Economic Simulation of a Food Supply Chain facing a Sanitary Crisis

Thi Le Hoa Vo* LEMNA University of Nantes, ENITIAA, EMN and CREM UMR CNRS 6211, University of Rennes 1 11, rue Jean Mac - 35708 Rennes (France)

Daniel Thiel University of Paris 13 UFR Sciences Economiques et Gestion CEPN, UMR CNRS 7115 99 avenue Jean-Baptiste Clement - 93430 Villetaneuse (France)

* Corresponding author: hoamoc@yahoo.com

Economic Simulation of a Poultry Supply Chain facing a Sanitary Crisis

Abstract This study deals with a specific poultry supply chain within the context of an Avian Influenza crisis. The first objective consists in ensuring enough food for the market during simultaneous fluctuations in raw material supplies (due to epizooty) and customer demand (due to customer anxieties and fears) that are caused by the sanitary crisis. The second objective is to minimize the additional costs due to the freezing requirement of slaughtered chickens as demand decreases as well as exceptional external purchasing due to the lack of available products when there is a sudden hike in demand. In this paper, a simulation model based on the system dynamics principles of Forrester (1961) has enabled us to study the influence of flexibility adjustment times, inventory coverage time, slaughtered chicken buffer size and smoothing policies on the supply chain performance in different crisis fluctuation rate scenarios. This applied research can help managers to reduce these additional costs and instabilities upon the supply chain during a crisis. Finally, it can help decision-makers to analyze complex dynamic behaviors and stability of fresh food push-pull supply chains when they are facing such crises by using both cybernetic representation and computer simulation.

Keywords: Food supply chain management, sanitary crisis, avian influenza, economic performance, system dynamics.

1. Introduction Avian Influenza (AI) crisis has significantly affected the whole poultry chain in different countries and all of the economic actors were concerned: breeding farms have to destroy their products of eggs and hens, rearing farms had to suffer from the consequences of confinement and sanitary conditions, manufacturers had to reduce their production capacity facing the market uncertainties and price variations. The consequences of such sanitary crisis were disastrous, as per example, the French poultry industry loosed 200 million Euros and 10,000 employees from October 2005 to March 20061. The impacts of AI disease on French poultry sector include poultry-meat-supply build-ups, poultry consumption declines, potentially sharp drops in global poultry trade, industry profitability, etc. Understanding how animal disease will impact the productivity and the stability of the whole food supply chain needs to refer to complexity theories. Usually, food supply chains consider farms as primary food producers and include various types of processing industry, trading companies, the food retail sector and final customers, each different stage of the whole production process being viewed as a link in the chain. The chicken meat supply chain is often composed by the following stages (see Figure 1): Rearing: The growing stage for chickens in a farm. The chickens are grown up to 2.2 kg in 40 days. After a given day, fully grown juvenile chickens are transported to the slaughtering plants. Slaughtering: This stage involves the slaughtering of chickens, de-feathering, evisceration, chilling, maturation, cutting, and packaging as well as the pricing for entire chickens products. Processing: The stage where value is added to the chickens (pre-cooking, adding spices, etc.) and where chickens are mostly used as an ingredient for the preparation of chilled food (ready meals, sandwiches, etc.) Distribution: The finished products are collected from the warehouses and delivered to the wholesalers and retailers. Consumption: This refers to the commercialisation of the product among wholesalers, retailers and markets, i.e., household purchasing, storage, cooking, catering, consuming and the disposing of food.

Fdration Franaise des Volailles, 2006

In addition, storage and transportation activities are performed between the different stages of the supply chain.
[Figure 1]

The first constraint of this chain is that all reared chicken (available live chickens) have to be slaughtered after exactly 40 days because of prior contracts between manufacturers and farmers. After the slaughtering phase, the second constraint is that slaughtered chickens are packaged and packed according to the actual retail sales and the available stock of these perishable products. Hence, there exist two potential stock management problems that can increase additional costs. Firstly, if the push production level of available live chickens is lower than the total customer demand, the supplier has to purchase chicken meat from external markets causing unexpected costs. Secondly, if the volume of slaughtered chickens is higher than the total customer demand, the slaughtering firms have to freeze or destroy the products after five storage days because of the perishability of the products. Again, additional costs will appear due to the depreciation of the products. The structure of this supply chain contains a particularity concerning the different constraints due to the perishability of these products and the multi-temporal space push-pull system. In fact, there is a long lead-time at downstream push production (40 days) and a very short leadtime at upstream working on-order (24 hours). In addition, a buffer of fresh slaughtered chicken has to be managed before five days, at connection. Our research challeng is to study how to manage such a complex supply chain under demand uncertainties and production disruptions due to AI. Recent researches (Van de Vorst 2000; Riddalls et al. 2000, Chang and Makatsoris, 2001; Higuchi and Troutt, 2004; Erkoc et al. 2005; Son and Venkateswaran, 2007) have emphasized on the supply chain behaviour under uncertainties. As far as we know, none of the authors mentioned the global behaviour of the particular multi-echelon push-pull supply chain under simultaneously external and internal environment uncertainties such as the poultry supply chain studied in this paper. Operational research has been mainly used by researchers after reduction of the problem complexity although simulation focused on detailed events under internal and external uncertainties. In this paper, we will firstly present a literature review focusing on supply chain modelling and our choice of a system approach that will substantiate our efforts to structure a logistic flow model for the entire poultry supply chain facing a sanitary crisis. Secondly, in order to analyse the behaviour of this supply chain in terms of stability and unexpected costs evaluation, we will test our model with the real data of the 2005-2006 avian influenza crisis in 3

France. A what-if analysis will then be performed to study the model stability under different environments. Finally, we will recall the results and show how this model can be used as a decision support for the supply chain management of fresh poultry push-pull industry faced with avian influenza.

