Adding Value to New Animal

Product Supply Chains

A report for the Rural Industries Research and Development Corporation

by Wondu Business and Technology Services

December 2004

RIRDC Publication No 04/166 RIRDC Project No WHP-6A

ii

© 2004 Rural Industries Research and Development Corporation.

All rights reserved.

ISBN 1 74151 075 9

ISSN 1440-6845

Adding Value to New Animal Product Supply Chains

Publication No. 04/166

Project No. WHP-6A

The views expressed and the conclusions reached in this publication are those of the author and not necessarily those of persons consulted. RIRDC shall not be responsible in any way whatsoever to any person who relies in whole or in part on the contents of this report.

This publication is copyright. However, RIRDC encourages wide dissemination of its research, providing the Corporation is clearly acknowledged. For any other enquiries concerning reproduction, contact the Publications Manager on phone 02 6272 3186.

Researcher contact details David Michael Wondu Business and Technology Services Pty Limited Level 31, 88 Phillip Street, Sydney, NSW, Australia P.O. Box 1217, Bondi Junction, NSW, Australia Phone: 61 2 93692735 Fax: 61 2 93692737 Email: dmichael@wondu.com

In submitting this report, the researcher has agreed to RIRDC publishing this material in its edited form.

RIRDC contact details

Rural Industries Research and Development Corporation Level 1, AMA House 42 Macquarie Street BARTON ACT 2600 PO Box 4776 KINGSTON ACT 2604 Phone: 02 6272 4539 Fax: 02 6272 5877 Email: rirdc@rirdc.gov.au Website: http://www.rirdc.gov.au

Published in December 2004

Printed on environmentally friendly paper by Canprint

iii

Foreword From paddock to consumer, from food to fibre, and new industrial to new health products, effective management of the supply chain is emerging as the key element in profitability and sustainability. The emergence of new information and communication technology is enabling new levels of supply-chain management, communication and integration efficiency. Skilled operators are stepping forward to exploit the technology. This can be seen as either a threat or an opportunity. This project was designed to improve the capacity of producers and processors of new animal products (NAP) to take advantage of the opportunities in supply-chain management, but it also points to the need for actions to improve supply-chain infrastructure and management where weaknesses exist.

This project shows how value is added by collaboration between labour and owners of capital along the NAP supply chains. It identifies the relative strengths and weaknesses of these supply chains. It should help in the negotiation of agreements between participants in the supply chains. It should also encourage better use of quality management systems in the NAP industries.

This publication considers seven NAP enterprises: ostrich, crocodile, yabby, duck, buffalo, camel and squab. While there are differences between the industry structures there are also many common themes in terms of supply-chain management practices.

This project was funded from RIRDC Core Funds which are provided by the Australian Government. This report is an addition to RIRDC’s diverse range of over 1000 research publications and forms part of our New Animal Products research and development (R&D) program, a key strategy of which is to strengthen development within and across industries by supporting creativity, innovation, commercialisation and integration along the value-added chain.

Most of our publications are available for viewing, downloading or purchasing online through our website: • downloads at www.rirdc.gov.au/reports/Index.htm • purchases at www.rirdc.gov.au/eshop

Simon Hearn Managing Director Rural Industries Research and Development Corporation

iv

Abbreviations ABC Activity-based costing

CFCW Cold-finished carcass weight

CRM Customer relationship management

ERP Enterprise resource planning

GMP Good manufacturing practice

HACCP Hazard analysis at critical control points (a formal process for minimising or eliminating food contamination in food processing)

NAP New animal products

NLIS National Livestock Identification System

ROI Return on invested capital

SCM Supply-chain management

Take-off In the supply-chain model, a take-off factor is the amount of resource used to produce each unit of end product

XML Extensible mark-up language

Special note about underlined text This report was developed in a multimedia framework. Many words are underlined, and the underlines indicate that those words on the electronic version are either website-linked direct, or lead to a website link or a series of links somewhere nearby in the text. Website URLs are all shown in blue in the online version of this report and are linked but, for easy reading on paper, they are not underlined.

v

Contents Foreword................................................................................................................................................................ iii Abbreviations......................................................................................................................................................... iv Executive Summary ............................................................................................................................................. viii

Recommendations .......................................................................................................................................... x 1. Introduction......................................................................................................................................................... 1

1.1 Background to the research .......................................................................................................................... 1 1.2 Study objectives............................................................................................................................................ 2 1.3 Research strategy and methods..................................................................................................................... 2 1.4 Scope of this study........................................................................................................................................ 4 1.5 Report outline ............................................................................................................................................... 4

2. Review of the History, Situation and Outlook for Value-Chain Management ................................................... 5 2.1 Historical perspective on value-chain management ..................................................................................... 5 2.2 Supply-chain management industry and software vendors .......................................................................... 6 2.3 SCM outlook and the emergence of web-based integration ......................................................................... 7

3. New Animal Product Supply-Chain Parameters............................................................................................... 12 4. Duck Value Chain............................................................................................................................................. 14

4.1 Background ................................................................................................................................................ 14 4.2 The flow of products and yields in the duck value chain ........................................................................... 15 4.3 Size and structure in the duck value chain.................................................................................................. 15 4.4 Product analysis.......................................................................................................................................... 18

Supply chain 1: Whole duck to the supermarket.......................................................................................... 18 Supply chain 2: Sale of boned meat, through to a restaurant, via a supermarket......................................... 20

4.5 Main messages from the duck value chain ................................................................................................. 22 5. The Ostrich Value Chain .................................................................................................................................. 24

5.1 Background ................................................................................................................................................ 24 5.2 The flow of products and yields in the ostrich value chain ........................................................................ 25 5.3 Size and structure in the ostrich value chain .............................................................................................. 28 5.4 Product analysis.......................................................................................................................................... 28

Supply chain 1: Whole ostrich to the supermarket....................................................................................... 28 Supply chain 2: Sale of boned meat, through to a restaurant, via a supermarket......................................... 30

5.5 Main messages from the ostrich value chain .............................................................................................. 31 6. The Crocodile Value Chain .............................................................................................................................. 32

6.1 Background ................................................................................................................................................ 32 6.2 The Flow of products and yields in the crocodile value chain ................................................................... 32 6.3 Size and structure in the crocodile value chain .......................................................................................... 35 6.4 Product analysis.......................................................................................................................................... 35

Supply chain 1: Whole crocodile carcass to the supermarket ...................................................................... 36 Sale of crocodile skin for leather.................................................................................................................. 37

6.5 Main messages from the crocodile value chain .......................................................................................... 38 7. Yabby Value Chain........................................................................................................................................... 39

7.1 Background ................................................................................................................................................ 39 7.2 The flow of products and yields in the yabby value chain ......................................................................... 40 7.3 Size and structure in the yabby value chain................................................................................................ 44 7.4 Product analysis.......................................................................................................................................... 44 7.5 Main messages from the yabby value chain ............................................................................................... 46

vi

8. Squab Value Chain ........................................................................................................................................... 47 8.1 Background ................................................................................................................................................ 47 8.2 The flow of products and yields in the squab value chain.......................................................................... 49 8.3 Size and structure in the squab value chain ................................................................................................ 49 8.4 Squab product analysis ............................................................................................................................... 52 8.5 Main messages from the Squab Value Chain ............................................................................................. 55

9. Camel Value Chain ........................................................................................................................................... 56 9.1 Background ................................................................................................................................................ 56 9.2 The flow of products and yields in the camel value chain.......................................................................... 57 9.3 Size and structure in the camel value chain................................................................................................ 57 9.4 Product analysis.......................................................................................................................................... 60 9.5 Main messages from the camel value chain ............................................................................................... 61

10. Buffalo Value Chain ....................................................................................................................................... 62 10.1 Background .............................................................................................................................................. 62 10.2 The flow of products and yields in the buffalo value chain ..................................................................... 63 10.3 Size and structure in the buffalo value chain............................................................................................ 63 10.4 Product analysis........................................................................................................................................ 66 10.5 Main messages from the buffalo value chain ........................................................................................... 68

11. Discussion of Overall Results ......................................................................................................................... 69 12. Conclusions and Recommendations ............................................................................................................... 70

Recommendations, repeated from the Executive summary.............................................................................. 70 Appendix 1: Detailed Technical Ratios: Supply Chains: Various New................................................................ 71

Appendix 2: Activity-Based Costs: New animal products.................................................................................... 77 References........................................................................................................................................................... 122

Tables, Charts and Figures

Table ES1: Supply chains’ costs: by resources used ($/kg cold finished carcass weight) .............................. viii Table ES2: Supply chains’ costs: by activity ($/kg cold finished carcass weight).......................................... viii Chart ES1: Supply-chain throughput (kg/year) ................................................................................................. ix Chart ES2: Supply-chain costs ($/kg CFCW) ................................................................................................... ix Table ES3: Supply chains’ production indicators .............................................................................................. x Chart 1.1: Adding value to new animal products ............................................................................................... 3 Table 1.1: Farm-gate values of selected new animal product industries ............................................................ 4 Chart 2.1: Business system — McKinsey and Co .............................................................................................. 6 Chart 3.1: Feed-conversion ratios: By animal and feeding system (supplemented feed consumed : live weight gained (kg)). [Note: Includes only feed concentrates, not pasture in extensive systems]. ............................... 12 Chart 4.1: Duck meat and byproduct components: $/kg .................................................................................. 15 Flowchart 4.1: The duck production, processing & service value chain.......................................................... 16 Flowchart 4.2: Duck value chain: the flow of animals, products and yield...................................................... 17 Chart 4.2: Supply chain 1: whole ducks for supermarkets ($/kg CFCW) ........................................................ 19 Table 4.1: Co-products from the duck value chain........................................................................................... 20 Chart 4.3: Supply chain 2: Ducks from elite breeding to restaurant meal ........................................................ 21 Chart 4.4: Resource use: Duck processing chain: by activity........................................................................... 21

vii

Chart 4.5: Resource use: Duck processing chain: breeding to restaurant......................................................... 22 Figure 4.1: Duck processing layout.................................................................................................................. 23 Chart 5.1: Selected ostrich meat cuts: $/kg....................................................................................................... 25 Flowchart 5.1: The ostrich production, processing and service value chain .................................................... 26 Flowchart 5.2: Ostrich value chain: the flow of animals, products and yield .................................................. 27 Chart 5.2: Supply chain 1: Ostrich meat for supermarkets ($/kg CDCW) ....................................................... 29 Table 5.1: Co-products from the ostrich value chain ....................................................................................... 30 Chart 6.1: Selected crocodile meat cuts: $/kg................................................................................................... 32 Flowchart 6.1: The crocodile production, processing and service value chain ................................................ 33 Flowchart 6.2: Crocodile value chain: The flow of animals, products and yield ............................................. 34 Chart 6.2: Leather boot prices: by leather ($US).............................................................................................. 35 Chart 6.3: Supply chain: Crocodile meat for supermarkets ($/kg CDCW) ...................................................... 36 Table 6.1: Co-products from the crocodile value chain.................................................................................... 37 Chart 7.1: World freshwater crustacean production: 1996–2002 (tonnes)....................................................... 39 Chart 7.2: Yabby prices received: by weight in grams..................................................................................... 40 Table 7.1: Yabby product possibilities ............................................................................................................. 40 Flowchart 7.1: The yabby production, processing and service value chain ..................................................... 41 Figure 7.1: Chitin and chitosan manufacturing process ................................................................................... 42 Flowchart 7.2: Yabby value chain: The flow of animals, products and yield .................................................. 43 Table 7.2: Co-products from the yabby value chain......................................................................................... 45 Chart 7.3: Supply chain: Yabby tails for restaurant meals ($/kg CDCW)........................................................ 45 Chart 7.4: Resource use: Yabby processing chain............................................................................................ 45 Chart 8.1: Squab meat styles and components: $/kg ........................................................................................ 49 Flowchart 8.1: The squab production, processing and service value chain...................................................... 50 Flowchart 8.2: Squab value chain: the flow of animals, products and yield .................................................... 51 Chart 8.2: Supply chain 1: Whole squab for supermarkets ($/kg cfcw)........................................................... 53 Chart 8.3: Squab resource use ($/kg CFCW) ................................................................................................... 53 Table 8.1: Co-products from the squab value chain ......................................................................................... 54 Chart 9.1: Camel meat and byproduct components: $/kg................................................................................. 57 Flowchart 9.1: The camel production, processing and service value chain...................................................... 58 Flowchart 9.2: Camel value chain: the flow of animals, products and yield.................................................... 59 Chart 9.2: Supply chain 1: Camel meat for restaurants ($/kg CDFW)............................................................. 60 Chart 9.3: Resource use: Camel processing chain: breeding to restaurant ....................................................... 60 Table 9.1: Co-products from the camel value chain......................................................................................... 61 Chart 10.1: Buffalo meat and by-product components in Canada: $/kg........................................................... 62 Flowchart 10.1: The buffalo production, processing and service value chain ................................................. 64 Flowchart 10.2: Buffalo supply chain .............................................................................................................. 65 Chart 10.2: Supply chain 1: Buffalo for restaurant meal ($/kg CDFW)........................................................... 66 Table 10.1: Co-products from the buffalo value chain..................................................................................... 67 Chart 10.3: Resource use: Buffalo processing chain ........................................................................................ 67 New animal product supply chain: comparison of key parameters .................................................................. 71 Duck meat for restaurant meal.......................................................................................................................... 77 Ostrich meat for restaurant meal....................................................................................................................... 83 Crocodile meat for restaurant meal................................................................................................................... 90 Yabby tail meat for restaurant meal.................................................................................................................. 96 Squab meat for restaurant meal ...................................................................................................................... 102 Camel meat for restaurant meal ...................................................................................................................... 108 Buffalo meat for restaurant meal .................................................................................................................... 115

viii

Executive Summary This study maps out the supply chains for seven new animal product (NAP) industries, showing how and where value is added, strengths and weaknesses along the supply chains, and providing information about labour and capital resources used for different activities. The method used is known as ‘activity-based costing’. The basic end product defined for each supply chain is one kilogram of meat (cold dressed weight), taken through to a restaurant meal where it is prepared and presented with vegetables, salads, flavourings and other components. For some products (e.g. ostrich and crocodile) the value of the co-product, such as skins for leather, can be greater than the value of the meat. Each activity is defined in terms of materials, labour, expenses, capital investment and equipment used.

Table ES1: Supply chains’ costs: by resources used ($/kg cold finished carcass weight)

Resource Duck Ostrich Crocodile Yabby Squab Camel Buffalo Materials 5.54 6.74 6.75 4.36 13.17 3.28 3.15 Labour 5.85 5.59 9.80 11.12 8.13 5.89 5.94 Expenses 5.83 5.66 6.03 7.38 6.45 5.83 5.70 Machinery & equipment 0.24 0.93 2.10 0.98 4.54 2.31 0.72 Investment 0.16 0.31 1.69 2.71 3.41 5.73 2.43 Profits 0.27 1.08 1.48 0.29 1.40 1.85 1.01 Income tax 0.08 0.46 0.64 0.12 0.60 0.52 0.43 Total costs 19.03 21.66 29.67 28.66 40.11 25.93 20.20 Co-product revenue credit 0.45 6.42 9.20 0.53 0.45 0.76 0.86 Tot. costs after co-products 18.58 15.24 20.47 28.13 39.66 25.17 19.34 Profit % of sales 1 5 5 1 5 5 5 ROI (%) 48.65 85.55 39.16 28.66 17.67 16.13 32.07

The supply-chain analysis extends from elite breeding flocks and herds through to growing, processing, supermarkets and restaurants.

Table ES2: Supply chains’ costs: by activity ($/kg cold finished carcass weight)

Duck Ostrich Crocodile Yabby Squab Camel Buffalo Elite 0.001 0.001 0.07 0.03 0.24 0.46 0.19 Grandparents 0.041 0.040 0.24 0.06 2.72 2.97 1.11 Parents 0.216 0.330 1.54 0.14 10.50 3.18 1.59 Growers 3.488 4.090 5.45 7.99 3.53 0.29 0.23 1st process 0.897 1.480 5.53 2.44 5.20 2.83 1.14 2nd process 0.043 0.290 0.54 0.10 0.04 0.29 0.68 Co-products 0.027 0.050 0.05 0.01 0.01 0.05 0.00 Dist. & mktg 1.560 1.5600 1.56 1.56 1.56 1.56 1.56 Supermarket 2.170 2.19 2.19 2.17 2.17 2.19 2.19 Restaurant 9.170 9.260 9.26 9.17 9.17 9.26 9.26 Other 0.970 -0.750 -5.96 4.40 4.52 2.00 1.13

The supply chain structures examined in the study required an initial investigation and identification of the quantity of material to be handled by each supply chain. This was completed after investigating existing supply chains and reviewing previous studies. It is in the early stages of processing (slaughtering) that economies of scale emerge as a key element of cost competitiveness. The problem for new animal product (NAP) operators is that they have to be able to source enough materials to keep processing plants operating at full capacity (or at least at 75 per cent), otherwise the high costs of low capacity reduce profitability. There is some evidence of economy of scale in the data, as shown in the following chart.

ix

Chart ES1: Supply-chain throughput (kg/year)

Ostrich

Yabby Camel

0

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

Ducks Ostrich Crocodile Yabby Squab Camel Buffalo

Chart ES2: Supply-chain costs ($/kg CFCW)

Ostrich

Yabby Camel

0

20

40

60

Duck Crocodile Squab Bufalo

There are a number of important messages from the analysis: • The competitiveness of NAP supply chains is constrained by small size, which leads to high

delivery costs and limited ability to reliably supply service retailers who need continuous supplies of high-quality products. Cooperation by operators along the supply chain or vertical integration and development of differentiated products for niche markets can offset the cost disadvantage.

