SUPPLY CHAIN MANAGEMENT IN PERISHABLES: A PRODUCE APPLICATION

The objective of supply chain management (SCM) is to remove time and cost from supply chains, improving profitability and/or competitiveness. It is possible through conceptual advances, utilization of computer hardware and software, and other advances in electronic technology. Business literature is used to define the concept. Most applications and benefits have resulted from alliances between large retailers and large packaged goods vendors. Specific applications of SCM in the produce industry, with emphasis on factors such as perishability and production variability, are discussed. Firm-size implications are important. While small and mid-sized growers may find the cost to be high, the innovation of logistics provided by outside suppliers is an alternative. A third-party provider was interviewed; its approach and services are documented; and industry implications are discussed.Agribusiness,

PRICE ADJUSTMENTS IN CHERRY MARKETS

Buyers of cherries trade initially without inspection. Upon receipt, buyers sometimes seek to renegotiate the earlier agreements. Empirical results suggest that changing market conditions, fruit quality, and characteristics of the trading partners significantly affect the probability that a trade is renegotiated.Demand and Price Analysis,

MEASURING THE EFFECTS OF GENERIC PRICE AND NON-PRICE PROMOTIONAL ACTIVITIES: THE CASE OF WASHINGTON APPLES

This paper develops a monthly domestic demand and supply equilibrium model for Washington apples that can be used to assess the effectiveness of price and non-price promotional activities. The econometric methodology employed takes into account market differences across the U.S. and is based on data pertaining to individual retail stores located throughout the U.S. The period of analysis is from September 1990 through August 2000 on a regional basis. A unique feature of the model is its explicit allowance for multiplier effects to exist between the level of print media (newspaper ad and flyers) expenditures provided by the Washington State Apple Commission (WAC) in support of apple demand and supplementary funds provided by retailers in support of apple promotion. In particular the model allows for the fact that Commission funds oftentimes represent only a relatively small fraction of the overall print media expenditures made in support of apple sales, and that Commission funds are often effectively only "pump priming" or serve as inducements for additional promotional activities by other entrepreneurs in the marketing chain. Also, the subset of promotional activities (print media and price reductions) provided by retailers is modeled in a dynamic fashion, whereby market conditions feedback affects the level of apple promotion provided by retailers. The overall model includes a set of retail demand equations, a set of retail-F.O.B. price linkage equations, a set of ad lines - WAC Ad buys linkage equations, and an aggregate industry supply function. Additional factors such as asymmetry in retail-F.O.B. price response, the effects of information technology in retail pricing, and the effects of the large crops and the Asian and the Mexican crises on domestic supply are all simultaneously considered. Results of this analysis indicate that, in the aggregate, price promotion is a significant factor positively impacting apple sales. Furthermore, price promotion elasticities were relatively high when compared to non-price promotional activities, leading to a conclusion that greater gains with respect to returns on promotional investment may occur when retail price reductions are pursued. Despite an increased domestic supply and the effects of the Mexican and the Asian crises, among the non-price promotional activities, results indicated that both non-trade (TV and Radio) and trade-related efforts (in store demonstrations, point of sale displays, promotional give-aways, and ad buys) have contributed to increased demand for Washington apples. Sensitivity analysis of trade and non-trade expenditures indicated that trade-related activities were more effective in increasing demand at current expenditure levels relative to non-trade activities. Promotional efforts in the form of billboards, food service expenditures, and other miscellaneous activities, which the industry also carried out during the historical period of analysis, did not have a measurable impact on demand in any of the regions. It was also found that WAC ad buy expenditures resulted in a multiplier effect on the total number of ad lines. While the direct effect of these Commission expenditures on demand would be relatively small without the supplementary efforts forthcoming from retailers, the fact that retailers multiplied the Commission's expenditures into a substantially larger promotional effort resulted in a significant positive effect on apple sales when viewing the promotion program as a whole. Key words: price and non price promotion, trade and non trade activitiesprice and non price promotion, trade and non trade activities, Marketing,