2. Literature review As regards the literature in simulation of multi-echelon push-pull supply chains under crisis, we were only able to refer to the research of Van de Vorst et al. (2000) applying discreteevent simulation for evaluating alternative designs of the supply chain. Nevertheless, an analysis of global dynamic behaviour of a multi-echelon push-pull supply chain with nonlinear delays becomes too complex to model with discrete-event simulation. In fact, exponential delays are needed in our representation of the chicken supply chain. This corresponds to decision-making smoothing which describes a decision makers tendency to gradually react to changes in information. Smoothing appears frequently in human decision making. When decisions are based on smoothed information, the action is delayed. Delay results when perceptions (upon which a decision is based) require time to adjust to changes in incoming information (Sterman, 1989). In addition and because of such complexity, many researchers have used a cybernetic vision based on feedback loops and considered that both the structure of the supply chain and the flow control determine its performance2, which enables the modeller to capture the mode of dynamic behaviour for the whole system. Given these observations, the Forrester system dynamics theory using continuous simulation has been applied by numerous authors to supply chain modelling (Forrester, 1961; Senge and Sterman, 1992; Cheng, 1996; Sterman, 2000; Higuchi and Troutt, 2004; Kamath and Roy, 2007; Rabelo et al. 2008). Sterman (2006) states that a supply chain network is a complex dynamic system which generates multiple modes of behaviour including business cycles (oscillations in production and inventories), a boost in orders and production rates (cf. Bullwhip Effect), and a time gap between the beginning of the perturbation and its effect (shifts in the timing of the cycles from consumption to materials). Hwang and Xie (2008) proceed in their investigations by using system dynamics to ascertain how the variability in orders or inventories and chaos may occur in a multi-echelon supply chain system and offer insights into how to manage relevant supply chain factors to eliminate or reduce the chaotic effects. Additionally, other studies on poultry supply chain modelling focus on understanding
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For example, Pidd (1984) showed that dynamic simulations have proved the proficiency in analysing the supply chain because of its interactive and incorporate hierarchical feedback process.

the complex behaviour of the poultry industry (Minegishi and Thiel, 2000). In their model, these authors endeavour to study the influence of demand fluctuations on production system behaviour. When demand decreases, the inventory of slaughtered chickens increases and the solution to this problem of overstocking is by freezing. In addition, Georgiadis et al. (2007) adopt the system dynamics methodology as a modelling and analysis tool to tackle strategic issues for multi-echelon food supply chain. To build their system dynamics model, they first design generic single-echelon inventory systems that incorporate all state variables and policies for both inventory control and capacity planning. Basing on this model, they demonstrate how generic multi-echelon supply chain models can be constructed at a strategic level. Hence, these works stress the need for studying the operational or strategic problems of the production process and contributing certain decision suggestions to managers but not on analysing the global behaviour of the whole supply chain under environmental uncertainties such as in the research we describe in this paper. To conclude, system dynamics methodology seems to be the most relevant approach to deal with a complex supply chain simultaneously disturbed by upstream and downstream environment uncertainties. In fact, sanitary crises cause uncertainties in both raw materials supply (cf. the living chicken production under avian influenza effects) and customer demand. Our emphasis is on understanding the impact of this uncertain upstream and downstream environment upon the supply chain instability resulting in problems of stock management, the Bullwhip Effect or operational and behavioural effects, etc. Therefore, this applied modelling work offers further insights into supply chain management under uncertainties than those previously appraised by many researchers. This will be considered in the discussion section.

3. Proposal of a system dynamics model for the chicken meat supply chain In this paper, we choose to study the case of the French fresh standard chicken representing 75% of the whole chicken meat supply chain which was most affected by the AI crisis. The fresh finished standard chicken products include 60% of packed entire chickens and 40% of processed chickens (including packed carcasses and cooked products). In 2005, the average production rates were 1,250 tons/day for entire chicken and 833 tons/day for processed chicken (sources: AGRESTE, 2006). General statistics concerning consumption and economic impacts of AI were collected from Food and Agriculture Organization of the United Nations, World Health Organization, World Bank and the Service Central des Enqutes et Etudes Statistiques (AGRESTE). We also collected data and information from the major French poultry firms (Terrena, LDC, Doux, 5

Arriv, Glon) representing 70% of the total turnover of the whole supply chain3. It helped us to determine the structure, the operations and the reactions of the supply chain facing the AI crisis. We completed this survey by interviews with poultry supply chain stakeholders: Ministry of Agriculture and Fisheries, Office de lElevage, Institut Technique de lAviculture (ITAVI) and Fdration des Industries Avicoles (FIA). This preliminary survey allows us to represent the structure of the logistical flows of the poultry supply chain, the inter-relationships between different actors and their short-term reactions during the AI crisis from October 2005 to March 2006. The most important short-time decisions during the AI crisis concerned : rearing volumes adjustments according to the actual demand fluctuations. product purchases from external markets when demand exceeds the available inventory slaughtered chickens freezing after five storage days when insufficient demand.