• Small things can have a big impact on supply chains. The two most prominent examples are genetic improvement, through an elite-grandparent stock selection system, and a livestock identification and traceability system. Very advanced genetic improvement, and livestock identification and traceability systems can be introduced with a small direct impact on overall supply-chain costs, but a major impact on productivity and end-market product values and security. The supply chains of animal industries that fail to implement identification and traceability systems are likely to become increasingly uncompetitive and vulnerable to shifts in market preferences for improved food security.

• Identifying, designing and preparing the best supply-chain business model for each of the NAP industries is a key factor in supply-chain competitiveness. Supply-chain leaders should set up efficient structures, develop distinctive brands, and manage supply so that they can capture the benefits of investment in new breeding, production and processing technology, and capitalise on the results of brand development. The duck supply chain has many attributes of the ideal business model, with a high level of vertical integration, effective brand development and sufficient economies of scale to be cost-competitive with many substitutes.

• An efficient NAP value chain1 results from meeting the requirements of end-product markets, which all have different needs, and which can turn to substitute meat and leather products if their needs are not adequately met.

• The animal-growing activities, and feed costs in particular, account for a significant share of the

1 The differences between ‘value chain’ and ‘supply chain’, if any, are discussed in section 2. For the moment, they can be considered as synonyms.

x

costs in the more intensively operated2 supply chains such as duck and squab. Measures that improve animal growth rates, feed conversion and the yield of high-priced meats, skins and leather can improve the value added in all NAP supply chains.

• There are strong links between growing performance and breeding, and because growing and its associated feed cost is an important activity in the overall supply-chain costs, investment in breeding can significantly improve supply-chain competitiveness. Each of the supply chains has its strengths and weaknesses: ducks and yabbies have relatively high feed-conversion ratios for intensively run production systems; camel and buffalo need little supplementary feed or capital for buildings, and, while they use a lot of land, it is low-cost land; crocodiles can use low-value food scraps and this tends to offset relatively low feed-conversion ratios; ostriches generate diverse income from both meat and skins; and squabs make efficient use of capital.

Table ES3: Supply chains’ production indicators

Duck Ostrich Crocodile Yabby Squab Camel Buffalo Feed conversion ratio (supplemented feed used : live weight sold):

grower level 2.92 4.76 14.8 1.18 0.75 0.03 0.02 integrated * 3.08 4.95 15.01 1.18 11.23 0.14 0.07 Building/dam yield (kg/m2) 102.48 21.67 0.30 0.28 1.36 4,120.57 13,305.81 Land yield (kg/ha) 39,256.10 6,691.46 1,305.93 1,397.59 16,160.53 0.72 11.98 *the integrated supply chain covers the production and feed from elite breeding through to growers, not just the growing activity.

• While supermarket and restaurant returns account for a relatively high share of the value-chain costs, they are not excessive in the context of reaching and meeting consumer needs in a low-cost way. Direct sale to gourmet delicatessens and restaurants offers an alternative outlet when supermarket costs are too high.

• Restaurant services account for a significant share of all the value chains, and it is important to understand precisely their requirements, especially in terms of quality and type of meat cuts preferred for particular consumer groups, such as people of various ethnic origins.

• Co-products have significant value. The revenue from co-products (assumed to be a negative processing cost) can more than halve most of the 1st-stage processing cost.

Recommendations 1. The value-chain research project should be extended to all NAP industries.

2. Identification and traceability systems should be developed for all NAP industries, starting with a project to define the requirements for each industry, followed by systems design and implementation.

3. Further research should be undertaken into measuring the yields and product conversion ratios and identifying the product possibilities for NAP co-products.

2 Intensively managed systems rely mainly on supplementary feed (e.g. grain) to maintain animal nutrition, compared to extensive systems which rely mainly on natural feed (e.g. grass and clover).

1

1. Introduction 1.1 Background to the research New animal product industries face significant challenges in producing, processing and delivering products for either food or industrial markets. Frequently the firms involved are start-up companies with severe capital shortages and undeveloped supply chains. The operators typically need to learn a lot about running the business. Small size, market uncertainty, lack of reliable information, restricted or expensive access to raw materials, lack of supply-chain coordination and lack of product and market development are significant barriers to industry development.

At the retail end, NAP enterprises often compete against supply chains of traditional industries, which often feature highly developed and technologically advanced information flows, coordination, movement of goods and ultimately lower costs. One of the great challenges in this environment is that costs are typically high when transaction levels are relatively small.

To overcome the high cost problem, there is often a search for niche markets that might be able to generate price premiums to cover higher costs. But the product proliferation that this requires further fragments supply, and accentuates the small-supply and high-cost problems.

In addition, there is mounting evidence to show that there is increased demand uncertainty when sales are low, especially for fashion and speciality-oriented products. Some of this demand uncertainty can be reduced through improved supply-chain management strategies, which might even involve decreased product variety and product consolidation. This could result in decreased lead times, decreased transport uncertainties and improved quality. Judging the right level of product and support service differentiation for the small NAP business is likely to involve a great deal of skill, though this judgment would probably be improved with access to good information systems.

If supply-chain participants improved their knowledge of what is happening upstream and downstream from them, they would advance their strategic thinking and planning in four key strategic variables: • enhanced end-product cost competitiveness • economic value for end-product customers and supply-chain participants • cooperation, partnerships and strategic alliances to enhance coordination and integration • allocation of R&D funds to overcome limiting constraints.

Both food and industrial supply chains are becoming more integrated to improve quality management and cost control. In the food supply chain the major Australian retailer, Woolworths, has more and more of its products delivered through formal supply-chain management systems. This makes cost control and improved food-quality management easier through better compliance with standards like Hazard Analysis at Critical Control Points (HACCP). Another major Australian retailer, Coles, insists that suppliers of private label (non-proprietary brand) food products must comply with the good manufacturing practice (GMP) and food safety requirements detailed in the Coles Myer Food Standards. Producer-members of this type of supply chain have a better understanding of market requirements and marketing risks are, therefore, generally reduced. Kenny’s Creek Natural Beef, from Kenny’s Creek Angus Stud in NSW, is developing a fully integrated supply chain from genetics through to The Commissary, a specialty natural food product network in Sydney. Similar benefits are emerging in the textile and apparel supply chains.

Supply-chain case studies suggest that improvements in supply-chain management can typically generate cost savings equivalent to five per cent of revenue or seven per cent of costs. Industry turnover of the NAP industries within RIRDC is estimated to be more than $180m, with more than 50 per cent exported. This suggests potential gross revenue benefits of $9m/year for the portfolio as a whole if superior supply-chain management practices are implemented.

2

1.2 Study objectives The study had four main objectives:

1. Increased knowledge by industry stakeholders of how value is added by collaboration, and various levels and combinations of labour and capital along the supply chains.

2. Improved awareness of relative strengths and weaknesses along the supply chains as well as the overall supply chain.

3. Improved information for negotiating agreements between participants along the supply chain.

4. Improved information for quality management systems. Outcomes expected from the study include interested parties’ dealing better with the underlying sources of cost weaknesses, such as small size, use of old technology, poor data collection practices, inadequate use of capacity, and poor access to raw materials. In addition, we expect that raw material suppliers, including livestock producers, will gain from the report a better understanding of how and why prices change and value is added along their various supply chains. The report should also enhance R&D decision-making by identifying the areas along the chain where most value is created and, in some cases, destroyed.

1.3 Research strategy and methods There is competition between providers of supply-chain management (SCM) solutions. Very broadly speaking, the alternative methods can be categorised as either process-oriented or transaction-oriented. The process-oriented solutions view the whole design of the supply chain as a highly flexible system and that superior SCM is best focused on process planning to take advantage of new technologies, new work practices, new markets and changing customer preferences. In contrast, the transaction solution tends to focus more on reducing costs or increasing value from an existing supply chain by collecting, analysing and sharing information across all supply-chain activities with the aim of improving coordination through what is termed enterprise resource planning (ERP). Activity-based costing (ABC) involves identification of all supply-chain activities and the costs of performing them. It accurately identifies sources of profit and loss, as long as data measurement problems are eliminated. For this study we use essentially an activity-based costing model. More recently another category has emerged, customer relationship management (CRM), which gives more attention to intangibles such as keeping customers happy, all the time. In reality, the different supply chain terms are closer to each other than they and some patriotic critics suggest.

We recognised that data limitations would be a severe constraint for this study. In these circumstances we considered it appropriate to report on and analyse the way in which value is added and prices change through each stage of the existing supply chains. It is, basically, the start of a planning phase for a NAP supply chain. The study does not look into the ways respondent firms and industries carry out their businesses. This aspect is, however, an important area for further development by NAP firms.

There are five basic components that need to be addressed in developing SCM systems (Koch 2002): • Plan, starting with a strategy for managing the resources needed to meet customer requirements. • Source (production of animals or materials for processing). Involving selecting the suppliers that

can meet customer requirements. • Processing. This step involves scheduling of all those activities necessary for production, quality

control, testing, packaging and preparing for delivery. • Delivery. Often this is called logistics, though contemporary logistics operators would label this a

very narrow definition of their industry (see below). • Return of defective goods and management of customer relationships.

This study is essentially about the planning step.

The conceptual layout of the activity-based costing model used in this study is shown in chart 1.1

3

Chart 1.1: Adding value to new animal products

0

100

200

300

400

500

600

700

$/kg (finished wt)

Animal product 1 Animal product 2 Animal product 3

Sourcing Processing Inward deliveryOutward delivery Reject/returns Capital cost

This study required the construction of supply chain structures for seven NAP industries. This involved: i. work breakdown structure, requiring identification of the supply-chain activities that are

manageable, measurable and independent, but capable of closer integration and coordination ii. cost breakdown structure, which involved sequential identification of costs associated with item (i),

from the bottom up, starting from production of raw materials on farms, though distribution and processing to retail

iii. price breakdown structure, which involved calculation of prices that enable recovery of costs.

The supply-chain model used for this study is based essentially on one product being produced for the full supply chain, with breeding, farm production of growers, 1st-stage slaughter, 2nd-stage boning and separation, retail and restaurant activities.

Co-products are treated as negative costs when they generate additional income.

Each activity is defined in terms of materials, labour, expenses, capital investment and equipment used.

At the product definition level we specify a product name (e.g. whole carcass or breast meat) and volume produced for one year. For each activity, a unit of output from that activity is defined as the takeoff per unit of end product. For example, the final output may be 10 000 kg of ostrich meat to be produced each year. Then, in the farm-production activity, the take-off (the amount of resource used to produce each unit of end product) may be 250 growers/10 000 kg of ostrich meat. In turn, this farm production activity may use 250 kg of grain/grower at a grain price of $0.30/kg. This process is extended through the supply chain to arrive at a supply-chain cost of production. The model allows profits to be built into the supply-chain costs.

There are a number of financial variables used in estimating the supply-chain costs, including taxes, mark-ups and commissions: • income tax: a constant rate of 30 per cent • GST of 10 per cent is applied to all inputs other than labour • overhead costs, equivalent to two per cent are applied to all input costs • sales commission of 1.0 per cent is applied to the end sales value • net profit of 1.0 per cent of sales revenue is included as a cost for ducks and yabbies and 5.0

percent for ostrich, crocodile, squab, camel and buffalo. The lower profit rate for ducks was used because of its typically large volume and for yabbies because of the cooperative structure, which

4

typically involves shifting profits to suppliers in the form of higher input prices paid. In reality, each supply chain requires individual calculations.

The distribution of this net profit is not determined. After the adjustments listed above, a supply-chain cost is estimated and from this amount revenue from sales of co-products would be deducted, enabling a final cost to be determined and compared to what can be achieved in the market.

Data for the study were obtained from a combination of field visits, literature searches and in-house data from previous studies. Data from co-products was obtained from a number of studies. This is an area for further research because co-product revenue can offset processing costs and improve competitiveness.

We hope that the results of this project will stimulate further, more commercial work by specific supply-chain participants, who would be better able to identify and capture the potential value-adding benefits that come from improved supply-chain integration and collaboration.

1.4 Scope of this study Seven industries are selected for the study. These are duck, ostrich, crocodile, yabby, squab, camel, and buffalo. With a potential revenue benefit of five per cent from improved SCM strategies, the potential gain from the study is between $1.5m and $2.0m/year. Because most of these industries are growing at 10 per cent/year or more, the present value benefits are potentially large.

Table 1.1: Farm-gate values of selected new animal product industries

Industry *Value ($m)

Duck 15 Ostrich 6 Crocodile 6 Yabby 1 Squab 1 Camel 1 Buffalo 2

*Values from RIRDC 2001 and internal estimates

1.5 Report outline Section 2 reviews the history and current state of supply-chain modelling and management, with case studies to illustrate business models being employed in other industries. Section 3 describes the parameters of the supply-chain model used in this study. Sections 4–10 describes the individual NAP supply chains in more detail. Appendix 1 is a table containing key technical conversion ratios from the different supply chains. Appendix 2 is a large spreadsheet with the costs of activities and resources used in each of the supply chains.

5

2. Review of the History, Situation and Outlook for Value-Chain Management 2.1 Historical perspective on value-chain management A sobering starting point for a review of value chain or supply-chain management is the observation that they are not new concepts. Even Gooch (2002) and Van Dalen (1997), citing Hines (1994), seem to recognise this in their quite unremarkable conclusion that unless a process or procedure adds value to a supply or value chain it cannot achieve a sustainable competitive advantage. Coase (1937) first gave rational insights into supply-chain structures and operations. He developed the logical idea that firms organise themselves on the basis of transaction costs associated with different methods of production. Firms and other economic organisations and institutions, in effect, exist because their agents and managers find it an effective way of minimising transaction costs. It’s as simple as that. When costs and risks become too high for a particular structure firms will rationally reorganise themselves to take advantage of the lower cost or the value-increasing structure. Coase would have been unsurprised by the growth in SCM systems, which has occurred in conjunction with access to new information and communication technology. This technology has enabled lower-cost transactions to take place between firms along the supply chain. If the systems do not add value then it seems reasonable to expect there would be little investment in them.

The names, words, titles and emphasis change every now and then to reflect different conditions and technologies and there is more than a little creative writing by promoters of supply-chain software. Nonetheless, it is important to recognise, as Coase no doubt would have, that actions which result in mere distribution effects along the supply chain are not necessary sustainable if, for example, they eventually reduce the competitiveness of a particular supplier for the benefit of a particular buyer. The question of sustainability of a supply-chain structure becomes important in fragmented, non-integrated structures because every supply structure requires reliable materials and support services to sustain it. Even with a fully vertically integrated structure the firm will be outsourcing products and services, and be reliant on these providers to sustain the delivery system.

In its earliest days, supply-chain and value-chain management went under the name of logistics, an operations research control technique for identifying, measuring, analysing and managing logical relationships in a business, especially distribution and transport problems. In 1961 Koontz and O’Donnell referred to the emergence of logistics for planning and control of inventory and the ‘more exciting’ prospect of extending it to other functional areas of the firm (Koontz and O’Donnell 1976). Even now it is the Logistics Association of Australia that deals most regularly with SCM components and gives most serious attention to creating systems and structures that can be implemented in an operational sense, not simply written about from an abstract strategic planning perspective. Nevertheless, logistics is logistics, and the discipline has had difficulty in embracing the supply chain as a broader and integrated structure that extends systematically along the whole supply chain, through to the end consumer with many ‘soft issues’ like negotiations with suppliers and relationship-building with customers. Seizing on this weakness, the software and strategy entrepreneurs have eagerly come forth with ‘demand pipelines’, ‘value profit chains’, ‘customer relationship management’, ‘vision software’ and many, many others.

Porter (1985), in Competitive Advantage, rode to fame with the idea that every firm is essentially a value chain of connected activities that are undertaken to support their product with the aim of gaining a competitive advantage. This approach extended McKinsey and Company’s business system idea of the firm being comprised of a series of functions that need to be performed according to world-best practices. Porter expanded the scope of SCM to the all-embracing notion that the whole essence of competitive advantage, even survival of the firm, is about creating value through superior linkages and networks of activities and relationships. In this framework, Porter identified three basic ways of gaining a competitive advantage for the firm: cost advantage (e.g. by achieving economies of scale, increasing capacity utilisation and better integration with suppliers and distributors); product or service differentiation (e.g. quality management; close supplier relationships); and/or focus on a particular

6

product, technology or market segment. (e.g. game meats, instead of all-red meats, or natural meat instead of lot-fed meat).\

Chart 2.1: Business system — McKinsey and Co

Recent attempts to draw a distinction between so called ‘customer relationship management’, ‘supply chains’ and ‘value chains’ seem at first to be exercises mainly in etymology or creative use of words, especially when it comes to implementation or lack of it in some cases. Walters and Lancaster (2000) define supply-chain management as dealing with the interface relationships among key stakeholders and enterprise functions that occur in the maximisation of value. ‘This is driven by customer needs satisfaction and facilitated by efficient logistics management …’ The idea that value-chain management is somehow different to supply-chain management on the grounds that it involves ‘… a much more complex set of tangible and intangible factors …’ seems to ignore the evolving nature of SCM. With developments in information and communications technology it was only a matter of time before systems would be developed for SCM and that strategic perspectives would take on greater importance in SCM. If value-chain management becomes too holistic it runs the risk of system failure and a return to the past problems of poor linkages between logistics and end consumers. Russell (2003) observes that ‘… SCM is widely understood to be a key driver of shareholder value, but very few Australian companies are realising the financial reward that transformation … can deliver’. Most companies simply optimise specific supply-chain functions within their own boundaries, when transformation involves going outside the four walls of an organisation and genuinely collaborating with players up and down the supply chain. Russell believes that only this next step can turn the supply chain into a major source of innovation and competitive advantage. He says: ‘Companies who lead the way in working out how to transform their supply chains are scaling up so quickly that they could get so far ahead that followers simply will not catch them.’

