Supply chain coordination in the Canadian beef industry : assessing the opportunities and constraints

In recent years, the beef industry has been forced to examine improving supply chain coordination in order to respond to the declining consumer demand for beef. Exploring the different supply chain structures being used by beef industry participants to improve coordination and provide consumers with differentiated beef products is important. The problem is that it is not clear how the different attributes often included in branded beef programs affect transaction costs and result in the formation of particular supply chain structures. This thesis examines what makes a successful supply chain alliance in the beef industry. Essentially, this study examines the sustainability and effectiveness of different alliance types and their ability to coordinate various branded beef programs and the product attributes included under these programs. A predictive transaction cost model is developed, which examines how different product attributes result in the emergence of particular transaction characteristics. The model shows how the structure of the supply chain adapts in order to minimize the associated transaction costs. In order to better understand the relative importance of different transaction characteristics to supply chain participants, a two-part empirical study was conducted. In the first portion of the study the relative importance of key transaction characteristics to cow-calf operators was examined through the use of conjoint analysis. The results from the conjoint analysis indicate that certain transaction characteristics, namely asset specific investments, limit the willingness of cow-calf operators to participate in alliances due to the associated transaction costs. Cow-calf operators placed an emphasis on premiums, which shows that while they are willing to make trade-offs and accept increased costs, associated with asset specific investments and price uncertainty, they are only willing to do this when benefits are greater than costs. To further understand the importance of different transaction characteristics to supply chain participants, key managers and directors of different beef alliances throughout Canada and the United States were interviewed. Based on the interviews it appears that alliances have typically limited the level of asset specific investments required. Consequently, the degree of coordination is not affected to, any great extent, by the level of investments required. Instead, the degree of coordination appears to more a result of how an alliance is aligned with a particular brand name label. It appears that greater coordination occurs when an alliance owns a brand name label or is an exclusive supplier to a brand name label, as there is a higher risk of opportunistic behaviour and, as a result, higher transaction costs. The use of grid-based pricing systems and the number of buyers/sellers in the market did not appear to have a significant affect on the method of coordination chosen. Based on the results obtained from both the cow-calf operator conjoint-based analysis and interviews with alliance members this thesis identifies several critical success factors and challenges to improving coordination in the beef industry. Most significantly, when developing alliances it is necessary to understand the importance of different transaction characteristics to supply chain participants. This research demonstrates that supply chain participants in the beef industry are willing to make trade-offs between the benefits received from improved coordination and the transaction costs that arise, as long as the benefits exceeds the increase in costs