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Project Report # 01-00 AARI Project # 98058 RURAL ECONOMY Supply Chain Competency: Recipe for Cereal and Livestock Marketing in Alberta? M. Lee, J.R. Unterschultz and M.L. Lerohl Project Report # 01-00 AARI Project # 98058 Project Report Department of Rural Economy Faculty of Agriculture & Forestry, and Home Economics University of Alberta Edmonton, Canada Supply Chain Competency: Recipe for Cereal and Livestock Marketing in Alberta? M. Lee, J.R. Unterschultz and M.L. Lerohl The authors are graduate student, Associate Professor and Professor respectively in the Department of Rural Economy, Faculty of Agriculture, Forestry and Home Economics, University of Alberta. Copyright 2001 by M. Lee, J. Unterschultz and M. Lerohl. All rights reserved. Readers may make verbatim copies of this document for non-commercial purposes by any means, provided that this copyright notice appears on all such copies. Funding for this project was provided by an Alberta Agricultural Research Institute Research Grant and by the Alberta Agricultural Research Institute’s sponsorship of the AARI Professorship in Marketing. ii Table of Contents LIST OF TABLES………………………………………………………….. v LIST OF FIGURES………………………………………………………… vii ACKNOWLEDGEMENTS ………………………………………………. viii ABSTRACT…………………………………………………………………. ix EXECTIVE SUMMARY…………………………………………………… x 1. HISTORICAL EVOLUTION OF THE BARLEY INDUSTRY IN ALBERTA ............................................................................................................. 1 1.1. INTRODUCTION ..................................................................................................................................1 1.2. THE HISTORY OF BARLEY MARKETING IN CANADA ..........................................................................1 1.3. ROLES OF INSTITUTIONS IN THE CANADIAN BARLEY INDUSTRY........................................................4 1.3.1. Winnipeg Commodity Exchange..............................................................................................4 1.3.2. Canadian Grain Commission ..................................................................................................4 1.3.3. Canadian Wheat Board ...........................................................................................................5 1.3.4. Canadian International Grains Institute .................................................................................5 1.4. BARLEY STATISTICS, CANADA ..........................................................................................................6 1.4.1. Barley Acreage, Canada..........................................................................................................6 1.4.2. Barley Production, Canada.....................................................................................................7 1.4.3. Barley Varieties, Canada ........................................................................................................7 1.4.4. Canadian Barley Exports ........................................................................................................8 2. ECONOMIC THEORIES APPLIED TO SUPPLY CHAIN MANAGEMENT ................................................................................................ 16 2.1. INTRODUCTION ................................................................................................................................16 2.2. ECONOMIC THEORY REVIEW ...........................................................................................................16 2.2.1. Transaction Cost Economics.................................................................................................16 2.2.2. Industrial Organizational Theory..........................................................................................18 2.2.3. Strategic Management Theory...............................................................................................19 2.2.4. Game Theory .........................................................................................................................21 2.2.5. Summary and Conclusion......................................................................................................23 2.3. SCM STUDIES..................................................................................................................................23 2.3.1. Kennett (1997, 1998a, 1998b) ..............................................................................................24 2.3.2. Hennessy (1996) ...................................................................................................................25 2.3.3. Hobbs and Young (1999).......................................................................................................26 2.3.4. Boehlje et al. (1998) .............................................................................................................27 2.4. DIFFERENCE BETWEEN SCM AND VC.............................................................................................28 2.5. PREVIOUS ECONOMIC TOOLS FOR SCM...........................................................................................28 2.6. CONCLUSION ON THE APPLICABILITY OF SCM THEORIES AND STUDIES TO OUR PROBLEM ............29 2.6.1. The Economics Rationality / Efficiency Motives ...................................................................29 2.6.2. The Investment / Structural Restraints ..................................................................................30 2.6.3. The Strategic Management Motives ......................................................................................31 2.6.4. The Risk Reduction Motives ..................................................................................................32 2.7. CONCLUSION ...................................................................................................................................32 3. PROJECT OBJECTIVES..................................................................................35 3.1. INTRODUCTION ................................................................................................................................35 3.2 A CASE STUDY OF SUPPLY CHAIN RELATIONSHIPS FOR ALBERTA-PRODUCED FEED BARLEY.........35 3.2.1 The Market Structure and the Concentration Ratios of Feed Barley, Livestock and Poultry Markets in Canada...............................................................................................................36 3.2.2 Feed Barley Demand by Beef and Dairy, Hog and Poultry Industries .................................37 iii 3.1.1. Recent Developments in Defining Feed Quality of Barley ....................................................38 3.1.2. Study Objectives ....................................................................................................................40 3.2. A CASE STUDY OF SUPPLY CHAIN RELATIONSHIPS FOR MALTING BARLEY ....................................40 3.2.1. The Market Structure of the Malting Industry in Canada .....................................................41 3.2.2. Study Objectives ....................................................................................................................42 4. STATISTICAL METHODOLOGIES.............................................................. 47 4.1. OVERVIEW OF METHODS USED IN SCM STUDIES ............................................................................47 4.2. THE SCALING METHOD....................................................................................................................48 4.3. THE FACTOR ANALYSIS METHOD....................................................................................................48 4.3.1. The Analytical Framework of Factor Analysis Model..........................................................49 4.4. THE STATED PREFERENCE ANALYSIS METHOD ...............................................................................50 4.4.1 The Analytical Framework of SPM .......................................................................................51 5. RESULTS AND DISCUSSIONS...................................................................... 53 5.1 PART I: THE ALBERTA FEED MILL SURVEY ....................................................................................53 5.1.1. The Product Characteristics and Attributes ..........................................................................53 5.1.2. The Questionnaire .................................................................................................................55 5.1.3 The Surveyed Feed Mills .......................................................................................................56 5.1.4 The Concentration Measure of the Feed Mills ......................................................................58 5.1.5 The Direct Interviews ............................................................................................................58 5.1.6 The Average Rankings of the Barley Attributes.....................................................................60 5.1.7 Statistical Results...................................................................................................................60 5.1.8 Conclusions: Feed Barley ....................................................................................................66 5.2 PART II: THE NORTH AMERICAN MALTING COMPANIES SURVEY...................................................67 5.2.1 The Surveyed Malting Companies.........................................................................................68
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