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The costs of increased localization for a multiple-product food supply chain: Dairy in the United States

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  • Nicholson, Charles F.
  • Gómez, Miguel I.
  • Gao, Oliver H.

Abstract

There is increased interest in greater localization of food supply chains but little evidence about the effects of localization on supply-chain costs. Assessing these effects is complex in multiple-product, multi-process supply chains such as the dairy industry. In this study, we develop a spatially-disaggregated transshipment model for the US dairy sector that minimizes total supply-chain costs, including assembly, processing, interplant transportation and final product distribution. We employ the cost-minimizing solution as benchmark to compare alternative scenarios of increased supply chain localization. Our results indicate: (1) short-run limits to increased localization, (2) modest impacts on overall supply-chain costs, and (3) large cost re-allocations across supply chain segments, regions and products. We find that increased localization reduces assembly costs while increase processing and distribution costs. Cost increases are larger in regions with smaller raw milk supplies and during the season when less raw milk is produced. Minimizing distances traveled by all dairy products results in tradeoffs across products in terms of cost and distance traveled. The relationship between increased localization and costs appears to be nonlinear.

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  • Nicholson, Charles F. & Gómez, Miguel I. & Gao, Oliver H., 2011. "The costs of increased localization for a multiple-product food supply chain: Dairy in the United States," Food Policy, Elsevier, vol. 36(2), pages 300-310, April.
  • Handle: RePEc:eee:jfpoli:v:36:y:2011:i:2:p:300-310
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    2. D. G. Mogale & Sri Krishna Kumar & Manoj Kumar Tiwari, 2020. "Green food supply chain design considering risk and post-harvest losses: a case study," Annals of Operations Research, Springer, vol. 295(1), pages 257-284, December.
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    10. Zach Conrad & Christian J. Peters & Kenneth Chui & Lisa Jahns & Timothy S. Griffin, 2017. "Agricultural Capacity to Increase the Production of Select Fruits and Vegetables in the US: A Geospatial Modeling Analysis," IJERPH, MDPI, vol. 14(10), pages 1-15, September.
    11. Ge, Houtian & Canning, Patrick & Goetz, Stephan & Perez, Agnes, 2015. "Assessing the Supplier Role of Selected Fresh Produce Value Chains in the United States," 2015 AAEA & WAEA Joint Annual Meeting, July 26-28, San Francisco, California 205713, Agricultural and Applied Economics Association.
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