The main variables of the model belonging to each level of the supply chain are defined in the following table: [Table 1] The first step of our modelling approach is to define the key system-features and to create a high-level causal loop diagram that captures the key elements of the relevant system including the major short term feedback loops. In our study, the supply chain is seriously disturbed in its downstream and upstream. The Figure 2 illustrates the interactions and cause-and-effect relationships among the different system parameters by arrows and signs4. [Figure 2] Five principal homeostatic feedback loops are described below: Rearing sector Loop 1: Actual-expected demand gap Expected order rate Rearing WIP: Regulation of rearing WIP (Work-in-Process) by adjusting the rearing start rate according to the expected order rate. The rearing WIP level is adjusted and based on production planning (Master Production Schedule - MPS) according to the actual demand.
3
4

Source : Xerfi2008
Each arrow shows a causal relationship between variables. A plus sign (+) indicates a change in the same direction

(increase/decrease increase/ decrease). A minus sign (-) indicates a change in the opposite directions (increase/decreasedecrease/increase). A feedback loop is formed by a path that begins at any variable and from arrow to arrow returns to the original variable.

Rearing-slaughtering sector Loop 2: Expected order rate Rearing WIP Rearing-slaughtering transportation Slaughtered chicken inventory Frozen product inventory: Regulation of the slaughtered chickens inventory level by adjusting the freezing inventory level of slaughtered chickens. Processing sector Loop 3: Processing Finished products inventory: Regulation of the processing level by changing the stage of finished product inventory ready for dispatch. The slaughtering and processing inventory levels depend entirely on the actual demand. If they exceed the actual demand, the chicken products will be frozen after 5 days. Distribution and retail sectors Loop 4: Distributor inventory Wholesaler-retailer transportation: Regulation of the product transportation level to the retailer by adjusting the distributor inventory quantity. Loop 5: Retailer inventory Actual-desired retailer inventory gap Wholesaler-retailer transportation: Regulation of the product transportation level to the retailer by adjusting the gap between actual and desired inventory levels of the retailer. The level of finished product inventories in warehouses and retail stores depend on the actual sales rate and their management is based on the adjustment of the actual inventory level according to the desired inventory level at the retail stage. Our research is interested in the supply chains short-term actions that only concern the global control of materials flows. However, it must be recognised that other medium and long-term strategic regulation mechanisms equally work on a supply chain undergoing a crisis as regards food health related preventive actions, communication, customer advertising policy, legislation modification, etc., that have not be developed in our case. Based on this causal diagram, we will define the mathematical formulation of stocks and flow structures by a set of differential equations needed to study the complexity and stability of such a kind of model with non-linear relationships. According to the previous literature review, we choose to define the structure of our model of the chicken supply chain management based on Forresters fundamental Industrial Dynamics model (1958) and Stermans generic supply chain model (2000). Basing on the mathematical formulation of levels and flows diagram representing the feedback loops, the dynamics of this model is simulated by using iThink software.

4. Simulations results Our research focuses on studying the stability of the whole poultry supply chain and its sensitivity according different non-linear adjustment delays. The economic function integrates external purchasing and freezing costs during the simulation period (rearing, processing and distribution costs per product unit have been considered as constant during this period).We consider that there are no structural modifications of the model in a short-term period. First of all, we calibrate the model to reach an equilibrium considering a constant demand without sanitary crisis. The equilibrium is reached when the available live chickens level equals to 2,083 tons/days including 1,250 tons/days of entire chickens (60%) and 833 tons/day of processed chickens (40%) and when the supply chain fills all of its customers orders without extended costs due to external purchase or product freezing. Following this, we apply our model for analysing the French chicken supply chain behaviour influenced by the AI crisis during the period from the second week of October 2005 until end of March 2006 (about 161 days). The standard chicken sales evolution is showed in Figure 3 and the production evolution in Figure 4 (source: FIA, 2006 and AGRESTE, 2006): [Figure 3] [Figure 4] The simulation result shows the rearing production response to the fluctuation in the actual demand and to the impact of the AI crisis (Figure 5). In fact, the rearing capacity had not been concerned by avian influenza until December 2005 while the actual demand decreased from October 2005 as a result of the influence of the Media on consumer behaviour. Chicken rearing production (available live chickens) is not bumpy like total actual demand (including Entire Chickens and Processed Chickens demands) because of the smoothing and adjustment rules in the chain with a time lag of a 40 days rearing cycle. [Figure 5] On the other hand, because of the time needed to adjust the Master Production Schedule (MPS) to demand variation, long rearing WIP adjustment time (55 days) and rearing cycle time (40 days), all 40 day old chickens must be immediately slaughtered. Consequently, the breeders are unable to adequately adjust the chicken output to the change in the daily actual demand. This is also the reason why there is a rise and fall in the frozen chicken inventory and in external purchases when the demand seesaws (as shown in Figure 7). In Figure 5, the total actual demand varies continuously at a low level from the simulation starting point but it starts to soar from 1,970 tons Day 62 to the maximal level of 2,409 tons Day 76. Accordingly, the frozen chicken inventory and the external purchases quantity shift up and down (see 8

Figure 6). For example, the frozen chicken inventory reaches the maximum of 814 tons Day 35 while the external purchases are still equal to 0 and inversely, the external purchases starts increasing and attains 672 tons Day 81 whereas the frozen chicken inventory shrinks to its lowest level of 13.8 tons Day 127. [Figure 6] These fluctuations in frozen chicken inventory and external purchases generate the unexpected costs for the supply chain to peak at 540,421 Euros Day 81 when the external purchasing level is maximal. Downstream of the supply chain, as there is a decrease and fluctuation in the level of retail inventory due to changes in both EC and PC customer demands, the finished products inventory and distribution inventory consequently increase and fluctuate according to the adjustment of actual and desired retail inventory level. In addition, we recognize that the variation in retail inventory level leads to an increase and fluctuation in the distribution and finished products inventory levels since the retailer orders and purchases to its upstream supplier based on the actual sale rate (pull-based scheme). According to the simulation results, a sudden augmentation at retail inventory level Day 80 of both PC and EC products followed by its sharp drop leading to a significant increase in distribution and finished products inventories. These increases and fluctuations of the stock level at different stages of the supply chain prompt lost products at each echelon of the chain due to their perishability.