2.2 Supply-chain management industry and software vendors The supply-chain management industry is a multi-billion global industry headed by firms like SAP (revenue of $US8 billion/year, with mySAP SCM a major product), IBM and Manugistics, Baan, PeopleSoft, Siebel Systems, JD Edwards (which now owns PeopleSoft), QAD and I2. Smaller vendors, practising what they preach, are also managing to carve out niche markets. Australia-based Mincom, for example, is focused on Customer Relationship Management (CRM) software for the resource industries and has a high share of this segment of a global market. There are also many suppliers of SCM software that is directed to smaller companies. Captera, an online enterprise software centre, lists over 60 suppliers of supply-chain software, most of which are directed towards smaller-to-medium sized enterprises (http://www.capterra.com/supply-chain-management-solutions). Microsoft Corporation, through Microsoft.NET (http://www.microsoft.com/net) also provides a web-based system that can be developed for small firms. The main products emerging from Microsoft are ‘Great Plains’ and ‘Navision’, which are being positioned to compete with SAP.

USA-based QAD Inc. has recently gained attention in Australia by capturing the supply-chain software business (through a CRM solution) of the Australian pie maker Balfours Bakery in South Australia. QAD has developed significant expertise and experience in the food and fibre

7

manufacturing industries (refer to Case study 1). For this reason, and because it is seen to be among the lower-cost providers of CRM solutions, it is of interest to NAP industries.

2.3 SCM outlook and the emergence of web-based integration The adoption of new and improved SCM systems and structures has been identified as the next big driver of retail profits (Gottliebsen 2003). Woolworths is aiming to achieve cost savings of $500m over the next two to three years in the second stage of its ‘Project Refresh’, the benefits from which are expected to be shared 50:50 between shareholders (of Woolworths) and consumers. Suppliers do not seem to be mentioned, but when questioned about the impact on small product suppliers, the response of Roger Corbett, CEO of Woolworths, was that they should focus on niche markets that can entertain a price premium. If nothing else, that comment of indifference towards suppliers underlines the concentration of market power in Australian food retailing. The Project Refresh system at Woolworths is expected to cost about $1 billion over the five-year implementation period.

Coles Myer, the main Australian competitor to Woolworths, is also in the midst of a major SCM system upgrade with the ‘.. deployment of a Manugistics (and IBM) collaborative planning, forecasting and replenishment suite (CPFR) …’ (Mills 2003). CPFR manages relationships between supply-chain partners and seems to be more in the nature of a CRM than a SCM system, though it follows on from a $250m upgrade of Coles Myer’s SCM systems a year earlier. CPFR provides retailers and suppliers with what Mills calls a ‘common playground’ for aligning joint promotion tactics, improved forecasts about demand and inventory, management of change, information about the retailer’s supply chain system, and supply chain performance measurement.

The CPFR of Manugistics-IBM provides users with Internet access to secure shared data via a web browser. Unilever, which accounts for more than 30 per cent of Coles Myer’s supplies, is connected to the system and (at April 2003) commitments had been received from three other major suppliers, with discussions being held with a further ten.

A key feature of the connection between suppliers like Unilever and retailers like Woolworths is back-end integration, which means that data are entered once only, at the source of origin. This is an important feature in terms of its implications for security and access to the overall SCM system. It means, for example, that a great deal of scrutiny would have to take place before a business would be given access to the back end of any supply-chain member. It also means that significant resources are needed to supply and maintain secure back-end systems.

This may present problems for small suppliers. The supply-chain manager at Unilever Australia, Howard Evans, says smaller suppliers that may not want (or be able) to integrate their systems can simply use the system via a web browser. Of course, this would mean their data would not be real-time, and while real-time data may not be that important directly to a small supplier, it does present the potential for reduced access to the full set of supply-chain information. This may or may not be a problem, depending on the size of the supplier, frequency of transactions, promotional activity, brand development activity etc.

The emergence of web-based SCM systems and software offers the prospect of improving competition and bargaining strength along the supply chain and between supply-chain participants. Until now, traditional SCM operators and enterprise resource planning (ERP) vendors in particular have tended towards a centralised data warehouse as the way to achieve integration along the supply chain. The centralised database was seen to offer the potential for enhanced market power for the owner of the database and for the systems and software vendors. It was also seen to offer a way through the ‘…chaos of legacy applications and software proliferation …’3 (Strassmann 2003). The problem was

3 Legacy applications are those that exist from historical purchases, of days gone by, and not necessarily relevant to current needs. Software proliferation refers to the vast range of software products now available for specific applications. In the past there may have been just one or two software products, compared with literally hundreds in today’s market.

8

that firms tended to want to hang on to their legacy solutions that gave them the answers they needed, and so the costs of adapting to the centralised solution became a barrier to effective integration.

Web-based systems are opening new and much more decentralised SCM opportunities and at lower cost than might ever have been thought possible. This is being achieved through measures like XML, (extensible markup language), which has been designed to improve the functionality of the web through improved flexibility and adaptable information identification. XML is actually a ‘metalanguage’ — a language for describing other languages — which lets the user design their own customised mark-up languages for different types of documents. XML can do this because it is written in SGML, the international standard metalanguage for text markup systems (Flynn 2003). This means that supply-chain participants can continue to use their preferred legacy systems, while also linking up and integrating with the supply chain. The full impact of web-based SCM systems has yet to be felt.

Salesforce.com (http://www.salesforce.com) is a web-based CRM provider, owned by Marc Benioff. Salesforce offers cost-saving features that are likely to appeal to small businesses. It delivers what might otherwise be prohibitively expensive software though a web-based rental scheme. Although this scheme is confined at the moment to CRM systems, it is starting to expand into enterprise-based systems and an offering of SCM software seems to be just a matter of time.

The complexity of supply-chain design, operations and management is leading to outsourcing of the SCM system to third-party logistics suppliers (3PLs), who take over the information systems management (Lawson 2003). The 3PLs systems are linked to the suppliers’ and clients’ systems and this helps ensure that the orders and deliveries all happen as intended. New levels of complexity are resulting in even higher levels of logistics suppliers, with fourth party (4PL) operators now emerging for large firms with diverse product ranges.

The possibility of small-firms having limited access to new supply-chain technology is an issue of fundamental importance to agriculture, which is dominated by a large numbers of small firms delivering to a small number of very large firms, often just one or two. The small-size problem of agriculture is even more pronounced in NAP industries. In these industries there are sometimes just one or two processors and the products of small suppliers represent such a small proportion of large retailer sales that they do not enter their SCM databases. In these circumstances small industries can suffer a competitive disadvantage against suppliers of higher-volume products.

Russell (2003) complains about the domination of Australian industry by two or three strong players, who are complacent about their position and have no incentive to innovate. In contrast, O’Keefe and McEachern (2001) take the view that the Internet offers significant opportunities for small suppliers to create value for their shareholders through membership of supply-chain networks. This membership could be a valuable intangible asset, as distinct from the tangible assets dominated by land, buildings and other improvements on the balance sheets of most agricultural producers.

Field activity shows that some producers can see this potential for intangible value. For example, Banksia Beef is a group of 160 beef producers from three sub-groups who have linked with a Queensland export meat processor to target South-East Asian supermarkets (Robertson 2003, and refer to Case study 2). Banksia Beef’s system enables cattle to be identified individually and tracked from the paddock to the supermarket shelf in Malaysia. This gives the supply chain enhanced control of quality and capacity to prepare animals and product to suit specific country and regional tastes.

Banksia Beef exports to Singapore, Malaysia and Taiwan. In each of these countries, there is one supermarket with exclusive access to the supply chain. Banksia gets its power to be a supply-chain leader through the cooperative efforts and commitments of its 160 members, who have to deliver according to strict specifications on weight and quality. The abattoir at Warwick does not take over ownership of the stock. Instead, they process it for a contract fee. This enables the producers to stay in direct contact with the retail markets in distant countries and to continually monitor the product on the supermarket shelf and consumers’ behaviour to it. While this SCM model is still in its infancy it provides a glimmer of hope for small firms, especially those with aspirations for improved linkages with their customers. A key attribute of this model is that it gives members control of supply, with potential for brand building, which is a major transformation for an agricultural sector that is dominated by commodity selling to agents and brokers.

9

Banksia Beef is not an isolated example in the Australian meat industry. Meat and Livestock Australia (MLA) has developed an SCM program to increase the adoption of good SCM practices (Feedback 2003). This program is also facilitating integration of legacy programs and systems like the National Livestock Identification System (NLIS), EAN messaging, EDGE network and quality-management systems generally.

While supply-chain management offers the potential for significant gains there are costs and risks in implementation and organisation. Woodhead (2003) cites the online market research provider Gartner, who points to three main constraints: • access to reliable data • integration of systems • alignment of supply, which can be a major challenge for agricultural producers exposed to season

shifts in production, climate variability and small size, which all means that more producers from different regions with different climatic conditions are required to meet the ongoing needs of processors.

These obstacles will present significant barriers to most supply-chain developers and managers. But the benefits may often exceed the costs by a significant amount, at both the macro- and micro-economic level. US Federal Reserve Board Chairman Alan Greenspan has labelled SCM as potentially the most important productivity factor behind US economic expansion. And at the level of most firms, a 1997 benchmarking study sponsored by the Supply Chain Council concluded that the difference between having average and superior SCM performance is equivalent to between three and six percent of total revenue (Industry Search 2001).

In response to the problem of complexity, some service providers are offering simplification, with the aim of achieving some benefits up-front, instead of being overwhelmed by costs of implementing new systems and organisational structures. The Avraham Goldratt Institute has developed what it calls the Theory of Constraints, which states that any system has at least one constraint (Industry Search 2001). When applied to SCM, this means that the weakest link is the starting point for attention. When this link is improved the next weak link is tackled, with subsequent attention to other links. The problem with this approach is that it might result in a patch-up approach and lose sight of the overall supply chain and the key elements of integration. Nevertheless, it does offer a way of getting started without taking on large financial commitments, and this could be relevant to small firms.

10

CASE STUDY 1: QAD, SPECIALISING IN CRM FOR FOOD MANUFACTURING (THIS CASE STUDY IS VERBATIM FROM QAD) Confronted with consolidation, more demanding customers, and ever-fierce competition, food and beverage companies must find ways to adapt to fast-paced industry and market change — and introduce new products quickly. And they must do it in the face of mounting industry pressures such as food safety and quality, and regulatory compliance. Successful food and beverage manufacturers focus on ensuring profitability from all areas of the value chain. Operations are streamlined for maximum performance. The power of information technology is maximised to better manage all aspects of the business. Many are outsourcing products and services for greater efficiency. Collaboration extends beyond the enterprise to include growers, processors, manufacturers, distribution and retail partners. By doing so they accelerate innovation and improve time-to-market — introducing new products quickly and profitably. QAD World-Class Solutions for Food and Beverage Manufacturers Food and beverage manufacturers worldwide can choose QAD’s enterprise applications to help streamline operations and boost profitability. • QAD enterprise solutions provide for comprehensive management of the food or beverage

manufacturing enterprise, including: procurement, manufacturing, operations, sales & marketing, distribution, and customer service.

• QAD supply-chain execution solutions take supply-chain performance to the next level — enabling customers to improve collaboration across the supply chain, shorten cycle times, eliminate excess inventories, and reduce operating costs.

• Deep industry functionality addresses critical needs for food safety, product data synchronisation, and regulatory compliance.

Designed for single- or multi-site operations, QAD solutions accommodate production models, plant locations, and financial structure — in 26 languages and include support for multiple currencies. QAD’s focus on manufacturing — and close work with the world’s leading food and beverage companies — produces high-value solutions with bottom-line results.

QAD has recently finalised the contract to supply its CRM solution for Balfours Bakery, which is one of Australia’s largest bakeries and supplies the recognised footy pie to the Australian Football League.

11

CASE STUDY 2: BANKSIA PUTS PRODUCERS IN CONTROL OF DESTINY Courtesy of Global Supermarket http://www.globalsupermarket.com.au/1_2_2.html Banksia Beef is neither a producer nor processor of beef, yet it can claim to be the most successful consumer brand of beef in South-East Asia. It is a business established to deliver product integrity and service to its customers, whilst also delivering shareholder value. Banksia demonstrates best practice in the application of innovative supply-chain management principles and practices to address the business weakness of traditional commodity marketing in the beef industry. The Banksia Beef joint venture partners are Probeef Pty Ltd, an alliance of three beef producer networks in northern NSW and southern Queensland, and processors Warwick Bacon. Probeef members supply the cattle at prices set annually according to the market, and Warwick Bacon provides the processing and marketing support. Banksia Beef was set up because members of Probeef wanted improved returns for their beef to reduce fluctuations in income, take control of their own destiny, and to obtain feedback on the market performance of their cattle. Meat and Livestock Australia identified the opportunity for a tightly specified branded product across a range of Asian markets. Warwick Bacon, well known in Asia for its John Dee brand, recognised the opportunity to develop a new market backed by a consistent supply of suitable cattle. Critical success factors 1. Product differentiation to create customer value The product is significantly differentiated in the market as fresh premium yearling beef, free-range (free from growth hormones), Halal-certified and food safe. It is marketed as a tender, lean, healthy, natural product packaged under the Banksia Beef brand and sold in cuts according to Asian cooking styles to assist consumer selection. The production and marketing chain is HACCP-accredited and is transparent in providing market feedback to producers and full product traceability to customers. 2. Critical mass and year round consistency of supply Individual producers commit to deliver ‘decks’ of cattle (about 30 head) to agreed specification at a point in time against a performance bond. This could be forfeited if delivery commitments are not met. Group coordinators assist producers to finalise deliveries in accord with a specification grid developed for the product. Delivery prices are set annually, broadly to reflect spot market prices. 3. Thorough chain transparency The Banksia Beef structure enables the joint venture partners to build chain transparency and avoid the traditional adversarial relationship between producer and processor. Appointment of a chain manager provides for effective communication and building relationships between chain partners and ensuring consumer responses are relayed through the chain. Producers receive direct feedback on each shipment to enable production modifications to enhance compliance performance and yield. HACCP-based quality systems provide full product traceability from paddock to shelf. Financial performance is monitored by consignment to ensure sustainable profitable performance and to underpin marketing arrangements. 4. Building the brand Early in the project, retailer representatives, and their agent, visited Australia to meet producers, tour the plant and evaluate the integrity of the market offer. Selected producers participated in product launches and point-of-sale promotions putting the human face on the brand in the market place. Brand building has required continuous monitoring and liaison at the store level through effective category management (for example, ensuring complementarity of the Banksia and John Dee brands), including shelf presentation and maintenance of product/brand integrity to ensure that consumer expectations were achieved.

12

3. New Animal Product Supply-Chain Parameters In estimating the costs of the different animal product supply chains there are complex demands on mapping the tasks and their costs when they absorb resources such as materials, labour, expenses, machinery and investment in stock. Furthermore, there is a need for common standards in measurement to enable the inevitable comparison of performance indicators across animal types. For example, feed-conversion ratios (i.e. feed consumed : live weight gained) can be difficult to interpret when feeds of different quality and value are used. Crocodiles, for example, show relatively high and variable (ranging from 5-40% for hatchlings (Peucker, S. 2004)) feed-conversion ratios. This disadvantage is offset by the low-value waste that makes up most of their diet. More recently, however, Van Barneveld et.al. report achieving significantly improved feed conversion ratios for crocodiles fed on new formulations containing selected mineral supplements.

Other distortions arise when different quality and different-aged animals are compared. With ducks, for example, the feed-conversion ratio of a fully vertically integrated enterprise is logically higher than for an enterprise where the grower4 is purchased from an outside supplier at an age when it is ready to experience rapid growth. With some enterprises, such as squab, the grower is fed mainly by the parent. In these circumstances the integrated feed-conversion ratio is again much higher than for the grower in isolation. With extensive enterprises, such as camel and buffalo, there is little supplementary feeding and low feed-conversion ratios are shown, but this is offset by the absorption of grazing land.

Chart 3.1 shows the feed-conversion ratios for the seven different animal supply chains. The data for these estimates are derived from this study and previous research we have done in establishing benchmarks for these and other animal products. It shows the feed-conversion ratios for a grower purchased from another supplier and, as a comparison, the fully vertically integrated enterprise from breeding through to the finished grower.

