Supply chain models for small agricultural enterprises.pdf

Ann Oper Res (2011) 190:359–374 DOI 10.1007/s10479-009-0521-8 Supply chain models for small agricultural enterprises Wooseung Jang · Cerry M. Klein Published online: 4 February 2009 © Springer Science+Business Media, LLC 2009 Abstract Small agricultural production enterprises have been under immense economic pressures for many years. It is our belief that a favorable impact can be made on small farm enterprises through the development and implementation of models that address their basic needs and open new markets and production initiatives. In this paper, we develop models for supply chain issues facing small farmers, solve them, and suggest their uses and future con- siderations. In particular, we consider B2C and B2B aspects of an agricultural supply chain model. The B2C aspect is considered in direct farmer to consumer sales in retail markets, while the B2B aspect is represented by transactions through agricultural cooperatives. We evaluate key strategic decisions such as whether to form cooperative agreements with other farmers and if so, how large to make the cooperative, and the production quantities at which farmers would like to sell directly to customers with or without using the cooperative. Keywords OR in agriculture · Supply chains · Cooperatives · Optimization 1 Introduction Agricultural production is one of the largest segments of the global economy. One particular area of agricultural production that is struggling is the small farm enterprise. The small farm enterprise has continued to decline and faces economic hardship as industrialized agricul- ture grows and dictates the traditional markets. According to U.S. Department of Agriculture (USDA) statistics, there are 350,000 “large farms” that consume 95% of inputs and produce 95% of outputs. The decline in small farm enterprises has been alarming. There has been a 63% decline in farm ownership over the last several decades in USA. There is also a wide- spr