Effects of Generic Advertisement on Demand: The Case of the Washington State Apple Commission

The Washington Apple Commission (WAC) generically promoted apples for the Washington state industry from 1937 until 2003. This paper provides an analysis of the effects on demand attributable to these activities. Demand movement associated with promotion tends to be positive, though the results are mixed. Overall, WAC promotion increased growers’ total revenue by approximately $53.4 million for 2002. The estimated average return to advertising topped$8.7 per dollar of advertising. Continuing selected promotional activities could increase revenue for growers if these activities could be carried out by voluntary, coordinated efforts.Demand and Price Analysis,

PRICE ADJUSTMENTS IN CHERRY MARKETS

Buyers of cherries trade initially without inspection. Upon receipt, buyers sometimes seek to renegotiate the earlier agreements. Empirical results suggest that changing market conditions, fruit quality, and characteristics of the trading partners significantly affect the probability that a trade is renegotiated

SUPPLY CHAIN MANAGEMENT IN PERISHABLES: A PRODUCE APPLICATION

The objective of supply chain management (SCM) is to remove time and cost from supply chains, improving profitability and/or competitiveness. It is possible through conceptual advances, utilization of computer hardware and software, and other advances in electronic technology. Business literature is used to define the concept. Most applications and benefits have resulted from alliances between large retailers and large packaged goods vendors. Specific applications of SCM in the produce industry, with emphasis on factors such as perishability and production variability, are discussed. Firm-size implications are important. While small and mid-sized growers may find the cost to be high, the innovation of logistics provided by outside suppliers is an alternative. A third-party provider was interviewed; its approach and services are documented; and industry implications are discussed

MEASURING THE EFFECTS OF GENERIC PRICE AND NON-PRICE PROMOTIONAL ACTIVITIES: THE CASE OF WASHINGTON APPLES

This paper develops a monthly domestic demand and supply equilibrium model for Washington apples that can be used to assess the effectiveness of price and non-price promotional activities. The econometric methodology employed takes into account market differences across the U.S. and is based on data pertaining to individual retail stores located throughout the U.S. The period of analysis is from September 1990 through August 2000 on a regional basis. A unique feature of the model is its explicit allowance for multiplier effects to exist between the level of print media (newspaper ad and flyers) expenditures provided by the Washington State Apple Commission (WAC) in support of apple demand and supplementary funds provided by retailers in support of apple promotion. In particular the model allows for the fact that Commission funds oftentimes represent only a relatively small fraction of the overall print media expenditures made in support of apple sales, and that Commission funds are often effectively only "pump priming" or serve as inducements for additional promotional activities by other entrepreneurs in the marketing chain. Also, the subset of promotional activities (print media and price reductions) provided by retailers is modeled in a dynamic fashion, whereby market conditions feedback affects the level of apple promotion provided by retailers. The overall model includes a set of retail demand equations, a set of retail-F.O.B. price linkage equations, a set of ad lines - WAC Ad buys linkage equations, and an aggregate industry supply function. Additional factors such as asymmetry in retail-F.O.B. price response, the effects of information technology in retail pricing, and the effects of the large crops and the Asian and the Mexican crises on domestic supply are all simultaneously considered. Results of this analysis indicate that, in the aggregate, price promotion is a significant factor positively impacting apple sales. Furthermore, price promotion elasticities were relatively high when compared to non-price promotional activities, leading to a conclusion that greater gains with respect to returns on promotional investment may occur when retail price reductions are pursued. Despite an increased domestic supply and the effects of the Mexican and the Asian crises, among the non-price promotional activities, results indicated that both non-trade (TV and Radio) and trade-related efforts (in store demonstrations, point of sale displays, promotional give-aways, and ad buys) have contributed to increased demand for Washington apples. Sensitivity analysis of trade and non-trade expenditures indicated that trade-related activities were more effective in increasing demand at current expenditure levels relative to non-trade activities. Promotional efforts in the form of billboards, food service expenditures, and other miscellaneous activities, which the industry also carried out during the historical period of analysis, did not have a measurable impact on demand in any of the regions. It was also found that WAC ad buy expenditures resulted in a multiplier effect on the total number of ad lines. While the direct effect of these Commission expenditures on demand would be relatively small without the supplementary efforts forthcoming from retailers, the fact that retailers multiplied the Commission's expenditures into a substantially larger promotional effort resulted in a significant positive effect on apple sales when viewing the promotion program as a whole. Key words: price and non price promotion, trade and non trade activitie

