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Managing your Outputs . AG BM 460. Introduction. How do you make the most money? Complex question, but clearly making the most of your opportunity is part of it This means getting the most money from your production It also comes from pleasing the customer Short run vs. long run.

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Presentation Transcript

Introduction l.jpg
Introduction

  • How do you make the most money?

  • Complex question, but clearly making the most of your opportunity is part of it

  • This means getting the most money from your production

  • It also comes from pleasing the customer

  • Short run vs. long run


Tomato processor l.jpg
Tomato Processor

  • Have so many tons of tomatoes

  • How do you decide what products to makes?

  • Stewed tomatoes, paste, sauce, ketchup, salsa, crushed

  • You can sell these as name brand or private label – what do you do?


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Tomato Processor

  • Some customers want a full line (corn, etc.) - what do you do?

  • Tomatoes aren’t ready yet – can you lengthen your season?

  • It’s winter – what do you do with your plant?

  • You just had any early freeze and lost $1 million worth of tomatoes. Now what?


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Approach

  • What are you good at?

  • What will make you the most money?

  • What can you buy and resell?

  • Is this a long-run or a short-run decision?

  • Where is the competition stiffest?

  • Are there any trends we should know?

  • What will your inputs allow?


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Approach

  • What action has the brightest future?

  • Can I afford to alienate my customers? (soybean embargo)

  • Am I big enough to go it alone?

  • What role do contracts play?

  • Am I exposed to price changes?


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Doing the Math

  • How do you calculate the value of 1 ton of tomatoes as different products?

  • Same equation as in input section

  • Whole thing tied to price – what is your demand curve for product A

  • Often you would love to make all stewed tomatoes, but you know you can’t sell them all


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Concluding Comments

  • Output management is a balancing act

  • One product vs another

  • One customer vs another

  • One market vs another

  • Short vs. long term

  • Managing your facility is part of this

  • It really is a system and no decision is stand alone


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