Raw Material Variability in Food Manufacturing
We develop and parameterize a model to examine the impact of raw material variability on food manufacturing outcomes. We partner with a large food manufacturing firm whose primary raw material is wheat-flour to examine if variability in flour attributes impacts the firm’s finished goods quality and net-revenue outcomes. The food manufacturer faces a daily operations challenge to take wheat-flour, whose attributes vary between batches, and create a premium finished product. They alter their manufacturing controls between each batch to accommodate raw material variability. We develop two models, one to maximize finished goods quality, and the other to maximize net-revenues. We use the models to consider two questions: do the firm’s observed activities appear to be net-revenue maximizing in the face of raw material variability, and do firms facing raw material variability in their supply chains face a price-quality trade-off? We find that our partner firm may be able to improve hourly net-revenues over their observed activities. More generally, we find that raw material variability does impact finished goods quality outcomes, supplier selection is important to quality and net-revenue outcomes, and that in the presence of inexpensive, effective manufacturing controls, raw material price may be more important than raw material variability. We also find that firms should consider variability as a key component of raw material quality.
Gray, Purdue University.
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