5. What-if analysis In this multi-echelon push-pull supply chain, the upstream production decisions in the rearing farms play the most important role in terms of managing the volume of material flow for the whole supply chain. Based on the policy design systems of Lyneis (1988), we will start this section by analysing the effect of production decisions on performance and stability of this supply chain facing the crisis situation. According to Sterman (2006), supply chain instability will be increased by the amplification ratio, defined as the ratio of the maximum change in the output to the maximum change in the input. We also refer our measuring method to Rabelo et al. (2008) to perform a sensitivity analysis by changing the values of the control parameters to assess whether they can avoid or mitigate the undesirable behaviour of the supply chain.

5.1. Effect of rearing production decisions Decision policy analysis

In order to find out the most efficient production decision to minimize the total unexpected costs, we propose five scenarios of nonlinear decision policy patterns usually observed in the enterprises. These scenarios represent different types of reactions on the rearing quantity to cope with the external perturbations during crisis period based on the ratio between the actual and desired rearing work-in-process. If this ratio changes, the rearing production rate has to be proportionally decreased or increased. The five scenarios correspond to different empirical non-linear practices describing each reaction pattern. In Scenario 1, the rearing quantity is adjusted proportionally with the demand variations. In Scenario 2 the rearing quantity changes very much at the beginning and the end but it is almost unchanged in the middle. In this same scenario, if the actual inventory level is equal to the desired level, the reaction consists in reducing the rearing production rate which could be surprising but justified by the deciders by security reasons for example. In Scenario 3, this quantity is more or less unvaried. In contrast, it adjusts much more considerably in Scenarios 4 and 5. Table 2 shows the simulation results of three significant variables in each scenario providing a comparison of these decision policy patterns. [Table 2] According to these results, in the event that demand recovers, in order to significantly minimize the amount of external purchases, a decision of considerable reaction by production anticipation as shown in Scenario 5 to respond to the variations of the demand proves to be beneficial. In contrast, the reaction policy in Scenario 4 cannot make it possible to sufficiently anticipate the demand variations because the amount of external purchases remains more or less similar to the other policies that are moderate or even proportional to these variations. In this scenario, the amount of frozen products is reduced because the decision makers rapidly react in the amplification way to the demand drop leading to an evolution in the inventories. The policy in Scenario 2 consisting of no reaction when the inventories vary by +/- 40% to the objectives is the least interesting policy because it requires the most frozen products. This is the same result as Scenario 3 where the decision-makers insufficiently react to the inventory levels in the case of demand augmentation. Finally, the most interesting observations were that during the observed sanitary crisis, the decisional behaviour of this supply chain was much more sensitive in its policy of reducing the rearing production when there were too many inventories than in its reaction of increasing the production when there were insufficient inventories. For example, Scenario 2 is the passive one in comparison with Scenarios 1, 3 and 4 resulting in a need for external purchases

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rather similar to these scenarios. The only effective policy is the decision policy in Scenario 5 leading to a real performance improvement for this situation. Production decision policies and supply chain stability analysis We now extended our analysis by changing the demand pattern for these 5 scenarios. The real demand during the crisis period became a random demand for both entire chicken product and processed chicken product. These scenarios were run during a simulation time of 1800 days (about five years) and to analyse the variations of inventory level for each stage all along the supply chain. The results show that in all five scenarios, the retail inventory is more or less stable but the finished product inventory and distribution inventory did not obtain stability. We also obtained that the inventory level of all stages was significantly reduced, more stable with Scenario 5 and very high and less stable in Scenario 2. This result confirms our previous finding that the decision policy pattern of much more reaction in production anticipation can help to reduce the costs and improve the stability of the supply chain.

5.2. Effect of avian influenza influencing fluctuation rate We will now study in this section, the influence of different fluctuation degrees of the exogenous factors both upstream (avian influenza influence rate) and downstream (actual demand) of the supply chain (model input) on the models behaviour shown by the change in certain internal factors of the chain (model output) (see variables description in Table 1 above). We examine the case where there is a sudden and lasting variation of more avian influenza influence rate and a decrease in actual demand in different degrees: - 50%, -30%, and -10%. In Table 3, we will display the fluctuation ratios of these factors with the avian influenza influence rate and actual demand fluctuation rates and their influence on other internal factors, particularly on the available live chickens level. [Table 3] The simulation results show that the supply chain reacts well in the case of weak fluctuation amplitude (-10%) with a high quantity of available live chickens and reasonable levels of frozen chicken inventory and external purchases in comparison to the other two cases (-30% and -50%). For Step -30%, the supply chain suffers from an increase in both frozen chicken inventory and external purchases quantity. In the case of Step -50%, the level of frozen chicken inventory is very high while the external purchases attain the lowest quantity. These different variations result from the simultaneous fluctuations in upstream supply and 11

downstream demand. In contrast, the stock level at each echelon of the supply chain remains more or less at the same level. 5.3. Time parameter effect According to Towill (1996) who proposes that the paradigm of delay reduction is effective for reacting quickly to the market changes and makes it possible to forecast the progression of global performance, our aim in this section is to emphasize five time control parameters that can affect the supply chain behaviour: Demand change time (or demand adjustment time): Time to adjust expected demand to actual demand Rearing WIP adjustment time: Time to adjust the level of rearing Work-In-Process. Rearing time: Time to rear chickens at farms Freezing adjustment time: Slaughtered chicken stocking time before freezing