Chart 3.1: Feed-conversion ratios: By animal and feeding system (supplemented feed consumed : live weight gained (kg)). [Note: Includes only feed concentrates, not pasture in extensive systems].

02468

10121416

FCR

Ducks Ostrich Crocodile Yabby Squab Camel Buffalo

Grower Vertical

The process flow of materials and resource use is required before we can construct a basic supply-chain cost estimate from breeding through production, processing and retailing. The appendixes set

4 In this report, the term ‘grower’ refers to the animal that is being grown.

13

out the detailed supply-chain material and resource flow values for the seven animal product industries. The data for each of the animal products have been obtained from earlier benchmarking studies by the author (Wondu Holdings 2001,2002) and other technical studies in various locations. In some activities, especially the recovery of co-products, data are often limited. In these situations we have applied co-product yield ratios (e.g. offal : dressed weight yield) from other animal industries to arrive at broad estimates of co-product quantities from each supply chain.

The basic supply-chain models for each animal product is a a vertically integrated structure, with self-replacing animal breeding enterprises. That is, all animals for growing are generated from breeders within the enterprise. The only purchases are for a small number of key sires in the elite breeding herd/flock. There is one primary product for the vertically integrated enterprise and secondary and co-product revenues are treated as negative costs5. The full supply chain starts with an elite breeding activity6 that supplies superior stock to a grandparent flock activity, which supplies improved stock to a parent flock activity, which is the main source of growers (the grower activity). A small percentage of growers are also sourced from the culls of the elite and grandparent flocks. Finished livestock are transferred to an early-stage processing activity (slaughter and hide/feathers/skin co-product recovery), from where carcasses may be sent direct to a supermarket or to a boning room for further processing. Another choice at the end of the chain is to send the carcass direct to a restaurant.

When defining products in the model, there is an allocated product name for the primary product and volume produced is defined for a period of one year. That is, we define all the activities to be undertaken and resources used for making a set volume over a one-year period. Selecting the target volume is a key decision in supply-chain management as it is governed by market demand and economies of scale, and has major implications for the costs associated with different-scaled enterprises and management coordination tasks. Task take-off factors are used as the basis for defining resource use and costs. An example of task take-off is the number of ostriches needed to produce, say, 2.3 million kg of ostrich meat. From the table in appendix 1 it can be seen that this quantity of meat would require a self-replacing flock of about 650 parent female breeders, 36 grandparent females, and two elites.

After the take-offs for the activities are defined, the next step is to define the resource take-offs within each activity so that activity costs can be worked out. For example, it takes an estimated 27 kg of feed to supply a female squab for one year or 700 kg to sustain an ostrich breeder for one year. After the quantity take-off relations are defined the unit costs are then applied.

The 2.3 million kg processing operation for the duck supply chain is an approximate minimum efficient size, judging by our previous benchmarking studies. An operation of this size could be supplied by 30 different farms producing around 1200 growers/year each, but it might also be supplied by one large vertically integrated operation.

5 The treatment of co-product, joint product and waste product revenues as negative cost items avoids the problem of allocating direct costs to these products. It can, however, become a problem when the co-product revenue accounts for a large share of the final revenue, which is the case with some NAPs , such as ostrich and crocodiles, which produce both meat and leather. 6 ‘Elite breeding’ here means the activity of breeding superior stock or stock with particular characteristics sought by end consumers of the value chain. ‘Grandparent flock/herd’ means the stock directly derived from the ‘elites’, with the elites supplying all the replacement sires and breeders required to sustain the grandparents for the value chain. ‘Parent flock’ means the stock directly derived from the grandparents, with the grandparents supplying all the replacements required to sustain the parent group for the value chain. The ‘grower facility’ is the stock derived from the parents, as well as culls from elites and grandparents. It is the growers that supply the requirements for the first-stage processing activity.

14

4. Duck Value Chain 4.1 Background Ducks account for about five per cent of the world’s poultry flock, in which chickens have the dominant share (more than 90 per cent), and turkey (two per cent) (FAO 2003). Ducks take on added importance in Asia, which accounts for an estimated 87 per cent of global production, and in developing countries generally, which account for almost 95 per cent of global production. Asian migration to developed countries is a source of growing demand for duck meat in Australia and other developed economies. International trade in duck meat is around $420m/year (Wondu Holdings 2001).

Poultry raising is generally undertaken through what are termed extensive or intensive production systems. In developing countries, where most duck production takes place, the extensive system prevails, although there is also significant change towards intensive systems to meet growing demand.

In developed economies such as Australia, North America and Western Europe, more than 95 per cent of commercial duck production takes place through intensive production systems. While there are a few small-scale producers operating in developed countries, the large-scale specialist dominates the market, and economies of scale result in highly concentrated domestic markets. The Australian market, for example, is dominated by just two processors, who rely to a large extent on vertically integrated production systems, with some outsourcing of live animals for processing.

A number of major suppliers overseas operate fully vertically integrated production systems from the selection of elite breeding stock through to grandparent, parent, hatchery, growing and processing, and delivery to retailers. Green Label Farms, for instance, at Woodbridge in the UK, owns the breeding rights to the Gressingham Duck and uses this breed as the foundation for production on its own farm as well as for the outsourced production from contract growers. The rate of gain in live weight and level of feed conversion from genetic improvement are recognised as important and controllable variables in the duck supply chain, and there is considerable attention placed on genetic improvement for high performance (Metzer Farms 2003).

The value chain of intensive duck production and processing is complicated by the choices available to operators in terms of breed selection, how growers and materials are sourced, which markets are to be targeted, and how much processing and value-adding takes place at the slaughter and boning stages. There are several distinct, but highly integrated, stages in taking a duck from breeding though growing, early-stage processing and meat preparation to retailing, where it might be available as a 150–300-gram vacuum-packed breast or leg portion for caterers, or a 250-gram tray-wrapped leg for a supermarket or gourmet delicatessen.

Specialist preparers add further value through boning and stuffing and add components such as sachets of sauces and marinades. Restaurant chefs add further value through meal design, material blends and cooking techniques. A duck, which could start off at a value or cost of about $2.50 as a day-old chick, ends up at around $17.00 as a whole bird weighing 2 kg. A meal of Szechwan cured duck can be purchased at a Sydney restaurant for as much as $27.50 in the higher end of the market and more commonly at around $10–12 for roast duck in a mid-range Asian restaurant . This meal contains an estimated 150 grams of breast meat, the highest-valued portion of the duck, accompanied by a diversity of vegetables, sauces and other additives. Achieving the right balance and blend of flavours is an important skill in the final stage of the duck value chain.

The opportunities to add value to a duck are many and varied. The first opportunity is the choice of enterprise structure and scale. There are moderate economies of scale in production and strong economies of scale in processing, but it is equally important to make full use of assets, otherwise the gains from large scale are quickly dissipated. A number of operators gain control of their capacity utilisation by vertically integrating backwards into breeding and production, and forward to direct selling to end consumers.

The second major opportunity for adding value is in achieving operational efficiency for a given scale of operation, which means efficient selection and use of key inputs especially breeding stock, labour

15

and feed. Finally, there is the value of the end product where opportunities exist to achieve relatively high unit prices by delivering to niche markets that are prepared to pay price premiums for specialty products that meet consumer needs. These premiums may be achieved in special market segments, such as the Asian market for whole ducks with feet on, or general gourmet markets, for products such as duck liver, and smoked duck breastmeat. Chart 4.1 shows the differences in value for a selection of duck meat cuts and byproducts. About 15–20 per cent of the duck comprises breast meat, 18–20 per cent Maryland, 27–30 per cent fat and skin, and the balance is offal and feathers.

Chart 4.1: Duck meat and byproduct components: $/kg

9.99

17.98

39.88

910

05

10152025303540

$A/kg

Whole duck Duck Maryland Duck breast fillet Duck liver Duck fat

Source: Green-grocer.com, 27 January 2004: Luv-a-duck.

While the breast meat is clearly the highest-valued cut, it typically accounts for no more than 20 per cent of the carcass weight. There are value-adding opportunities with duck liver and duck fat recovery even though the unit prices and yields are relatively low, because this revenue can be generated with low marginal collection costs and it makes a valuable contribution to offsetting slaughter costs.

4.2 The flow of products and yields in the duck value chain The length and complexity of the duck value chain is shown in figure 4.1, which shows only the main activity categories. For example, the processing activities alone involve significant sub-activity details. Flowchart 4.1 shows the detailed sequence of duck processing activities and equipment. At each sub-activity there are various levels and combinations of capital, labour, outsourced services and materials to be procured and managed in the most efficient way possible.

The livestock, meat and byproduct flow for ducks is shown in flowchart 4.2. These are standard metrics and may vary depending on animal breeds, feeding and processing conditions.

4.3 Size and structure in the duck value chain The breeding structure and numbers within each activity along the duck supply chain are based on the requirements for a minimum efficient-sized early-stage processing plant, which is judged to have capacity to process 2.5 million ducks/year and 1000 birds/hour, or more when operating at full capacity 7. The design of an efficient supply chain requires an initial assessment about the efficient

7 Processing investment costs and technology were obtained from JM Poultry Technology BV in the Netherlands, and Meyn Food Processing Technology, also in the Netherlands.

16

size for each of the activities along it. From this point, a supply-chain leader can set about sourcing products and services in the most efficient way possible from efficient-sized suppliers.

Flowchart 4.1: The duck production, processing & service value chain

Elite breedingflock

Grandparentflock Parent flock Hatchery Growing farm

2. Distribution

Freight, cartage &handling

3. Early Stage Processing

Arrival &hanging

Stun/kill/de-feather Evisceration

Offal & co-products

Gizzards, liver, heart,neck, blood, feathers

Chill Weigh Wrap &pack

Specialtymarkets, incl.

industrial

4. Second Stage Processing

Cutting,separation &

boning

Boneless duck, boneless leg, wingjoints, breast, inner breast fillet, dicedbreast, thigh, drumstick, bone meal

Adding ingredients ... stuffing, flavouringsWrap & pack

5. Distribution

Transport Warehouse Wholesale

6a. Retail - Supermarket/Gourmet Deli

Storage Preparation Location & display Promote & sell

6b Retail - Restaurant

Storage Meal design One-to-onecustomer service

Promote & sale

Location & ambience

End consumer

1. Production

17

Flowchart 4.2: Duck value chain: the flow of animals, products and yield

The production starting point in the duck supply chain is an elite breeding flock of 12 females and two males. This elite flock can supply all the breeding material for a duck supply chain that provides 2.5 million growers and eventually produces 4 676 586 kg of duck carcass meat/year.

The elite flock supplies replacements for a grandparent flock of 216 females and 36 males which, in turn, supplies the replacement 16 632 females and 2772 males in a parent flock, which then supplies

a.) Production

Female duck (6-10)

Male (drake) duck(1)

200 eggs/female

Non-fertile eggs(10%)

Fertile eggs(90%)

150 ducklings(wt. 88g)

147 growers(wt.3kg)

b.) 1st Stage Processing c.) 2nd Stage Processing

Bone-in carcass(2kg)

Breast meat(400g)

Thigh meat (300g)

Wing &forequarter (500g)

Co-products(800g)

Boned-out meat(1.2kg)

Co-products(1kg + 800gtransferred infrom boning

Disappearances -moisture loss etc.

(984g)

Offal (256g)

Hide, skins,feathers

Fat (175g)

Bone, meat, otheretc. (230g)

Blood (55g)

Offal products:neck/feet (100g)liver (55g)heart (19g)gizzards (56g)other (26g)

feathers (100g)

Rendered products:tallow (160g)bloodmeal (10g)meatmeal (175g)

Effluent (940g)

106g

165gOther 100g

18

the 2 517 750 growers for fattening. In this model, duck growing is undertaken by 35 producers that each turn out 71 936 growers/year. Most of the economies of scale in the growing stage are achieved with facilities to handle less than 15 000 growers at any one time.

4.4 Product analysis There are many different processing options in the duck supply chain, depending on the specific product and market requirements. For convenience, and to demonstrate the different products and markets and their requirements, two options are examined: • sale of a whole duck through a supermarket retail store • sale of boned meat, through to a restaurant, via a supermarket.

It is relevant to note that the relative responsiveness of suppliers and end-market consumers to changes in price influences the respective prices and shares of the duck value chain held by consumers, producers and processors. The more inelastic is supply the more will be the gains captured by the producers (Freebairn, Davis and Edwards 1982) when they introduce a new technology, such as an improved duck breed. This is one reason why vertically integrated duck breeding, production, processing and branding systems have emerged. They enable the supply-chain leader to control supply and capture the gains from their investment in new technology and development of differentiated products that can yield sustainable price premiums. Consumer demand for ducks, however, is affected by substitute meat availability and prices (chicken and turkey in particular) so there is always this competitive environment to be considered when setting prices for the end user.

Supply chain 1: Whole duck to the supermarket The total costs are estimated to be $9.91/kg8 for a whole duck sold at a retail supermarket. This calculation can be compared to a current market cost of $9.99/kg (January 2004, subsequently increasing to $10.29 in July 2004) through the ‘Greengrocer.com’ (refer to chart 4.1). The single largest cost activity in this supply chain is the growing of the duck ($3.49/kg), followed by the retail supermarket where costs are estimated to be $2.17/kg. The next highest cost is in distribution and marketing ($1.56/kg). The value chain activities for duck production, though to the retail end, and their respective estimated costs are shown in chart 4.2. Appendix 2 shows the detailed costs for the duck supply chain from breeding through to the restaurant. The costs to the supermarket only are derived from the restaurant supply chain, less the restaurant costs and some distribution expenses.

The largest cost item in the duck growing activity is materials, mainly feed, which account for 67 per cent of total grower costs. Materials account for 29 per cent of total supply-chain costs, labour 31 per cent, expenses 31 per cent, and machinery and other investments for 8 per cent, and profits 1 per cent. The costs of labour in the duck-growing operation amount to $0.83/kg. This is based on a growing facility that turns out 72 000 ducks per year, through three full-time employees — one manager, one cleaner and one feed operator. It is assumed that each growing cycle lasts an average of two months, which allows 12 000 growers to be ‘turned-off’ (produced) in each two-month cycle. Work practices that reduce the intensity of labour have to be judged in terms of their impact on productivity and the investment cost of any labour-saving capital investment that may be involved.

8 As described earlier, all activity costs are translated into the unit costs per kg of end product.

19

Chart 4.2: Supply chain 1: whole ducks for supermarkets ($/kg CFCW)

Growers

Supermarket

00.5

11.5

22.5

33.5

$/kg

Elite flock Parents 1st process Dist & mktg Supermarket

While it is common practice to estimate costs from the farm gate, this neglects the identification of specific value-adding opportunities at the breeding and production stages, especially where production costs and specific activities within production account for a large part of the value chain. We therefore extended the value-adding chain analysis backwards down the chain through a breeding program based on an elite flock that is used to supply, in sequence, a grandparent flock, a parent flock, and growers for fattening before early-stage processing.

The growing task takes place over an eight-week period, during which the day-old duckling is taken to a 3.00 kg live weight, which produces a 2.00 kg cold finished carcass weight (CFCW). The importance of feed costs and feed conversion is highlighted, not just for on-farm production but also for the whole duck supply chain. The assumed feed input for growers is 8.5 kg (derived from SAC 2001; Metzer Farms 2003; Farhat et.al), with a feeding rate of 0.1 kg/day of starter feed, valued at $0.45/kg for the first two weeks, 0.15 kg/day of grower feed, valued at $0.425/kg for the next four weeks, ending with 0.25 kg/day of finisher feed, valued at $0.40/kg for the last two weeks. The feed inputs for the parent, grandparent and elite breeding flocks add further to the importance of feed. Measures that can either reduce the unit cost of feed or improve the productivity of feed can significantly reduce supply-chain costs.

A key decision point for production is whether to purchase a duckling and leave the breeding to others or to integrate backwards down the supply chain. A duckling could be purchased for around $3.50 and possibly less when a large supply-chain operator offers long-term contracts for supply. From the calculations made here it should be possible, with best production and breeding management practices, to produce the ducklings for less than $1.00 each. Operating a breeding flock, however, requires extra skills in breeding selection and management and these attributes should not be underestimated.

The unit costs of 1st-stage processing are estimated to be $0.90/kg. This calculation is based on an automated, large-scale modern processing plant with capacity to produce at least 1000 ducks/hour. The 1st-stage processing activity includes a number of opportunities for co-products such as feathers, giblets (gizzards, liver, heart, neck), feet, tongue and fat. Co-products may account for 30 per cent of carcass weight. Feathers seem to be the main co-products exploited, at least in developed economies, though the other co-products seem to have potential as both a revenue item and as a cost-saving practice for adding value to higher-priced cuts (e.g. skin removal from beast meat) and reducing waste disposal costs. To add value to the co-product material, it seems important to extract the co-product early in the value chain because it runs the risk being a waste product, especially when it reaches the restaurant. Co-product revenue is estimated to be between $0.35 and $0.50/kg, though again significant variation exists, depending on secondary processing and packaging with small packages of duck fat and liver reaching $10/kg or more (see chart 4.1).

