaluate “ex-ante” how different strategies suggested to improve milk quality could affect farmers and processors’ profits. The analysis is based on three complementary field studies conducted between 2012 and 2013. Our work has shown that the presence of a dual supply chain combining both formal and informal markets has a direct impact on dairy production at the technical and organizational levels, affecting small formal dairy processors’ possibilities to implement contracts, including agreements on milk quality standards. The analysis of milk quality management from farms to dairy plants highlighted the poor hygiene in the study area, even when average values of milk composition were usually high. Some husbandry practices evaluated at farm level demonstrated cost effectiveness and a big impact on hygienic quality; however, regular application of these practices was limited, since small-scale farmers do not receive a bonus for producing hygienic milk. On the basis of these two results, we co-designed with formal small-scale dairy processors a simulation tool to show prospective scenarios, in which they could select their best product portfolio but also design milk payment systems to reward farmers’ with high milk quality performances. This type of approach allowed dairy processors to realize the importance of including milk quality management in their collection and manufacturing processes, especially in a context of high competition for milk supply. We concluded that the improvement of milk quality in a smallholder farming context requires a more coordinated effort among stakeholders. Successful implementation of strategies will depend on the willingness of small-scale dairy processors to reward farmers producing high milk quality; but also on the support from the State to provide incentives to the stakeholders in the formal sector.