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Complementarity among Alternative Procurement Arrangements in the Pork Packing Industry

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Author Info

  • Vukina Tomislav

    (North Carolina State University)

  • Shin Changmok

    (Samsung Economic Research Institute)

  • Zheng Xiaoyong

    (North Carolina State University)

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    Abstract

    We estimate the economies of scale for a sample of pork packing plants and use these estimates together with two other performance measures (EBIT and gross margin) to examine whether the alternative procurement methods for live hogs are complementary. The results indicate that all procurement arrangements portfolios improve plant performance relative to the simple spot market purchases, but the portfolio coefficients in performance equations do not always monotonically increase with the portfolio order. However, looking at the price packers pay to procure their hogs, the results indicate that plants that use a combination of higher-order procurement arrangements on average pay lower prices relative to plants that use the spot market only. Comparing the magnitudes of the portfolio effects with the magnitudes of the individual procurement arrangement effects shows that individual practices have minimal additional impact on the procurement price, indicating that the procurement methods may be complementary.

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    File URL: http://www.degruyter.com/view/j/jafio.2009.7.1/jafio.2009.7.1.1252/jafio.2009.7.1.1252.xml?format=INT
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    Bibliographic Info

    Article provided by De Gruyter in its journal Journal of Agricultural & Food Industrial Organization.

    Volume (Year): 7 (2009)
    Issue (Month): 1 (March)
    Pages: 1-24

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    Handle: RePEc:bpj:bjafio:v:7:y:2009:i:1:n:3

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    Web page: http://www.degruyter.com

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    Web: http://www.degruyter.com/view/j/jafio

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    Cited by:
    1. Inderfurth, Karl & Kelle, Peter & Kleber, Rainer, 2013. "Dual sourcing using capacity reservation and spot market: Optimal procurement policy and heuristic parameter determination," European Journal of Operational Research, Elsevier, vol. 225(2), pages 298-309.
    2. Niemi, Jarkko K. & Liu, Xing & Pietola, Kyosti, 2011. "Price volatility and return on pig fattening under different price- quantity contract regimes," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114614, European Association of Agricultural Economists.
    3. Karl Inderfurth & Peter Kelle & Rainer Kleber, 2011. "Dual Sourcing Using Capacity Reservation and Spot Market: Optimal Procurement Policy and Heuristic Parameter Determination," FEMM Working Papers 110014, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.
    4. Niemi, Jarkko K., 2012. "Designing coordination contracts to support efficient flow-scheduling in pork chain," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 125208, Agricultural and Applied Economics Association.
    5. Rainer Kleber & Karl Inderfurth & Peter Kelle, 2014. "Combined sourcing and inventory management using capacity reservation and spot market," FEMM Working Papers 140005, Otto-von-Guericke University Magdeburg, Faculty of Economics and Management.

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