20

After the 1st-stage processing the distribution and marketing costs are estimated to be $1.56/kg, before retailing costs of $2.17/kg. The estimated retailing cost implies a retailer gross margin of 27 per cent, which is similar to the gross margin for all food retailers in Australia (refer to ABS catalogue 8622) and slightly less than the 28 per cent of the retailer members of the Food Marketing Institute (http://www.fmi.org/facts_figs/keyfacts/super.htm). Retail margins can be expected to vary according to the size and nature of the retailer. Small specialist retailers can be expected to have higher gross margins than the large supermarket chains.

Supply chain 2: Sale of boned meat, through to a restaurant, via a supermarket. By the time the duck reaches a customer in a restaurant it has a value of around $19/kg. The duck is now in the form of a meal that contains about 35 per cent duck meat. At this point about 4–5 meals would be made from one kilogram of duck leg or breastmeat. There is, however, significant variation in the price received for different duck varieties, for different components of a duck, and for the prices received in different markets. While it might be possible to obtain $5.89/kg for a whole duck delivered into a delicatessen in Australia the prevailing world trade price could be less than $3/kg. At the same time, a skinless and boned breastmeat piece weighing 200 grams could be selling for the equivalent of over $50/kg in the UK, $35/kg in Australia and $15/kg exported from Thailand. About 15–20 per cent of the duck is made up of the relatively high-value breastmeat. The large variation in prices reflects the influence of branding, product presentation, quality management and trade barriers.

In extending the analysis to the restaurant two additional activities are undertaken. First, the boning and separation activity takes place before chilling and packaging. The second additional activity is in the restaurant. These two additional activities add an additional $9.22/kg to the duck, over 99 per cent of which is in the restaurant, where other materials (vegetables, salads, condiments etc.) are added to form the meal. The total value of the duck meal (including the new materials) is now $19.03/kg, which could mean a meal price of around $10. Again, there is significant variation between the prices of meals, depending on the restaurant location, standing of the chef and general quality management.

Chart 4.3 sets out the perspective of the chain with the inclusion of the 2nd-stage processing or boning activity and the restaurant activity. The restaurant now accounts for almost 50 per cent of the product value. The cost of labour in preparing meals ($4.56/kg), the addition of further materials ($2.29/kg), and expenses such as rent account for major costs in the restaurant. Chart 4.4 shows the costs for expenditure on materials, labour, expenses etc. along the whole supply chain

While the role of the restaurant and supermarket in the total supply-chain cost structure are in keeping with expectations, the relatively high share of the growing activity is somewhat surprising. The full detailed costs for the duck supply chain, from breeding through to a duck meal at a restaurant, are shown in appendix 2.

The described duck supply chain produces an estimated 2.14 million kg of co-products, with a gross value of $2.1m. It is estimated that these would reduce the end product of the duck meat by $0.45/kg (table 4.1)

Table 4.1: Co-products from the duck value chain

Feathers Offal Renderables Other Moisture loss Total kg/ animal 0.1 0.15 0.51 0.10 0.94 1.80 Total (kg for supply chain) 226, 814 351, 679 1 ,169, 146 233, 829 2,136,050 4,117,518 Unit value ($/kg) 5.00 2.00 0.20 0.10 0.00 Total supply-chain value 1,134, 000 703, 358 233, 829 22, 383 0 2 ,093, 570

21

Chart 4.3: Supply chain 2: Ducks from elite breeding to restaurant meal

Grandparents

Growers

Boning Co-product recovery

Restaurant

0

2

4

6

8

10

$/kg

Elite flock Parents 1st process Dist. & mktg RetailSupermarket

Cost/CDCW

Chart 4.4: Resource use: Duck processing chain: by activity

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

5

$/kg

Materials Labour Expenses Machinery Investments O'heads

Elite Breeding Grandparents Parents Growers 1st processCo-product Dist. & mktg Boning Retail Restaurant

22

Chart 4.5: Resource use: Duck processing chain: breeding to restaurant

5.544

5.853

3.48

0.236 0.16

0

1

2

3

4

5

6

$/kg

Materials Labour Expenses Machinery Investments

4.5 Main messages from the duck value chain

There are several important findings from the study: • In many respects the duck supply chain is a model for new animal products to follow. Supply-

chain leaders have shown a capacity for leadership by developing distinctive brands and managing supply in such a way that they can capture the benefits of their investment in new breeding, production and processing technology.

• An efficient duck value chain is one that meets the specific requirements of end markets, and these have different requirements, and the value chain ultimately faces competition from substitute poultry products. Product development and supply-chain management is a critical task for a successful duck value chain.

• The duck-growing activity accounts for a significant share of the value-chain costs and value creation. Measures that improve growth rates, feed conversion and the yield of high-priced meats can improve other values added in the duck supply chain. There are also strong links between growing performance and breeding.

• While supermarket returns account for a relatively high share of the duck value chain costs, they are not excessive in the context of reaching and meeting consumer needs in a low-cost way. Gourmet delicatessens and restaurants offer an alternative outlet when supermarket costs are too high.

• Restaurant services account for a significant share of the duck value chain and it is important to understand precisely their requirements, especially in terms of quality and type of meat cuts preferred for particular consumer groups.

• Co-products can create significant value. The revenue from co-products (assumed to be a negative processing cost) can more than halve the 1st-stage processing costs of ducks.

23

Figure 4.1: Duck processing layout

24

5. The Ostrich Value Chain 5.1 Background Like other poultry-raising systems, ostrich-raising presents the choice between extensive or intensive production systems. Again, in developed economies such as Australia, North America and Western Europe, and increasingly South Africa, and now China, more than 95 per cent of commercial ostrich production takes place through intensive or semi-intensive production systems in which supplementary feed is the dominant source of animal nutrition. While there are a few small-scale producers operating in developed countries, the large-scale specialist accounts for the larger shares of supply, and economies of scale in processing result in concentrated domestic markets.

As with duck supply chains, some overseas suppliers operate fully vertically integrated production systems — from the selection of elite breeding stock through to grandparent, parent, hatchery, growing and processing, and final delivery to retailers. But there remain a number of fragmented ostrich supply chains in which contract processing is undertaken by the abattoir owner for grower cooperatives, individual growers or product developers.

The value chain of intensive ostrich production and processing is complicated by the choices available to operators in terms of breed selection, whether to focus on meat or leather or both products, how growers and materials are sourced, which markets are to be targeted and how much processing and value-adding takes place at the slaughter and boning and skin preparation stages.

Some operations are also extended back into the supply of feed for animals.9 Again there are several distinct, but highly integrated, stages in taking an ostrich from breeding though growing, early-stage processing and meat preparation to retailing, where it might be available as a 150–300 gram vacuum-packed boned leg portion for caterers, for a supermarket or gourmet delicatessen.

Fat colour (white is preferred), carcass weight (more than 45 kg for class 1), liver colour (even red-brown colouration is favoured (Benson and Holle 2003), and hide quality have potential to add significantly to the value of products.

Specialist preparers can add further value through stuffing and add-on components such as sachets of sauces and marinades. Restaurant chefs add further value through meal design, material blends and cooking techniques. An ostrich, which could start off at a value or cost of $50–$100 as a 1–5-day-old chick, could end up at over $1200 as a whole bird weighing 100 kg, yielding 63.7 kg of cold dressed weight carcass, 15 square metres of leather and 27 kg of co-products. If the leather is taken forward further to be formed into a product, it could add as much as $3900 to the animal.10 A meal of ostrich fillet steak can be had at Chez Rene, a Sydney French restaurant, for as much as $27.00 in the higher end of the market, but more commonly at less than $20 for roast in a mid-range restaurant or even less than $10 for an ostrich sausage. These meals contain an estimated 175 grams of meat, accompanied by a diversity of vegetables, sauces and other additives. Achieving the right balance and blend of flavours is an important skill in the final stage of the ostrich value chain.

The opportunities to add value to an ostrich are again many and varied. The first opportunity is the choice of enterprise structure and scale. There are moderate economies of scale in production and stronger economies of scale in processing, and, again, it is equally important to make full use of assets, otherwise the gains from large-scale are quickly dissipated. A few operators have gained greater control of their capacity utilisation by vertically integrating backwards into breeding and production, and forward to direct selling to end consumers. As a general observation, ostrich supply chains feature smaller-sized processing operations than some other animal product chains like ducks. This reflects, in

9 The Ostrich Farming and Processing Industrial Base at Jingmen City in China is a fully vertically integrated enterprise, containing a farm production sub-enterprise, feed plant, meat processing plant, and skin processing and byproduct plant. Total investment was $US12.41m for a facility to handle 30 000 ostriches/year. 10 JPS Boots sells speciality boots made from ostrich skins at $US1300/pair. About three pairs of boots can be made from a good quality ostrich hide.

25

part, the fragmented supply chains in which a number of producers supply a processor, without strong links between the two activities. This tends to reduce their cost competitiveness. The second major opportunity for adding value is in achieving operational efficiency for a given scale of operation, which means efficient selection and use of key inputs especially breeding stock, labour and feed. Finally, there is the value of the end product, and opportunities exist to achieve relatively high unit prices by delivering to quality-sensitive markets.

Ostrich meat prices for different grades vary significantly (see chart 5.1).

Chart 5.1: Selected ostrich meat cuts: $/kg

33.6730

22

9.18

0

5

10

15

20

25

30

35

$A/kg

Prime fillet Choice steak Select roast Burger patty

Source: C&S Ostrich Products, North Carolina, US (US dollar values converted to $A at $US0.72/$A on 30 April 2004)

5.2 The flow of products and yields in the ostrich value chain The ostrich value chain map is shown in flowchart 5.1. At each sub-activity there are various levels and combinations of capital, labour, outsourced services and materials to be procured and managed in the most efficient way possible.

The livestock, meat, skin-leather and byproduct flow for ostriches is shown in flowchart 5.2. These metrics are sourced from a study undertaken by the Texas A&M University in 1992 and are based on the dissections and weights of 14 ostriches, with average live weights of 95 kg. The yields of co-products may vary depending on animal breeds, feeding, age at processing, and processing conditions.

26

Flowchart 5.1: The ostrich production, processing and service value chain

1. Production

Elite breedingflock

Grandparentflock Parent flock Hatchery Growing farm

2. Distribution

Freight, cartage &handling

3. Early Stage Processing

Arrival &hanging Stun/kill/skin

Evisceration

Offal & co-products

Gizzards, liver, heart,neck, blood, feathers

Chill Weigh Wrap &pack

Specialtymarkets, incl.

industrial

4. Second Stage Processing

Cutting,separation &

boning

Boneless fan fillet, fillet, steak, trim,sausages, chipolatas etc.

Adding ingredients (e.g. stuffing)Wrap & pack

5. Distribution

Transport Warehouse Wholesale

6a. Retail - Supermarket/Gourmet Deli

Storage Preparation Location & display Promote & sell

6b Retail - Restaurant

Storage Meal design One-to-onecustomer service

Promote & sale

Location & ambience

End consumer

Skins: wtblues

Finished leather:automotive, garments,

w allets, handbags,luggage, footw ear.

27

Flowchart 5.2: Ostrich value chain: the flow of animals, products and yield

a.) Production

Female ostrich (2)

Male ostrich (1)

100 eggs/female

Non-fertile eggs(10%)

Fertile eggs(90%)

68 hatchlings(wt. 880g)

51 growers(wt.100kg)

b.) 1st Stage Processing c.) 2nd Stage Processing

Bone-in carcass(63.7kg)

Neck meat(2.7kg)

Leg & thigh meat(44kg)

Lean trim (2.5kg)

Co-products(12.3kg)

Semi-boned-outmeat (51.4kg)

Co-products(48.6kg)(36.3 +

12.3kgtransferred infrom boning

Disappearances -moisture loss etc.

(5.5kg)

Offal (20kg)

Hide, skins,feathers (8.8kg)

Fat (5.2kg)

Bone, meat, otheretc. (6kg)

Blood (3.1kg)

Offal products:feet (2.6g)liver (1.5kg)heart (1.0kg)gizzards(2.25kg)viscera (8.7kg)other (3.95kg)

feathers (1.8kg)skin (7kg)

Renderedproducts:

tallow (5kg)bloodmeal (1kg)meatmeal (5kg)

Effluent (8.8kg)

Tenderloin(M.obturatorius) (2.2kg)

Carcass fat (3.1kg);Bone (4.3kg)

15.21g

4.93g

28

5.3 Size and structure in the ostrich value chain The breeding structure and numbers within each activity along the ostrich supply chain are based on the requirements for a minimum efficient-sized early-stage processing plant, which is judged to have the capacity to process at least 35 000 birds/year.11 The design of an efficient supply chain requires an initial assessment about the efficient size for each of the activities along it. From this point, a supply-chain leader can set about sourcing products and services in the most efficient way possible from efficient-sized suppliers.

The production starting point in the ostrich supply chain is an elite breeding flock of two females and one male. This elite flock can supply all the breeding material for an ostrich supply chain that provides 36 600 growers and eventually produces 2.3 million kg of carcass meat/year, 66 000 kg of feathers, 256 368 kg of skins for hides, 732 480 kg of offal, and 115 534 kg of blood. The elite flock supplies replacements for a grandparent flock of 36 females and 18 males, which in turn, supplies the replacements for 648 females and 324 males in a parent flock, which then supplies 39 269 growers for fattening. In this model, ostrich growing could be undertaken most efficiently by seven producer sub-enterprises turning out 5232 growers/year. This size production enterprise is estimated to achieve all the economies of scale in production.

5.4 Product analysis In the ostrich supply chain there are many different processing options, depending on the product and market requirements. In the past, the ostrich skin was the prime product, and meat was more the co-product, sometimes with hide revenue double that of meat. Over recent years, however, there has been a increase in the price of meat compared to ostrich hides and, at $11.00/kg for a boned-out ostrich carcass weighing 48 kg, the meat revenue could be over $500 and skins less than $500. The addition of further revenue for feathers and offal adds to the gains from non-hide products.

For convenience, and to demonstrate the different products and markets and their requirements, we examine two options: • sale of ostrich through to a supermarket retail store • sale of boned meat, through to a restaurant, via a supermarket. It is recognized that in some countries like Australia almost all of the ostrich is exported. I these circumstances the distribution expenses and taxes and charges for international trading activities would be higher.

Supply chain 1: Whole ostrich to the supermarket A complication with allocating costs of production to an ostrich enterprise is the presence of joint or even multiple products and the allocation of costs to these different sub-enterprises. Here we have allocated total costs of production up to, but not including boning and the supermarket, equally to the ostrich hide and ostrich meat sub-enterprises. The supermarket cost is allocated totally to the meat sub-enterprise. Offal and other byproducts in the meat system are allocated as negative costs totally to the meat enterprise, because they are essentially a minor sub-enterprise closely associated with meat. The total costs are estimated to be $11.96/kg, on average, for a whole ostrich meat carcass weighing 63.7 kg (before allocating a negative cost for offal, feathers etc.) at the supermarket (includes 2.19/kg for the supermarket) and $315 for the 15 ft2 skin, ex-abattoir. The revenue from skins, feathers and 20 kg of offal could be valued at the equivalent of $6.42/kg. This would reduce the costs of an ostrich carcass (with a weight of 63.7 kg) at the supermarket to an average unit value of $5.54/kg.

The single largest cost activity in this supply chain is the growing of the ostrich ($260), followed by the retail supermarket, where costs are estimated to be $2.19/kg, equivalent to $140 for the full carcass. The next highest cost is in distribution and marketing ($1.56/kg). The value-chain activities

11 The 35 000+ unit is derived from previous benchmarking studies undertaken by Wondu, and crosschecks to other operations such as the Jiangmen City ostrich facility in China.

29

for ostrich production, though to the retail end, and their respective estimated costs are shown in chart 5.2.

The largest cost item in the ostrich-growing activity is material, mainly feed, which accounts for over 85 per cent of total grower costs. The costs of labour in the ostrich-growing operation amount to $0.31/kg.

Materials account for 31 per cent of total supply-chain costs, labour 26 per cent, expenses 26 per cent, and machinery and other investments and overheads for 7 per cent, selling expenses for 4 per cent and profits 5 per cent.

Chart 5.2: Supply chain 1: Ostrich meat for supermarkets ($/kg CDCW)

Elite flock

Grandparents

Parents

Growers

1st process

Boning

Dist & mktg

Co-product

Supermarket

-1-0.5

00.5

11.5

22.5

$/kg

Elite flock Parents 1st process Dist & mktg Supermarket

Cost/CDCW

While it is common practice to estimate costs from the farm gate, this approach neglects identification of specific value-adding opportunities at the breeding and production stages, especially where production costs and specific activities within production account for a large part of the value chain. We therefore extended the value-adding chain analysis backwards down the chain through a breeding program based on an elite flock that is used to supply, in sequence, a grandparent flock, parent flock and growers for fattening before early-stage processing.

The growing task takes place over a 300-day period, during which the 1–5-day-old ostrich is taken to a 100 kg live weight, which produces a 63.5 kg cold finished carcass weight (CFCW) (Benson & Holle 2003). The importance of feed costs and feed conversion is highlighted, not just for on-farm production but also for the whole ostrich supply chain. The assumed feed input for growers is 165 kg of starter feed, 246 kg of grower feed and 47.6 kg of finisher feed. The feed inputs for the parent, grandparent and elite breeding flocks add further to the importance of feed. Measures that can either reduce the unit cost of feed or improve the productivity of feed can significantly reduce supply-chain costs.