These times are initially set at 7 days, 55 days, 40 days, and 5 days respectively. A sensitivity analysis is performed by varying the value of these parameters up and down to observe the supply chain behaviour. Effect of demand change time
[Table 4]

We find that by increasing the demand adjustment time from 1 to 13 days, the amount of frozen chicken inventory slightly increases while the quantity of external purchases, unexpected costs and unexpected costs of the entire supply chain shrinks somewhat. This means that we can reduce the supply chain costs by increasing the demand adjustment time. Effect of rearing WIP adjustment time
[Table 5]

The results show that longer rearing WIP adjustment time can help the supply chain to reduce the amount of frozen chickens inventory and the unexpected costs. Effect of rearing time
[Table 6]

The simulation results show that a reduction of 5 days in rearing time can reduce the amount of external purchases but give rise to frozen chickens inventory. In contrast, an increase of 5 days in rearing time can considerably reduce the level of frozen chicken inventory while the quantity of external purchases remains the same. This means that an extension of rearing time can be a solution to demand variations during the crisis. Effect of freezing adjustment time In this case, the frozen adjustment time is varied from 1 to 9 days: 12

[Table 7]

The simulation results show that by increasing the freezing adjustment time we can reduce significantly the level of frozen chicken inventory, external purchases, unexpected costs. However, we cannot actually keep freshly slaughtered chickens for more than 5 days because of their perishability. 6. Key findings in terms of improving the supply chain management5 6.1. Supply chain behaviours under uncertainties First, when the influence of sanitary crisis is minor, the manufacturer has to keep the nondelivered chickens in a freezing inventory because of the long production time in rearing farms impeding the reaction of the supply chain to the daily fluctuation of customer demand during the crisis period. Moreover, this time parameter is fixed and can not be adjusted due to the product quality conditions; the appropriate solution for the decision makers in this situation is freezing of unused products but which causes unexpected cost. On the other hand, when the influence of sanitary crisis is more significant than a demand variation, the level of rearing production considerably decreases and the manufacturer has to purchase live chickens from external markets. Consequently, he has to endure problems of raw material availability and unexpected cost due to additional spending and related external purchasing costs. These two cases show that the production capacity of the supply chain is very sensitive to the sanitary crisis. External purchasing is a usual short term solution of the supply chain decision makers for responding to customer demand variations but it results in unexpected costs and it is not insurable solution. This weakness of the supply chain explains why this supply chain is particularly fragile. These findings also suggest that the main sources of complexity in food supply chain are the length of different adjustment times: order forecast horizon, long production adjustment time and very short shipment and customization times of the perishable products. This difficulty hampers the reactivity of the supply chain in responding to external uncertainties, particularly in the case of simultaneous fluctuations of both upstream production capacities and downstream end-customer demand. This requires more flexibility in the managerial policies in terms of the interval of adjustment times and more integration between the different supply chain stages in order to avoid shortage in the production capacity for all fresh food supply chains.

see also certain results in Vo and Thiel (2008).

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Second, in our model, a small decrease in customer demand immediately leads to a reduction in retail inventory because the retailer places an order and adjusts his inventory according to the actual sale rate but what then results in an increase in other inventory levels of finished products and distribution stages. This finding shows that there exists the Bullwhip Effect (cf. Forrester, 1961; Lee et al., 1997; etc.) in this particular supply chain because of the effect of sharing customer demand information in case of fluctuation of this end-customer demand. This is an inventory management issue for each stage of a multi-echelon supply chain with a hybrid push-pull production system. Multi-level structure and sharing customer demand information are major causes of inventory oscillation issues needing a smoother inventory control and more significant integration between the supply chain stages that help to stabilize the system. In the third place, the results of sensitivity analysis show that supply chain behaviour is quite sensitive not only to the variation of external environment but also to the deviation in internal control factors of the supply chain. For example, by increasing demand change time, we can reduce the unexpected costs. Therefore, this finding also suggests that order forecasting horizon plays an important role in supply chain management. By extending the order forecasting horizon, we can minimize the unexpected costs and achieve more stability for the system. This policy should be used by fresh food supply chains to effectively cut the unexpected cost resulting from a sanitary crisis.