MEASURING THE IMPACT OF ADVERTISING AND PROMOTION: SINGLE-OR MULTI-EQUATION SYSTEMS? A CASE STUDY OF THE WASHINGTON APPLE INDUSTRY

This paper reports the results of a case study analyzing the impacts of promotion and advertising conducted by the Washington Apple Commission (WAC) using both single- and multi-equation systems. The analyses are compared in terms of the comparability and coherency of results and in terms of the types of information that can be generated by the multi-equation model but not by the single-equation model. Due to the availability of detailed data from the WAC, the multi-equation system incorporates measures of actual lines of print media within an explicit model of print media as well as a measure of the multiplier effect associated with WAC promotion expenditures relative to the overall (retail-matched) level of print media. This information cannot be effectively included in a single-equation analysis. The multi-equation system also includes supply-response and price linkages between F.O.B. and retail levels. Monthly data are used for all systems. The results of this study suggest that in terms of predicting the quantity effects of promotion expenditures, if one conditions on F.O.B. price levels the effects of non-trade activities from the single equation are not statistically significant and seasonality is not a major factor in determining monthly demand. Conversely, within the multi-equation approach, results of this study suggest that non-trade activities did have a measurable impact on the demand for Washington apples and that seasonality is a major factor in determining monthly demand. In terms of predicting the price effects of promotion expenditures, if one conditions on supply elasticities, the approaches provide similar predictions of price impacts. However, the simultaneous supply feedback is significant in the apple industry case, so, by taking the interaction of supply and demand into account, the more complex multiple-equation approach predicts notable supply response-induced mitigation in price increases originally induced by promotion efforts relative to when impacts of promotions are measured under scenarios of a fixed supply function. Actual cost estimates by type of analysis are also provided for each approach. The estimates are based on actual costs incurred in conducting the analyses. The results of the case study provide a basis for assessing the necessity, as well as the benefits and costs, of conducting a detailed and complex multi-equation promotion evaluation relative to a simpler and more focused single-equation analysis of promotion effectiveness

Interaction Of Potato Production Systems And The Environment: A Case Of Waste Water Irrigation In Central Washington

Potato production and processing are very important activities in the agricultural economy of the Pacific Northwest. Part of the reason for the development of this industry has been the availability of water for both growing and processing. A great amount of water is used in processing potato products, such as frozen French fries, and the waste water is a pollutant because it contains high levels of nitrate and other nutrients. Using this waste water to irrigate the fields can be a suitable disposal method. Field application will reduce potato fertilizer costs, but it can also cause underground water contamination if over-applied to the field. In this econometric study, we used field data associated with current waste water applications in central Washington to examine the yield response as well as the soil nitrogen content response to waste water applications. Our results from the production model show that both water and nitrogen positively affect crop yields at the current levels of application, but potassium has been over applied. This implies that replacing some waste water with fresh water and nitrogen fertilizer will increase production. The environmental model results show that applying more nitrogen to the soil leads to more movement below the root zone. The results also suggest that higher crop yields lead to less nitrogen in the soil, and applying more water increases crop yields, which can reduce the nitrogen left in the soil. Therefore, relative to the current practice, waste water application rates should be reduced and supple-mented with fresh water to enhance nitrogen use by plants and reduce residual nitrogen in the soil. © ISWA 2007