A key decision point for production is whether to purchase an ostrich at 1–5 days old and leave the breeding to others, or to integrate backward down the supply chain. A 1–5 day old ostrich could be bought for between $50 and $100. From the estimates here, the costs of producing the 1–5 day old chick would be around $25, without allowance for profit and distribution. Operating an ostrich breeding flock requires extra skills in breeding selection and management, and these attributes should not be underestimated. The pay-offs seem high for a good operator with an efficient processing and producer network.

The unit costs of 1st-stage processing are estimated to be $1.48/kg. This calculation is based on an

30

automated, large-scale modern processing plant with capacity to produce at least 1000 birds/week.12 The 1st-stage processing activity includes a number of opportunities for co-product recovery such as skins, gizzards, liver, heart, feet and fat. It seems important, when adding value to the co-product material, to extract the co-product at an early stage in the value chain because co-products run the risk of becoming waste products when they are distributed to a large number of users, especially when they reach the restaurant. Co-product revenue (mainly skins) is estimated to be around $6.42/kg (Table 5.1), though again, significant variation exists, depending on skin quality, secondary processing and packaging, and marketing skills.

After the 1st-stage processing the boning and separation cost is estimated to be $0.29/kg and the distribution and marketing costs to be $1.56/kg, before retailing costs of $2.19/kg. The estimated retailing cost implies a retailer gross margin of around 31 per cent, which is slightly higher than the 27 per cent gross margin for all food retailers in Australia (refer to ABS catalogue 8622) and the 28 per cent of the retailer members of the Food Marketing Institute (http://www.fmi.org/facts_figs/keyfacts/super.htm). Retail margins can be expected to vary according to the size and nature of the retailer. Small specialist retailers can be expected to have higher gross margins than the large supermarket chains.

Supply chain 2: Sale of boned meat, through to a restaurant, via a supermarket By the time the ostrich reaches a consumer in a restaurant it has a value of around $21.00/kg. The ostrich could now be in the form of a steak meal that would contain about 35 per cent ostrich meat. At this point, about 4–5 meals could be made from one kilogram of ostrich meat. There is, however, significant variation in the price received for different meat cuts and for the prices received in different markets.

The restaurant activity adds an additional $9.26/kg to the dressed carcass weight. Other materials (vegetables, salads, condiments etc.) are added to form the meal.

The restaurant accounts for almost 50 per cent of the full supply-chain product value, excluding further product development of leather. The cost of labour in preparing meals ($4.60/kg), the addition of further materials ($2.34/kg) and expenses such as rent account for major costs in the restaurant.

The described ostrich supply chain produces an estimated 1.4 million kg of co-products, with a gross value of $14.7m, most of which is due to the value of skins. It is estimated that these would reduce the end product of the ostrich meat by $6.42/kg to $15.24/kg (see table 5.1 and ES1).

Table 5.1: Co-products from the ostrich value chain

Skins Offal Renderables Other-feathers

Moisture loss

Total

kg/ animal 7.00 4.79 15.93 1.8 19.08 48.6 Total (kg for supply chain) 251,244 171, 931 571, 579 64,606 334, 165 1, 393,525 Unit value ($/kg) 45.00 2.00 0.20 45.00 0.00 Total supply-chain value 11,305,980 343 ,862 114, 316 2,907,270 0 14,671,428

12 The capital costs of establishing a vertically integrated ostrich production and processing plant with capacity to process 40 000 birds/year were estimated to be $21.6m.

31

5.5 Main messages from the ostrich value chain

There are several important findings from the ostrich supply chain study: • An efficient ostrich value chain is one that meets the specific requirements of end markets,

which are extremely sensitive to quality variation. It would be useful for a supply-chain leader to prepare a detailed requirements definition for each activity in the supply chain. Product development and management is a critical task for a successful ostrich value chain.

• Fragmentation in the ostrich supply chain puts it at a distinct disadvantage when compared to closely integrated supply chains like ducks. Fragmentation increases risks and costs when capacity is not fully used.

• While the ostrich skin was once the prime revenue earner for the enterprise, meat and associated co-products have emerged as a important sources of revenue. Nevertheless, leather and the products made from leather can generate high unit prices providing there is a high proportion of high quality skins (Wondu Holdings 2000), although costs of making leather products are also high and require specialised skills.

• The ostrich-growing activity accounts for a significant share of the value-chain costs and value creation. Measures that improve growth rates, feed conversion and the yield of high-priced meats can improve efficiency in the ostrich supply chain. There are also strong links between growing performance and breeding, and because breeding accounts for a relatively small proportion of total costs, there seem to be benefits from vertical extension down to breeding.

• While supermarket returns account for a relatively high share of the ostrich meat value-chain costs, they are not excessive in the context of reaching and meeting consumer needs in the most efficient way possible, and seem to be similar to general food product retail gross margins.

• Restaurant services account for a significant share of the value chain and it is important to understand precisely their requirements, especially in terms of quality and types of meat cuts preferred for particular meals and consumer groups.

• Co-products can also create value. The revenue from co-products (assumed to be a negative processing cost) can more than halve the 1st-stage processing costs of ostriches.

32

6. The Crocodile Value Chain 6.1 Background The global crocodile industry is estimated to have a value approaching $400m/year, mostly attributed to skins (75 per cent), with meat an important co-product. Again, with the new crocodile production systems there is the choice between extensive (‘wild’ farming) or intensive production systems, though in some regions and countries, harvesting of wild animals is banned or strictly limited. In addition, there is the potential for tourism as the enterprise focal point or as a sub-enterprise. More than 95 per cent of commercial crocodile production takes place through intensive or semi-intensive production systems in which supplementary (often the only fed) feed is the dominant material input.

Most operators run fully vertically integrated production systems with the opportunity to start at the point of selection of elite breeding stock through to grandparent, parent, hatchery, growing and processing and final delivery to retailers. Tourism is usually run as an associated or subsidiary enterpriser to a production enterprise in which high-quality crocodile skins is the main target.

Crocodile supply chains are characterised by relatively small-sized processing activities, reflecting difficulties and high costs in transport and consolidation of smaller production centres. This tends to reduce their processing cost competitiveness unless accompanied by a large associated production centre.

Meat prices for different cuts vary significantly (chart 6.1).

Chart 6.1: Selected crocodile meat cuts: $/kg

6.8

3.1

3.1

0

1

2

3

4

5

6

7

$A/kg

Tail Backstrap Leg (bone-in)

Source: Wondu Holdings 2002

6.2 The Flow of products and yields in the crocodile value chain The crocodile value-chain map is shown in flowchart 6.1. At each sub-activity there are various levels and combinations of capital, labour, outsourced services and materials to be procured and managed in the most efficient way possible.

The livestock, skin, meat and co-product flow for the crocodile is shown in flowchart 6.2.

33

Flowchart 6.1: The crocodile production, processing and service value chain

.

1. Production

Elite breedinggroup

Grandparentgroup Parent group Hatchery Growing farm

2. Distribution

Freight, cartage &handling

3. Early Stage Processing

Arrival &hanging Stun/kill/skin

Evisceration

Offal & otherco-products

Gizzards, liver, heart,neck, blood

Chill Weigh Wrap &pack

Specialtymarkets, incl.

industrial

4. Second Stage Processing

Cutting,separation &

boning

Fillet, steak, trim, sausages, etc.

Adding ingredients (e.g. stuffing)Wrap & pack

5. Distribution

Transport Warehouse Wholesale

6a. Retail - Supermarket/Gourmet Deli

Storage Preparation Location & display Promote & sell

6b Retail - Restaurant

Storage Meal design One-to-onecustomer service

Promote & sale

Location & ambience

End consumer

Skins: wtblues

Finished leather:automotive, garments,

w allets, handbags,luggage, footw ear.

Tourism?

34

Flowchart 6.2: Crocodile value chain: The flow of animals, products and yield

a.) Production

Female crocodile(2)

Male crocodile (1)

45 eggs/female

Non-fertile eggs(10%)

Fertile eggs(90%)

40 hatchlings(wt. 150g)

30 growers(wt.15kg)

b.) 1st Stage Processing c.) 2nd Stage Processing

Bone-in carcass(5.5kg)

Tail meat (2.5kg)

Backstrap(1.75kg)

Leg (0.5kg)

Co-products(0.25kg)

Semi-boned-outmeat (5.25kg)

Co-products(9.75kg)(9.5kg +

0.25kgtransferred infrom boning

Disappearances -moisture loss etc.

(1.35kg)

Offal (1.11kg)

Hide, skins,(2.21kg)

Fat (0.13kg)

Bone, meat, otheretc. (3.7kg)

Blood (1.25kg)

Offal products:feet (0.2g)liver (0.1kg)heart (0.11kg)gizzards(0.2kg)viscera (0.5kg)

skin (2.2kg)

Rendered products:tallow (0.12kg)bloodmeal(0.12kg)meatmeal (53.5kg)

Effluent (1.35kg)

Strip (0.5kg)

Carcass fat (0.3kg)

35

6.3 Size and structure in the crocodile value chain The breeding structure and numbers within each activity along the crocodile supply chain are based on the requirements for a minimum efficient-sized early-stage processing plant, which is judged to have capacity to process 3600 crocodile/year. 13 The design of an efficient supply chain requires an initial assessment about the efficient size for each of the activities along it. From this point, a supply-chain leader can start setting up those activities in the most efficient way possible so that the capacity of capital-intensive activities can be fully used.

While selection of crocodiles for improved characteristics such as growth rates and skin quality is not common, this seems to present an opportunity for skilled operators. In addition, for the purpose of comparison with other animal supply chains, the study production starting point in the crocodile supply chain is an elite breeding group of three females and one male. This elite flock can supply all the breeding material for a crocodile supply chain that provides 3605 growers and eventually produces 51 928 kg of carcass meat/year, 7789 kg of skins from 3605 hides (1 hide has an area of about 6.6 ft2)14, and 3905 kg of offal. The elite flock supplies replacements for a grandparent flock of 12 females and four males, which in turn, supplies the replacements for 120 females and 40 males in a parent flock, which then supplies 3605 growers for fattening. In this model, crocodile growing would be undertaken most efficiently by one single vertically integrated enterprise. This size production enterprise is estimated to achieve all the economies of scale in production and most of the economies in processing (refer to Wondu Holdings 2002, ‘Crocodile Production Benchmarks’).

6.4 Product analysis In the crocodile supply chain there are many different value-adding options, depending on the product and market requirements. The crocodile skin has dominated enterprise revenue, though both meat and tourism can significantly improve returns. Crocodile skins are used to make products for high-value niche markets such as designer boots (chart 6.2), wallets, belts and garments.

Chart 6.2: Leather boot prices: by leather ($US)

900

2250

1075

1300

0

1000

2000

3000

$US/pair of boots

Cowhide Crocodile Kangaroo Ostrich

$/pair

Source: JPS Boots

For convenience and to demonstrate the different products and markets and their requirements, two supply chain structures are examined: • sale of crocodile meat through to a supermarket retail store • sale of the skin for leather.

13 The minimum-sized estimate is based on benchmark data from earlier studies undertaken by Wondu. 14 While crocodile hides are not measured in area units this (along with quality) is the unit that defines how many end products such as shoes or handbags can be made. In this study we translate the weight of skin/animal to area, which is then used as the basis for making a number of end products.

36

Supply chain 1: Whole crocodile carcass to the supermarket As with the ostrich supply chain, the allocating of costs of production in the crocodile enterprise is complicated by the presence of multiple products and the allocation of costs to the different sub-enterprises, which could include skins, meat and tourism. Here we have allocated total costs of production up to the end of the first processing stage on the basis of 80 per cent to the crocodile skin and 20 per cent to the meat sub-enterprises. Beyond this activity the boning and supermarket costs are allocated totally to the meat sub-enterprise. Offal and other byproducts in the meat system are allocated as negative costs totally to the meat enterprise, because they are essentially a minor sub-enterprise closely associated with meat. The total costs are estimated to be $6.85/kg, on average, for a whole crocodile meat carcass weighing 14.7 kg (before allocating a negative cost for offal, skins etc.) at the supermarket (includes 2.19/kg for the supermarket) and $151 for the estimated 6.7 ft2 skin, ex-abattoir. The revenue from 6.19 kg (per crocodile) of offal and other co-products could be valued at $2.00/kg. This would reduce the costs of a crocodile carcass weighing 14.7 kg by $0.84/kg (that is, $12.38/14.7) at the supermarket to $6.01/kg.

The single largest cost activity in this supply chain is the growing of the crocodile ($80), followed by the early-stage slaughter processing activity where costs are estimated to be $81/crocodile, with labour accounting for over 50 per cent of this cost. The next highest cost is in retailing of meat ($2.19/kg) and then distribution and marketing ($1.56/kg). The value-chain activities for crocodile production, through to the retail end, and their respective estimated costs, are shown in chart 6.3.

The largest cost item in the crocodile growing activity is material, mainly feed, which accounts for over 85 per cent of total grower costs. The costs of labour in the crocodile growing operation account for about 23 per cent of this activity’s costs. Materials account for 22 per cent of total supply-chain costs, labour 33 per cent, expenses 20 per cent, and machinery and other investments and overheads for 7 per cent, selling expenses for 4 per cent and profits 7 per cent.

Chart 6.3: Supply chain: Crocodile meat for supermarkets ($/kg CDCW)

Elite flock

Grandparents

Parents Growers1st process

Boning

Co-product

Supermarket

-1

-0.5

0

0.5

1

1.5

2

2.5

$/kg

Elite flock Parents 1st process Co-product

Cost/CDCW

The crocodile-growing task takes place over a 640-day period, during which the 12-month-old crocodile is taken to a 25 kg live weight, which produces a 14.7 kg cold finished carcass weight (CFCW) and a hide with a skin width of 40 cm and length of 1.65m, an area of about 0.66 m2 . The importance of unit feed costs and feed conversion is highlighted, not just for on-farm production but also for the whole crocodile supply chain. The assumed feed input for growers is 15 kg of starter feed, 150 kg of grower feed and 15 kg of finisher feed (derived from Wondu Holdings 2002 and ‘CrocProfit’ 2001). The feed inputs for the parent, grandparent and elite breeding flocks add further to the importance of feed. Measures that can either reduce the unit cost of feed or improve the productivity of feed can significantly reduce supply-chain costs. Some enterprises have managed to build their supply chain on extremely low-cost waste inputs that may cost less than $0.10/kg, compared to the

37

$0.25/kg (main feed cost) and $0.35/kg (starter feed cost) allowed here. There is a need for more research into feeding types and productivity, especially for growing crocodiles

A key decision point for production is whether to purchase a crocodile hatchling and leave the breeding to others or to integrate backward down the supply chain. A crocodile hatchling could be bought for around $100. From the estimates here, the costs of producing the crocodile hatchling would be around $27, without allowance for profit, tax and distribution costs. Operating a crocodile breeding flock requires extra skills in breeding selection and management, and these attributes should not be underestimated because losses can be very high without attention to temperature, feed and general management.

The unit costs of 1st-stage processing are estimated to be $1.10/kg of dressed meat and $65/skin. This calculation is based on an automated, large-scale modern processing plant with capacity to process at least 750 crocodiles/week. The 1st-stage processing activity includes several opportunities for co-product recovery such as the head, heart, feet and fat. Co-product revenue is estimated to be around $2.00/kg, though there appears to be little recovery of co-products.

After the 1st-stage processing, the boning and separation cost is estimated to be $0.539/kg and the distribution and marketing costs to be $1.56/kg, before retailing costs of $2.19/kg. The estimated retailing cost implies a retailer gross margin of around 35 per cent, which is slightly higher than the 27 per cent gross margin for all food retailers in Australia (refer to ABS catalogue 8622) and the 28 per cent of the retailer members of the Food Marketing Institute (http://www.fmi.org/facts_figs/keyfacts/super.htm). Retail margins can be expected to vary according to the size and nature of the retailer. Small specialist retailers can be expected to have higher gross margins than the large supermarket chains.

Sale of crocodile skin for leather As indicated above, the skin sub-enterprise is the major source of revenue in the traditional crocodile enterprise. In the models used here, 80 per cent of the costs have been allocated to skins (this is based on costs being shared according to revenue shares of 80% for skins and 20% for meat) and this amounts to $151 for the estimated 6.7 ft2 hide. With a skin width of 40 cm, the average break-even price before selling costs and profit is $3.80/cm, which is the rate for a 3rd-grade skin. With a profit rate of 5 per cent of sales and selling expenses of 2 per cent, the break-even return is $4.10/cm.

By the time the crocodile hide reaches a customer in a fashionable clothing store it could have a value of over $A1500 in a pair of boots.

The described crocodile supply chain produces an estimated 31 000 kg of co-products, with a gross value of $410 316. It is estimated that these would reduce the end product of the crocodile meat by $09.20/kg (see table 6.1).

