A Dairy Supply Chain Model of the New Zealand Dairy Industry

The seasonal change in milk supply and composition of milk (fat, casein, whey protein and lactose concentration) determine the type and value of dairy products that can be manufactured by a dairy processing plant over the season. Milk composition can be manipulated on-farm using a number of methods. Those methods include animal breeding, feeding, altering calving and lactation patterns, interfering with the physiological pathways and manipulating the rumen micro-organism. This paper describes the use of a Dairy Supply Chain Model (DSCM) to study how market demand for dairy products, and how changes in milk composition at the farm level impact on manufacturing performance of the New Zealand Dairy Industry. The DSCM was developed in SDI Industry Pro, a dynamic simulation software, and Microsoft Excel using the Solver add in, a mathematical programming application. The DSCM was developed to mimic standard supply chain management functions which include (a) placing of orders for dairy products so that inventories at demand centres were not depleted, (b) assigning orders to the suppliers of products, (c) manufacturing and creating a shipment of product, and (d) routing the order to its destination. Other features included the ability to specify a milk supply schedule, outline product demand profiles for 15 dairy products, define inventory replenishment policies, and optimise the type and quantity of dairy products that can be manufactured. Supply chain performance was assessed taking into account manufacturing profit and inventory related costs. The effects that modifying the composition of casein in milk has on the dairy product mix and on supply chain performance is reported in this paper. The information can be used to prioritise research and development in the dairy sector.