6.2. Weaknesses of control and decision-making processes On one hand, the simulation results of different scenarios of production decision policies showed that during the crisis period, the decisional behaviour of the supply chain is more sensitive in cases of excessive inventories than those of insufficient inventories in the upstream production and a policy of considerable reaction by production anticipation is relevant to minimize the unexpected costs and enhance the stability of the supply chain in this situation. Therefore, this finding suggests that in order to cope with demand variations, it is important for the decision makers to significantly increase the amount of production anticipation and this policy also helps to stabilise the supply chain. On the other hand, as a rule, finding the right balance (optimal buffer size) between making logistic decisions based on schedules (push) and manufacturing and distribution activities only in response to internal and external customer requests (pull) is an important issue in supply chain management. In addition, it requires a buffer and safety stock to ensure a stable supply usually when end customer demand is unpredictable. We can observe certain related 14

research that focuses on this issue in the literature. This starts with Clark and Scarf (1960) who showed that a base-stock policy is optimal in a finite-horizon periodic problem with no fixed cost and no capacity constraint. Let us equally cite Chen and Song (2001) who characterized the structure of the optimal policy in a multi-stage inventory model with Markov-modulated demand. However, in our model, the change in the expected order rate and the available live chickens level (upstream sectors) depends on both variations of customer demand (downstream external environment) and the sanitary crises rate (upstream external environment) while the inventory levels at each supply chain echelon (downstream sectors) oscillate mainly because of the variation of customer demand and the supply chain adjustment policies. Hence, our problem is how to maintain a significant buffer size to respond to a supply line coping with both changes in customers demand and instability in production capacity. This is an important question that has never been addressed in the literature that we intended to mention in this paper so as to fill this gap. However, because of the complexity (the many delays along the multi-echelon supply chain) and the specific characteristic (short-term perishable products) of the chicken meat supply chain, optimizing this push-pull supply chain is extremely complex. We were therefore interested in studying supply chain behaviour in a situation of perturbation rather than focusing on optimization solutions. Nevertheless, this work is designed to underline this outstanding problem and to contribute to further research that we would like to continue in our upcoming studies.

6.3. Strategic dimension and information systems improvement outlooks On one hand, the results of this research allowed us to propose a comprehension support of short-term dynamic behaviours of a food supply chain. Nevertheless, the threat of a new sanitary crisis and the economic consequences suffered by the supply chain require new performance measures and efficient strategic policies. Our model would be extended to study the medium and long run actions by taking into consideration: The other theories of performance as well as the endogenous psychosocial aspects of the supply chain (decision-making processes under crises, internal communication, etc.) and exogenous factors (changes in consumer attitudes). The other constraints related to the modifications of governmental regulations and policies, suppliers requirements (conditions of the contract), etc.

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One of the causes of supply chain fragility is absence of general inter-profession. It would be necessary to identify new cooperation forms among the members of the supply chain that could be analysed by inter-organisational theories as well as to focus on the organisational learning phenomenon.

On the other hand, the results show that the behaviour of the supply chain is disturbed by not only exogenous factors but also endogenous factors such as adjustment and decision policies, information sharing. In fact, due to the multi-echelon structure and the existence of various adjustment policies at each level of this supply chain, the possibility of attaining the information about real consumer demand and quality of the information is limited. This requires developing our model by taking more into account the information sharing. That is the reason why it seems to us important to propose some modifications of decision feedback loops in our model: A new regulation loop of farming decisions allowing an information sharing system between downstream distributors and upstream producers about final consumer demand. An information partition among all the echelons of the supply chain about their inventory level. An information feedback loop between the finished products processing and the distributors stock level. This leads our model to using the concept of Capacity Requirement Planning largely facilitated by an pushed integration of the supply chain (Berry et al. 1982, Harl et Ritzman, 1985,). These propositions show that it is very important of reinforcing the global integration of all supply chain; a wider and compound information system would be indispensable. An example of the type of information system between the poultry supply chain actors is suggested in a project of the region Pays de la Loire (Regat project, 20086).

7. Conclusion In such circumstances, all unexpected costs have a great influence of the profitability of the economic actors involved in this supply chain. In this paper, we have explained why our work focuses on simulation modelling for studying the behaviour of the entire chicken meat supply

Regat is a collaborative platform via Internet allowing all the operators of the poultry supply chain of the region Pays de Loire to share and exploit the information in real time about their products and services with their suppliers and customers.

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chain threatened by high uncertainties in the supply capacity (the impact and influence of sanitary crises on rearing farms) as well as in customer demand (unpredictable consumer behaviour effecting the sales rate). A system dynamics model based on Forrester methodology has been developed to analyse the stability and the unexpected cost variations of the supply chain within this context of exogenous perturbations in both the upstream and downstream of the supply chain. The simulation of the system dynamics model has been carried out in the programmable continuous simulation environment of Ithink software that makes it possible to simulate the internal dynamics of each supply chain stage and also the entire chicken supply chain experiencing the sanitary crises situation. The complexity and particularity of this supply chain behaviour have been studied and discussed demonstrating that this system dynamics model allows us to improve our understanding in this field and is useful for decision support purposes in the supply chain management. The simulation results show that fluctuations in customer demand and production are progressively amplified by each supply chain stage and affect the stability and performance of the whole chain. Moreover, the global behaviour of the supply chain is influenced not only by the exogenous environment factors but also by the endogenous control factors such as lead time, ordering policies and information sharing. By adjusting these endogenous factors, we can minimize the consequences resulting from exogenous factors and enhance supply chain performance. Besides, the simulation results propose an important decision policy of high production anticipation that can help to improve the supply chain performance to cope with a crisis situation. Our observations also show that during the observed sanitary crisis, the supply chain behaviour is very sensitive in policies of quick reduction of upstream production when there are too many inventories while it is less sensitive to increasing production when there are insufficient inventories. Additionally, the findings in this paper have put forward certain relevant issues relating to buffer management in such a kind of complex supply chain that require further research. Finally, this model analysed the global complex behaviour of the poultry supply chain under uncertainties caused by AI crisis in order to propose relevant adjustments of managerial parameters to reduce the effects of such uncertainties.

Acknowledgements: This work was supported by the French Ministry of Research, the Ministry of Agriculture and the French Embassy in Vietnam.