Table 6.1: Co-products from the crocodile value chain

Skins Offal Renderables Other Moisture loss Total kg/ animal 2.21 1.11 3.68 0.74 2.58 Total (kg for supply chain) 6 686 3 352 11 143 2 229 7 821 31 231 Unit value ($/kg) 60.00 2.00 0.20 0.10 0.00 Total supply-chain value ($) 401 160 6 704 2 229 223 0 410 316

38

6.5 Main messages from the crocodile value chain

There are several important findings from the crocodile supply chain study: • An efficient crocodile value chain is one that meets the requirements of end markets, which are

extremely sensitive to quality variation. It would be useful for a supply-chain leader to prepare a detailed requirements definition for each activity in the supply chain. Product development and management is a critical task for a successful crocodile value chain.

• While the crocodile skin is the prime revenue earner for the enterprise, meat is an important source of revenue and offal can generate further cash. In addition, tourism can be a major activity for some farms.

• The crocodile-growing activity accounts for a significant share of the value chain costs and value creation. Measures that improve growth rates, feed conversion and the yield of skins and high-priced meats can improve efficiency and returns in the crocodile supply chain. The unit costs of feed have an important influence on supply-chain costs.

• End products for crocodile leather show very high unit values and the distribution of these returns to producers is governed by product quality with significant premiums for high-quality skins.

• While supermarket returns account for a relatively high share of the crocodile meat value-chain costs, they are not excessive in the context of reaching and meeting consumer needs in the most efficient way possible, and seem to be similar to general food product retail gross margins.

• High-quality leather products like boots, handbags, wallets and garments account for a significant share of the value chain and it is important to understand precisely the requirements of the manufacturers, especially in terms of quality and size of hides preferred.

• Co-products can create value more value in the crocodile chain by reducing the 1st-stage processing costs.

39

7. Yabby Value Chain The two main yabby species, Cherax albidus and Cherax destructor, are indigenous to central and eastern Australia, but they have developed commercially in different regions with C. albidus the main species in Western Australia and C. destructor the main species in eastern Australia.

7.1 Background According to FAO statistics, world aquaculture production of freshwater crustaceans (includes all crustacean species — prawn, marron, redclaw and yabby) has experienced extreme growth of more than 25 per cent/year over the past decade, with production increasing from 73 000 tones in 1993 to 592 000 tonnes in 2002. This estimate may also understate production. Ackefors (2000) estimated actual production of crayfish farming is four times the quantity given by FAO statistics. Aquaculture production, despite its high growth, is still below captured production of freshwater crustaceans (chart 7.1), although aquaculture is likely to be the main system of production within five years. Australian production of crustaceans under aquaculture was estimated (Abareconomics 2002) to be 4000 tonnes in 2002, which implies a share of 0.7 per cent of world aquaculture production of crustaceans.

Chart 7.1: World freshwater crustacean production: 1996–2002 (tonnes)

0.00100,000.00200,000.00300,000.00400,000.00500,000.00600,000.00700,000.00800,000.00900,000.00

1996 1998 2000 2002

AquacultureCaptured

Source: FAO

The unit value of world freshwater crustacean production under aquaculture systems was estimated by the FAO to be $4.35/kg in 2002 and there is some evidence of declining trend in unit values over the past decade, with prices above $US5.00/kg for most of the 1990s but below $US5.00/kg for the four years ended 2002.

The share of yabby production in global output of crustaceans is small, and less than 0.5 per cent. Australian yabby production was estimated to be 220 tonnes in 2000–2001, with a value of $A2.2m (Wondu Holdings (2002)). ABARE (Abareconomics 2002) estimated production to be 276 tonnes in 2000–2001 with a value of $3.4m. It is possible that the quantity and value of production of yabby is much higher, perhaps in line with Ackefors (2000) suggestion that it could be four times higher than official estimates. Home consumption and other unofficial trading activity may explain the difference. In this case Australian production could be approaching 1000 t/year.

In Western Australia, which accounts for over 60 per cent of Australian production, women and children are occupied in harvesting and maintaining the semi-intensive and extensive systems, which are low-cost and a source of supplementary income for households (Ruello 2003). NSW is the second-most important supplier of yabbies, accounting for about 30 per cent of Australian production. In NSW about 50 per cent of production is sourced from aquaculture and 50 per cent from wild stocks.

An important feature of the yabby supply chain is its seasonal nature, with harvesting taking place when water temperatures are high, which is between February and April (Ruello 2003). There is, however, some improvement over the July–August period when supplies were traditionally very low.

40

This is due to the growing skills in harvesting and the higher price incentive for supplies at this time of the year.

There are several supply-chain delivery systems operating with yabbies. Trade is dominated by the sale of live purged yabbies direct to restaurants, especially with the aquaculture systems, though cooked yabbies are often distributed after cooking and then sold in the central fish markets of different cities.

Tourism is sometimes run as a subsidiary or associated enterprise to a yabby production enterprise, with customers having access to the fish as part of farm-stay activities.

Yabby supply chains are characterised by relatively small-sized production enterprises, though the growing share of aquaculture is leading to larger and more vertically integrated operations. Small producers, however, often distribute through cooperative supply-chain networks. In WA, for example, four companies handle more than half the 5000 yabby-containing farm dams in that state.

Price premiums are paid for yabbies, especially with heavier weights of over 80 g/unit (chart 7.2). Operators have to make judgments about the optimal weight for harvesting. Increased weight means increased costs and days held on the dam, but the price premiums received can offset this cost, at least for parts of the year.

Chart 7.2: Yabby prices received: by weight in grams

0

5

10

15

20

$/kg

<30 gms 30-40 40-50 50-60 60-70 70-80

Average Highest

Source: Wondu Holdings 2002 http://www.wondu.com/yabby.htm

7.2 The flow of products and yields in the yabby value chain The yabby value-chain map is shown in flowchart 7.1. At each sub-activity there are various levels and combinations of capital, labour, outsourced services and materials to be procured and managed in the most efficient way possible to produce particular products and byproducts. A key decision for operators is what product to focus on. Ruello identifies 12 product possibilities in table 7.1.

Table 7.1: Yabby product possibilities

Live yabbies: various sizes and grades Live yabbies for bait

Boiled yabbies: chilled, small, medium or large Live Yabbies for aquarium

Boiled yabbies: frozen Yabby shell waste for fertiliser or animal feed

Uncooked frozen whole yabbies Yabby oil

Boiled yabby tails Yabby flesh paté

Boiled yabby meat Boiled yabby meat pickles

41

Flowchart 7.1: The yabby production, processing and service value chain

Other product possibilities include chitin, from yabby shells, which can be used to make polymers. France Chitine produces 500 tonnes of chitine/year, which is derived from a combination of crustacean shells and squid bone (figure 7.4). Crustacean shells contain about 18 per cent chitin and 45 per cent protein. Chitin is selling for around $1.50/kg. Chitin can be used as the main feedstock for making biodegradable polymers. The intermediate products are chitin and chitosan. The end products of chitosan include biodegradable plastics, pharmaceuticals, medicines and many more. Chitin is the second most abundant polysaccharide, after cellulose. The main problem in making chitin and chitosan

1. Production

Elite breedinggroup

Grandparentgroup Parent group Hatchery Growing farm

2. Distribution

Freight, cartage &handling

3. Early Stage Processing

Arrival &purging

Ice slurry forkilling Boiling

Offal & otherco-products, incl. eff luent

Gizzards, mustard,shells, pate, oil, stock

Chill or freeze Weigh Wrap &pack

Specialtymarkets, incl.

industrial

4. Second Stage Processing

Cutting,separation &

shelling

Tails and other meat sections fromlegs etc

Adding ingredients (e.g. herbs, flavourings,stuffing)

Wrap & pack

5. Distribution

Transport Warehouse Wholesale

6a. Retail - Supermarket/Gourmet Deli

Storage Preparation Location & display Promote & sell

6b Retail - Restaurant

Storage Meal design One-to-onecustomer service

Promote & sale

Location & ambience

End consumer

Tourism?

Live direct tomarket

42

is the cost of collecting a sufficient volume to make processing viable. Large crustacean processing factories can achieve the necessary economies of scale, but where production-processing is low and spread over wide areas it is difficult to achieve viability.

Figure 7.1: Chitin and chitosan manufacturing process

Source: France-Chitine

The value chain estimated metrics for yabby production are shown in flowchart 7.2.

43

Flowchart 7.2: Yabby value chain: The flow of animals, products and yield

a.) Production

Female yabbies(100)

Male yabby (1)

1000 eggs/female

Non-fertile eggs(25%)

Fertile eggs(75%)

75,000hatchlings (wt.

10-15g)

356,250 growers(wt.100g)

b.) 1st Stage Processing c.) 2nd Stage Processing

Whole yabby(100g)

Tail meat (20g)

Other meat (40g)

Shell (30g)

Co-products (10g)

De-shelled meat(60g)

Co-products +40g transferred

in fromprocessing

Disappearances -moisture loss etc.

(10g)

Offal (3g)

Shells (25g)

Fat (2g)

mustard (2g)

chitine (5g)protein (11g)

Rendered products:meatmeal (5g)

Effluent (17g)

Shell (30g)

44

7.3 Size and structure in the yabby value chain The breeding structure and numbers within each activity along the yabby supply chain are based on the requirements for a minimum efficient-sized early-stage processing plant, which is judged to have the capacity to process 45 tonnes/year of tails from 76 t/year of yabbies live weight.15 This would require an estimated 772 000 growers for processing each year at an average live weight of 100 grams. This production would require an estimated 56 hectares of land and 28 hectares of ponds for breeding and growing. A suggested number of six semi-intensive growing farms could produce this output, an average of 128 666 growers/farm. The design of an efficient supply chain requires an initial assessment of the efficient size for each of the activities along it. From this point a supply-chain leader can start setting up those activities in the most efficient way possible so that the capacity of capital-intensive activities can be fully used. Like most of the other NAP supply chains, early-stage processing, where stock from a number of production points are assembled, defines the volume required for an efficient supply chain.

While selection of yabbies for improved characteristics such as growth rates and feed conversion is not common, this seems to present an opportunity for skilled operators. In addition, for the purpose of comparison with other animal supply chains, the study production starting point in the yabby supply chain is an elite breeding group of 100 females and one male. This elite flock can supply all the breeding material for a self-replacing yabby supply chain that provides the 772 000 growers and eventually produces 45 tonnes of yabby tails/year, 15 tonnes of shells for fertiliser or chitin, and 16 tonnes of byproducts. The elite flock supplies replacements for a grandparent stock of 400 females and four males, which in turn, supplies the replacements for 1600 females and 400 males in a parent flock, which then supplies 824 000 growers for fattening (losses reduce this number to 772 000 deliveries). In this model, yabby growing would be undertaken most efficiently by one single vertically integrated enterprise, though existing enterprise sizes suggest that production activities would need to be undertaken by about six enterprises. This size production enterprise is estimated to achieve all the economies of scale in production and most of the economies in processing.

7.4 Product analysis In the yabby supply chain there are many different value-adding product options, depending on market requirements. Yabby meat, live or cooked, dominates enterprise revenue, though both co-products and tourism can significantly improve returns. For this study the supply chain product selected is boiled yabby meat tails, which are taken through to a restaurant where it is served as part of a meal, with other components such as vegetables, flavourings, sauces etc.

As with the other NAP supply chains, the allocation of costs of production in the yabby enterprise is complicated by the presence of multiple products and the allocation of costs to the different co-product enterprises, which could include shells for chitin, as well as tourism. The total costs are estimated to be $28.65/kg by the time the yabby reaches the restaurant table in the form of a meal.

The single largest cost activity in this supply chain is the growing of the yabby ($7.99/kg), followed by the restaurant activity ($9.17/kg). The next highest cost is in retailing of meat ($2.17/kg) and then processing ($2.44/kg).

The described yabby supply chain produces an estimated 30 936 kg of co-products, with a gross value of $23 370. It is estimated that these would reduce the end product of the crocodile meat by $0.53/kg (see table 7.2)

15 The minimum efficient-sized processing estimate is based on the most efficient-szed described in the study by Ruello and Associates (2003). Production data are derived from earlier benchmarking studies undertaken by Wondu (2002).

45

Table 7.2: Co-products from the yabby value chain

Shells Offal Renderables Other Moisture loss Total kg/ animal 0.02 0.01 0.01 Total (kg for supply chain) 15 135 3 784 2 225 2 225 7 567 30 936 Unit value ($/kg) 1.00 2.00 0.20 0.10 0.00 Total supply-chain value ($) 15 135 7 568 445 222 0 23 370

Chart 7.3: Supply chain: Yabby tails for restaurant meals ($/kg CDCW)

0

2

4

6

8

10

$/kg

Elite flock Growers Separation Co-product Restaurant

Cost/CDCW

The largest cost item in the yabby chain is labour, which accounts for over 35 per cent of supply-chain costs.

Chart 7.4: Resource use: Yabby processing chain

0

2

4

6

8

10

12

$/kg

Materials Labour Expenses Machinery Investments Net profit Income tax

46

7.5 Main messages from the yabby value chain

There are several important findings from the yabby supply chain study: • An efficient yabby value chain is one that meets the requirements of end markets, which are

extremely sensitive to quality variation. It would be useful for a supply-chain leader to prepare a detailed requirements definition for quality and prices to be paid throughout the year. Product development and management is a critical task for a successful yabby value chain.

• While the yabby tail is the prime revenue earner for the enterprise, further cash could be generated from treatment of shells into fertiliser, protein and/or chitin. In addition, tourism could be a revenue-producing activity for some farms.

• The yabby-growing activity accounts for a significant share of the value-chain costs and value creation. Measures that improve growth rates, feed conversion and the yield of meat from tails will improve efficiency and returns in the yabby supply chain. The unit costs of feed have an important influence on supply-chain costs.

• While the restaurant activity accounts for a relatively high share of the yabby tail meat value chain costs, they are not excessive in the context of reaching and meeting consumer needs in the most efficient way possible.

47

8. Squab Value Chain 8.1 Background Squabs account for less than 0.5 per cent of the world’s poultry flock, and chickens have the dominant share (more than 90 per cent), ducks 5 per cent and turkey 2 per cent. (FAO 2003). We estimate that global production of squab could be around 70 000 tonnes/year, with between 225 and 600 tonnes in Australia (Wondu Holdings 2002). Squabs occupy a niche market and, like ducks, take on added importance in Asian communities, although western and eastern Europe both have a long history in the industry.

Squab production is generally undertaken through intensive, vertically integrated production systems. The scale of operations is typically small compared to other poultry products like chickens, duck and turkey. The Squab Producers Cooperative of California is an exception (see Case study no. 3). Processors tend also to deal in other specialist species such as guinea fowl, pheasants, quail and possibly ratites.

The value chain of intensive squab production and processing again offers choice in terms of breed selection, how growers and materials are sourced, which markets are to be targeted and how much processing and value-adding takes place at the slaughter and separation stages. The Bokhari Squab Breeding Farm places great emphasis on breeding squabs with high productivity rates, by using genetic selection to improve feed conversion, breast portion percentages, hatchability and survival.

Squab Multipliers

Parents Parents

Grandparents Grandparents Grandparents

Great-grandparents

Great-grandparents

Great-grandparents

Great-grandparents

Pedigree Pedigree Pedigree Pedigree Pedigree Pedigree Pedigree Pedigree

Source: Bokhari Squab Farm.

An estimated 40 per cent of a squab’s body weight happens through hereditary factors and 60 per cent through environmental influences. Along with body weight, the growth rate, feathering and shank length are all judged to have high heritability with squabs. Egg production, breast width, keel length, sexual maturity and egg weight of squabs are judged to have medium heritability.

There are again choices to sell the whole carcass or separate it into distinct portions for specific markets.

48

CASE STUDY 3: SQUAB PRODUCERS OF CALIFORNIA Squab Producers of California (SPC) claim to be the largest squab agricultural cooperative in the world. Formed in 1943, it is an association of small independent farmers who produce the squabs independently and then have them processed and marketed collectively by the cooperative. The producers use only natural feeds, no antibiotics, and no pesticides, with emphasis placed on creation of no-stress growing environments. These growing conditions are part of the attributes used to promote and sell the squab products. Processing is undertaken in a modern sanitary facility with only the highest-quality processing and packaging methods, which are essential to consistency, dependability of quality, and sizing, with maximum shelf life. SPC pursues three major strategies to differentiate their products from competitors: 1. Product quality assurance Quality management begins at the farm, and continues right through to final-stage processing and shipping. With this philosophy in mind the cooperative maintains a committee of dedicated, highly experience members to advise the membership in an effort to constantly improve quality. Farmer-members also adhere to strict policies on the use of antibiotics and pesticides as part of the cooperative’s ‘Animal Production Food Safety Plan’ to assure that their squabs are all natural and residue-free. At the processing level, every live bird is visually inspected upon arrival to assure healthy birds of proper maturity. Body development is closely checked, grading the bird against strict size and quality standards. Processing personnel are required to undergo training from the State of California Department of Food and Agriculture’s Bureau of Meat Inspection to become licensed poultry meat inspectors. This acts to further ensure that trained people with the authority to reject substandard product are there at each step of the processing operation. SPC believe their customers demand quality, and they do everything to deliver it. 2. Brand development and product variety High standards alone cannot build loyalty. Restaurateurs worldwide are encouraged to rely on ‘King Cal’ (the SPC brand) for consistent supplies and fair pricing. Patrons are seen to have discerning tastes and a requirement for good value. SPC strives to achieve the highest level of productivity without compromising quality, ensuring that they meet the needs of the marketplace. SPC squab is available in a number of forms to best fit the requirements of customers: • whole body — eviscerated with giblets and sorted by size. • semi boneless sleeve-boned with drumsticks and wingtips intact. • breasts — airline or boneless, whole or half. • Chinese style — Buddhist eviscerated with head and feet intact • New York dressed — Confucian style with entrails intact. • Other custom processing styles — available on request. 3. Reliable supply of high quality birds Pigeons have been bred for food for centuries dating back to early Asian, Arabic and European traditions. This history is seen to extend back beyond the current domesticated chickens and turkeys. SPC have taken the breeding tradition one step further by developing and further crossing to create a broader-breasted squab specifically for today’s food industry. Fed only whole corn, wheat and sorghum along with specially formulated all-natural grain pellets for protein, the SPC squab is ready for market at less than four weeks of age. This early preparation age, before the birds even fly, along with a stress-free grow out, all-natural diet, and special breeding, produce what SPC describe as a ‘special tenderness’. Squab meat is different from other domestic poultry, and considered milder than traditional game meats. With a delicate and unique taste of its own, squab meat is dark, moist, and flavoursome. Squab is viewed as ‘a treat’ and adaptable for inclusion in many meals. SPC believe that people who try squab often agree that it belongs at the top of their list of special entrees.