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References Berry, W.L., Schmitt, T.G. et Vollmann, T.E., 1982. Capacity planning techniques for manufacturing control systems: Information requirements and operational features. Journal of Operations Management, 3(1), 13-25. Chang, Y., Makatsoris, H., 2001. Supply Chain Modelling Using Simulation. International Journal of Simulation, 2(1), 24-30. Chen, F. and Song, J.-S., 2001. Optimal policies for multi-echelon inventory problems with Markov modulated demand. Operations Research, 49, 226234. Cheng H., 1996. Enterprise integration and modelling: The meta base approach. Massachusetts/ Kluwer Academic Publishers. Clark, A.J. and Scarf, H., 1960. Optimal policies for a multi-echelon inventory problem. Management Science, 6, 475490. Erkoc M., Lakovou E.T., Spaulding A.E., 2005. Multi-stage onboard inventory management policies for food and beverage items in cruise liner operations. Journal of Food Engineering, 70(3), 269-279. Forrester J.W., 1958. Industrial Dynamics : A major breackthrough fo decision makers. Harvard Business Review, 36(4), 37-66. Forrester, J.W., 1961. Industrial dynamics. Portland (OR): Productivity Press. Georgiadis, P., Vlachos D., and Iakovou E., 2005. A system dynamics modelling framework for the strategic supply chain management of food chains. Journal of Food Engineering, 70(3), 351-364. Harl, J.E., Ritzman, L.P., 1985. A heuristic algorithm for capacity sensitive requirements planning, Journal of Operations Management, 5(3), 309-326. Higuchi T., Troutt M.D., 2004. Dynamic simulation of the supply chain for a short life cycle product Lessons from the Tamagotchi case. Computers & Operations Research, Vol. 31, p. 1097-1114. Hwang, H.B., Xie N., 2008. Understanding supply chain dynamics: A chaos perspective. European Journal of Operational Research, 184(3), 1163-1178. Kamath, B.N., Roy R., 2007. Capacity augmentation of a supply chain for a short lifecycle product: A system dynamics framework. European Journal of Operational Research, 179(2), 334-351. Lee, H.L., Padmanabhan, V., Whang, S., 1997. Information distortion in a supply chain: The bullwhip effect. Management Science, 43(4), 546-558. Lyneis J.M., 1988. Corporate planning and policy design: a system dynamics approach, Pugh Roberts Associates. Minegishi, S., Thiel, D., 2000. System dynamics modeling and simulation of a particular food supply chain. Simulation Practice and Theory, 8(5), 321339. Pidd M., 1984. Computer simulation in management science. 2nd ed. Chichester: Wiley, 219226 and 250-261. Rabelo, L., Helal M., Lertpattarapong C., Moraga R., Sarmiento A., 2008. Using system dynamics, neural nets, and eigenvalues to analyse supply chain behaviour. A case study. International Journal of Production Research, 46(1), 51-71.

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Riddalls, C., Bennett, S., Tipi, N., 2000. Modelling the dynamics of supply chains. International Journal of Systems Science, 31(8), 969976. Senge P.M., Sterman J.D., 1992. System thinking and organizational learning: Acting locally and thinking globally in the organization of the future. European Journal of Operational Research, 59(1), 37-150. Son, Y-J., Venkateswaran J., 2007. Hierarchical supply chain planning architecture for integrated analysis of stability and performance. International Journal of Simulation and Process Modelling, 3(3), 153-169. Sterman, J.D., 1989. Modeling Managerial Behavior: Misperceptions of Feedback in a Dynamic Decision Making Experiment. Management Science, 35(3), p. 32139. Sterman, J.D., 2000. Business dynamics : systems thinking and modeling for a complex world. Boston, Mass.: Irwin/McGraw-Hill. 982. Sterman, J.D., 2006. Operational and Behavioural Causes of Supply Chain Instability, in: O. Carranza, F. Villegas (Eds.), The Bullwhip Effect in Supply Chain, Palgrave McMillan. Towill, D.R., 1996. Time compression and supply chain management- a guided tour. Supply Chain Management, 1(1), 15-27. Van de Vorst J.G.A.J., Beulens A.J.M, van Beek P. 2000. Modelling and simulating multiechelon food systems. European Journal of Operational Research, 122(2), 354-366. Vo T.L.H., Thiel D., A System Dynamics Model of the Chicken Meat Supply Chain faced with Bird Flu, International System Dynamics Conference, Athens, 20-24 July 2008. Websites: 1. AGRESTE (Agreste-La statistique agricole, Ministre de lAgriculture et de la Pche) http://agreste.agriculture.gouv.fr/conjoncture_1/aviculture_16/index.html 2. FAO (Food and Agriculture Organization of the United Nations) http://www.fao.org/index_fr.htm 3. FIA (Fdration des Industries Avicoles), http://www.fia.fr/ 4. FNICGV (Fdration National de lIndustrie et du Commerce en Gros de Viande) http://www.fnicgv.com/visu/index.php 5. ITAVI (Institut Technique de lAviculture), http://www.itavi.asso.fr/ 6. Ministre de lAgriculture et de la Pche, http://agriculture.gouv.fr/ 7. Office de lElevage, http://www.ofival.fr/ 8. WHO (World Health Organization), http://www.who.int/en/ 9. The World Bank, http://www.worldbank.org/ 10. Xerfi: La base dintelligence sur les secteurs et les entreprises, en France et dans le monde http://www.xerfi.fr/

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Raw material inventory (Slaughtering)

Finished products inventory (Processing)

Retailer inventory (Distribution)

Rearing (live chickens)

Consumption (final customer)

Push flow (40 days)

Buffer

Pull flow (1 day)

Based on MPS

Based on actual demand

Figure 1. Logistic flows schema of the chicken meat supply chain.

+
3(-)

Finished products inventory

Processing-distribution transportation

Processing + + Slaughtered chickens inventory Rearing-Slaughtering transportation 2(-) + Sanitary Crisis - Rearing WIP

External purchasing + Frozen products inventory

Wholesaler inventory +

4(-)

Wholesaler-retailer transportation
5(-)

1(-)

+ Actual-expected demand gap + -

Desired retailer + inventory +

Desired-actual retailer + inventory gap Retailer inventory

Expected order rate +

Actual demand -

Medias influence

Figure 2. Causal loop diagram for Chicken supply chain model

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30,0 20,0 10,0 % 0,0 1 - 10,0 - 20,0 - 30,0 - 40,0 Weeks 3 5 7 9 11 13 15 17 19 21 23 EC PC

Figure 3. Sales evolution of standard entire and processed chickens (Oct. 05 Mar. 06)

Figure 4. Production evolution of standard chickens (Oct. 05 Mar. 06)

1: Total actual demand 1: 2: 2500 1 2 1

2: Available live chickens

1 2

1 2 2

1: 2:

1250

1: 2: Page 1

0 0 40 81 Days Untitled Graph 121 161

Figure 5. Production fluctuation in accordance with actual demand variation and AI influence.

1: Frozen chickens inventory 1: 2: 900

2: External purchases

1 2 1: 2: 450

1 1: 2: Page 1 0 0 1 2 40 2 81 Days Untitled Graph 1 121 2 161

Figure 6. Frozen chicken inventory and external purchases.

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Table 1 The main variables of the supply chain model

Stage Demand MPS Rearing and

Variables Actual demand Expected order rate Rearing WIP Sanitary crisis External purchases

Definition Exogenous customer demand for one day Orders sent to rearing farms based on forecasts The level of chickens in the process of being reared Exogenous influence of a sanitary crisis on rearing farms The amount of chickens purchased from other (national or international) companies. The stock level of slaughtered chickens The level of processed (transformed) chickens products products The stock level of both entire and processed chickens ready to delivery. The stock level of chickens not delivered and then frozen The level of live chicken transported from rearing farms to slaughtering factories. The level of chickens transported from processing factories to distributors. The level of chickens transported from distributor to retailer. The stock level at the distribution level at a point of time The stock level at the retail level at a point of time The constant stock level that the retailer requires to cover the throughput (demand) The gap between actual and desired inventory levels at the retail level. The costs incurred by the supply chain when it has to freeze or purchase chickens. The inventory costs incurred by the supply chain when the chicken products are stocked in finished product inventory, distribution inventory or retail inventory.

Unit Tons/day Tons/day Tons % Tons Tons Tons Tons Tons Tons

Slaughtering Processing

Slaughtered chickens inventory Processing Finished inventory Frozen inventory

Transportation

Rearingslaughtering transportation Processingdistribution transportation Wholesaler-retailer transportation

Tons

Tons Tons Tons Tons Tons Million Euros Million Euros

Distribution Retail

Wholesaler inventory Retailer inventory Desired inventory retailer

Actual-desired retail inventory gap Performance Unexpected costs Holding costs

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Table 2 Variations of upstream factors under each production decision policies pattern
Scenario 1 - Frozen chicken inventory (tons) - External purchases (tons) - Unexpected costs (million Euros) 22,894 7,693 7.2 Scenario 2 27,317 9,298 8.8 Scenario 3 25,504 8,400 7.9 Scenario 4 22,819 6,288 6.2 Scenario 5 23,925 5,179 5.3

Table 3 Variations of internal factors under external influencing fluctuations.

Fluctuation rate of AI influence and actual demand rates Frozen chicken inventory (tons) External purchases (tons) Unexpected costs (million Euros) Rearing WIP (tons) Available live chickens (tons) Finished products inventory (tons) Distribution inventory (tons) Retail inventory (tons) Step -50% 145,974 31,918 32.8 6,523,600 196,602 38,162 38,622 38,887 Step -30% 93,930 45,086 40.7 7,647,864 237,100 53,427 53,794 53,883 Step -10% 57,887 39,852 34.7 9,911,187 287,930 68,692 68,980 68,965

Table 4 Effect of demand change time on internal factors

Demand change time Frozen chicken inventory (tons) External purchases (tons) Unexpected costs (million Euros) 1 41,392 26,598 23.5 7 43,348 26,347 23.4 13 44,101 25,757 22.9

Table 5 Effect of rearing WIP adjustment time on internal factors.

Rearing WIP adjustment time Frozen chicken inventory (tons) External purchases (tons) Unexpected costs (million Euros) 55 43,348 26,347 23.3 70 42,674 24,412 21.7 85 42,427 23,028 20.6

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Table 6 Effect of rearing time on internal factors.

Rearing time Frozen chicken inventory (tons) External purchases (tons) Unexpected costs (million Euros) 35 44,553 25,418 22.5 40 43,348 26,347 23.3 45 41,753 26,354 23.2

Table 7 Effect of freezing adjustment time on internal factors

Freezing adjustment time Frozen chicken inventory (tons) External purchases (tons) Unexpected costs (million Euros) 1 142,732 68,384 61.9 5 43,348 26,347 23.3 9 27,060 16,560 14.7

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