49

Chart 8.1: Squab meat styles and components: $/kg

25.6

46

102

2230

0

20

40

60

80

100

120

$A/kg

Whole squab Semi boneless Squab breastfillet

Asian style New Yorkdressed

Source: Various study sources.

While the breast meat is clearly the highest-value cut it typically accounts for no more than 20 per cent of the carcass weight. Value-adding opportunities exist with squab liver and squab fat recovery even though the yields are relatively low.

8.2 The flow of products and yields in the squab value chain The stages in the squab value chain are shown in flowchart 8.1. The livestock, meat and byproduct flow for squabs is shown in flowchart 8.2. The technical ratios are derived from previous studies and searches of various publications.

8.3 Size and structure in the squab value chain The breeding structure and numbers within each activity along the squab supply chain are based on the requirements for a minimum efficient-sized early-stage processing plant, which is judged to have the capacity to process at least 600 000 birds/year and 100 birds/hour or more when operating at full capacity.

50

Flowchart 8.1: The squab production, processing and service value chain

1. Production

Elite breedingflock

Grandparentflock Parent flock Hatchery Growing farm

2. Distribution

Freight, cartage &handling

3. Early Stage Processing

Arrival &hanging

Stun/kill/de-feather Evisceration

Offal & co-products

Gizzards, liver, heart,neck, blood, down feathers

Chill Weigh Wrap &pack

Specialtymarkets, incl.

industrial

4. Second Stage Processing

Cutting,separation &

boning

Boneless squab, boneless leg, wingjoints, breast, inner breast fillet, dicedbreast, thigh, drumstick, bone meal

Adding ingredients ... stuffing, flavouringsWrap & pack

5. Distribution

Transport Warehouse Wholesale

6a. Retail - Supermarket/Gourmet Deli

Storage Preparation Location & display Promote & sell

6b Retail - Restaurant

Storage Meal design One-to-onecustomer service

Promote & sale

Location & ambience

End consumer

51

Flowchart 8.2: Squab value chain: the flow of animals, products and yield

a.) Production

Female squab (1)

Male squab (1)

16 eggs/female

Non-fertile eggs(6%)

Fertile eggs(94%)

12 squablings(wt. 15g)

11 growers(wt.650g)

b.) 1st Stage Processing c.) 2nd Stage Processing

Bone-in carcass(390g)

Breast meat (80g)

Thigh meat (60g)

Wing &forequarter (100g)

Co-products(150g)

Boned-out meat(240g)

Co-products(260g + 140gtransferred infrom boning)

Disappearances -moisture loss etc.(241+10 =251g)

Offal (65g)

Hide, skins,feathers (26g)

Fat (3g)

Bone, meat, otheretc. (50g)

Blood (15g)

Offal products:neck/feet (2.5g)liver (14g)heart (5g)gizzards (14g)other (7g)

feathers (2.5g)

Renderedproducts:

tallow (3g)bloodmeal (3g)meatmeal (45g)

Effluent (251g)

10

52

The design of an efficient squab supply chain requires an initial assessment of the efficient size for each of the activities along it. From this point a supply-chain leader can set about sourcing products and services in the most efficient way possible from efficient-sized suppliers.

The production starting point in the squab supply chain designed here is an elite breeding flock of 500 females and 500 males. This elite flock can supply all the breeding material for a squab supply chain that provides 603 000 growers and eventually produces 226 000 kg of squab carcass meat/year. The elite flock supplies replacements for a grandparent flock of 5000 females and 5000 males which, in turn, supplies the replacements for 50 000 females and 50 000 males in a parent flock, which then supplies 602 716 growers for fattening. In this model, squab-growing is undertaken by 20 producers that each turn out 28 500 growers/year. The economies of scale in the growing stage of squab production are unclear and untested because most production is undertake by small enterprises, but earlier studies undertaken by Wondu indicated the presence of efficient growers with 2500 breeding pairs, which is about what is needed to produce 28 500 growers/year.

8.4 Squab product analysis In the squab supply chain there are many different processing options, depending on the product and market requirements. The activities and costs described here are for the sale of boned squab meat through to a restaurant, which buys the meat from a supermarket or specialist gourmet retail outlet.

It is relevant to note again that it is the relative responsiveness of suppliers and end-market consumers to price changes that influences the respective prices and shares of the activities undertaken in the squab value chain. The more inelastic the supply, the more will be the gains captured by the producers (Freebairn, Davis and Edwards 1982) when they introduce a new technology, such as an improved squab breed. This is one reason why vertically integrated squab breeding, production, processing and branding systems like the Squab Producers Cooperative of California have emerged. They enable the supply-chain leader (the cooperative) to control supply and capture the gains from their investment in new technology and development of differentiated products that can yield price premiums. Consumer demand for squabs, however, is again affected by substitute meat availability and prices (game meat and duck in particular) so there is always this competitive environment to be considered when setting prices for the end user. Bokhari Squab Farms identified the following factors as influencing the marketable attributes of squabs: • rate of growth in downs feathering • breast proportion and defects. (‘crooked keel’ and ‘breast blisters’ are common defects) • presence of black pigments or dark meat can adversely affect the prices received • cost of production and price, which is a function of feed conversion and other operational and size

efficiencies.

The total costs are estimated to be $40.11/kg16 for a whole squab sold at a retail supermarket. The single largest cost activity in this supply chain is the maintenance of the parent squab ($10.50/kg, based on 37kg/bird or 74kg/pair/year (refer to Kermode 1998), followed by the restaurant activity ($9.17/kg) and 1st-stage processing where costs are estimated to be $5.20/kg. The next highest cost is in the grower activity ($3.53/kg). The value-chain activities for squab production, though to the retail end, and their respective estimated costs are shown in chart 8.2.

16 As described earlier, all activity costs are translated into the unit costs per kilogram of end product.

53

Chart 8.2: Supply chain 1: Whole squab for supermarkets ($/kg cfcw)

Grandparents

Growers

Boning & separation

Co product

Restaurant

0

2

4

6

8

10

12

Elite flock Parents 1st process Dist. & mktg Supermarket

Cost/CFCW

In terms of resources used, the largest cost item in the squab parent maintenance activity is materials, mainly feed, which accounts for 64 per cent of total parent maintenance costs. Materials account for 33 per cent of total supply-chain costs, labour 20 per cent, expenses 16 per cent, and machinery and other investments 20 per cent, profits 3.5 per cent and income taxes 1.5 per cent.

Chart 8.3: Squab resource use ($/kg CFCW)

Labour

Machinery & equipment

Operating profits

02468

101214

Materials(mainlyfeed)

Expenses Investments Income tax

The growing task takes place over a 28-day period, during which the day-old squab is taken to a 0.65 kg live weight, which produces a 0.65 kg cold finished carcass weight (CFCW). The importance of feed costs and feed conversion is highlighted, not just for on-farm production, but also for the whole squab supply chain. The assumed feed input for parents is 37 kg/year or 74 kg/breeding pair. The feed inputs for the grandparent and elite breeding flocks add further to the importance of feed. Measures that can either reduce the unit cost of feed or improve the productivity of feed can significantly reduce supply-chain costs for squab.

The unit costs of 1st-stage processing are estimated to be $5.20/kg. This calculation is based on an automated, relatively large-scale modern processing plant with the capacity to produce at least 1000 squabs/hour or over 600 000 birds/year with 225 751 kg CFCW. The scale of this processing plant is, however, well below that of an efficient-sized duck processing plant, which is about 20 times larger with output around 4.7m kg CFCW. The 1st-stage processing activity includes a number of

54

opportunities for co-products such as down feathers, giblets (gizzards, liver, heart, neck), feet and fat. Co-products may account for 30 per cent of carcass weight. Feathers seem to be the main co-products exploited, at least in developed economies, though the other co-products seem to have potential as both a revenue item and as a cost-saving practice for adding value to higher-priced cuts (e.g. skin removal from beast meat) and reducing waste disposal costs. To add value to the co-product material, it is important to extract the co-product at an early stage in the value chain because it may be a waste product when it reaches the restaurant, except when it is a Chinese-style meal that requires the head and feet to be left on. Co-product revenue could reach $5.00/kg, though, again, significant variation exists, depending on secondary processing and packaging with small packages of duck fat and liver reaching $10/kg or more.

After 1st-stage processing the boning costs are estimated to be just $0.04/kg, and the distribution and marketing costs to be $1.56/kg, before retailing costs of $2.17/kg.

By the time the squab reaches a customer in a restaurant it has a value of around $40/kg. The squab is now in the form of a meal that would contain about 35 per cent boned squab meat. At this point about 5–6 meals would be made from 1 kilogram of squab meat.

The described squab supply chain produces an estimated 158 180 kg of co-products, with a gross value of $101 114 (table 8.1). It is estimated that these would reduce the end product of the squab meat by $0.45/kg. That is, $101 114 divided by 225 751kg equals $0.45/kg. Although the number is large (over 600,000 birds/year) it could be achieved with 30 efficient sized producers having around 30,000 birds produced/year. This volume would provide processors with some economies of scale to enable competitive costs to be achieved and reliable supply of product for distributors (refer to Case Study 3 on the Squab Producers of California).

Table 8.1: Co-products from the squab value chain

Feathers Offal Renderables Other Moisture loss Total kg/ animal 0.02 0.03 30.10 0.02 0.11 Total (kg for supply chain) 10 949 16 976 56 438 11 288 62 529 158 180 Unit value ($/kg) 5.00 2.00 0.20 0.10 0.00 Total supply-chain value ($) 54 745 33 952 11 288 1 129 0 101 114

55

8.5 Main messages from the Squab Value Chain

There are several important findings from the analysis of the squab value chain: • Small size is a limiting constraint to achieving low supply-chain costs. Even the largest

processing operations tend to be very small compared to other poultry operations, which might have turnover of 30–50 times greater. To achieve some basic economies of scale it would be important to have a well-managed network of producers to achieve reliability of supply.

• Because of the relatively high supply-chain costs, product quality, product differentiation and brand development take on added importance in terms of achieving price premiums that can cover the higher costs of production and processing. One of the product differentiation possibilities is biosecurity to guard against disease. As an example, PPMV-1 is a form of Newcastle disease adapted for growth in pigeons, but which can also infect chickens. Biosecurity measures would not amount to a relatively high cost in the overall value chain (probably less than $0.20/kg), but would act to protect price premiums and the risks of an industry shutdown in either local or export markets. In the USA, exports of poultry meat since 2002 have been significantly affected by outbreaks of avian influenza (Leuck, Haley and Harvey 2004).

• The squab parent maintenance activity accounts for a significant share of the value chain costs and value creation. Measures that improve growth rates, feed conversion and the yield of high-priced meats can improve the value added in the squab supply chain. There are also strong links between growing performance and breeding.

• Restaurant services account for a significant share of the duck value chain and it is important to understand precisely the requirements of restaurant operators, especially in terms of quality and type of meat cuts preferred for particular consumer groups.

• Co-products could create some value. The revenue from co-products (assumed to be a negative processing cost) can reduce the 1st-stage processing costs of squabs by perhaps 20 per cent.

56

9. Camel Value Chain 9.1 Background The FAO (http://www.fao.org/NEWS/FOTOFILE/PH9916-E.HTM) estimated that the world population of camels was over 19 million head in 1997. We estimate that this would have grown to over 20 million and be approaching 21 million in 2004. The one-humped dromedary accounts for the largest share (95 per cent) of the population and is most common throughout North Africa and the Middle-East. The two-humped Bactrian camel accounts for about five per cent of the numbers and is found in the colder desert climates of Kazakhstan, Russia and Eastern Asia. In Australia, the estimated population is between 150 000 and 200 000 (http://camelfarm.com), with 50 per cent in Western Australia, 25 per cent in the Northern Territory, and 25 per cent in Queensland and New South Wales.

The camel is extraordinary in terms of its productivity and diversity of uses, which are generated in some of the most arid and hostile climates in the world. There are a least 10 products or services that can be produced from a camel and they are all potentially important, depending on the enterprise focus: • renewable energy is produced as work for ploughing a field, transporting people and materials,

and various other tasks in developing countries

Source: FAO • milk and cheese production

Source: FAO • hair for textiles and clothing • meat • hides for leather • tourism • removal of woody weeds • entertainment • film and video production support • racing.

Camels are raised normally under extensive production systems with little supplementary feeding.

57

The meat portions from camel tend to sell at similar prices to beef and buffalo. Halal-conforming camel meat is also an option and may attract a price premium.

Chart 9.1: Camel meat and byproduct components: $/kg

0

2

4

6

8

10

12

14

16

$A/kg

Farm gate Grass-fed rumpsteak

Camel sausage Soup bones Steak & kidney

9.2 The flow of products and yields in the camel value chain The flow of products through the camel value chain is shown in flowchart 9.1. The livestock, meat and byproduct flow is shown in chart 9.2 (http://www.wondu.com/camel.htm) (http://www.wondu.com/Camel.xls). These are again standard metrics and may vary depending on animal breeds, feeding and processing conditions.

9.3 Size and structure in the camel value chain The breeding structure and numbers within each activity along the camel supply chain are a major constraint in achieving an efficient-sized early-stage processing plant, which could be as much as 50 000 tonnes of meat/year, equivalent to over 200 000 head/year if it were to compete on costs with beef processing. These numbers are not available in Australia or in many places anywhere in the world. For this study, we use an output of 73 000 kg of camel meat. Costs are, therefore, higher for processing camel than for large-volume products like beef. Even achieving and output of 73t/year would be a challenge for Australia.

While it might be argued that development of an elite and grandparent breeding flock is less relevant to animals captured from the wild it is suggested the same potential gains exist for breeding stock with values that generate high value. In these circumstances the ability to convert low value plants and survive droughts would be likely to assume greater importance than conversion of grain into live-weight gain.

58

Flowchart 9.1: The camel production, processing and service value chain

1. Production

Elite breedingherd

Grandparentherd Parent herd Growing farm

2. Distribution

Freight, cartage &handling

3. Early Stage Processing

Arrival &hanging Stun/kill/skin

Offal & otherco-products, incl.

effluent

Gizzards, liver, heart, neck,blood, hides, textiles

Chill or freeze Weigh Wrap &pack

Specialtymarkets, incl.

industrial

4. Second Stage Processing

Cutting,separation &

boning

Boneless camel meat, boneless leg, forequarterjoints, sirloin, scotch fillet, T-bone, rump steak,

sausages, soup bones, bone meal

Adding ingredients (e.g. stuffing)

Wrap & pack

5. Distribution

Transport Warehouse Wholesale

6a. Retail - Supermarket/Gourmet Deli

Storage Preparation Location & display Promote & sell

6b Retail - Restaurant

Storage Meal design One-to-onecustomer service

Promote & sale

Location & ambience

End consumer

Tourism?

Live direct toracing market

59

Flowchart 9.2: Camel value chain: the flow of animals, products and yield

a.) Production

Female camel (40)

Male camel (1)

1 female

Non-fertilefemales (50%)

Fertilefemales(50%)

16 Camel calves(wt. 37.5kg)

15 growers(wt.385kg)

b.) 1st Stage Meat Processing c.) 2nd Stage Processing

Bone-in carcass(231kg)

Breast brisketmeat (56kg)

Thigh meat (55kg)

Forequarter &other (50kg)

Co-products(70kg)

Co-products(154 + 63 =

217kg transferredin from boning

Disappearances -moisture loss etc.

(31+7=38kg)

Offal (45kg)

Hide, skins,feathers (50kg)

Fat (50kg)

Bone, meat, otheretc. (28kg)

Blood (8kg)

Offal products:trimmings (30kg)neck/feet (5kg)liver (3kg)heart (1kg)gizzards (3kg)other (3kg)

hair (3kg)hide (40kg)=5m2

Rendered products:tallow (45kg)bloodmeal (2kg)meatmeal (25kg)

Effluent (31kg)

7kg

30kg

d.) Annual on-going production of harvestable products

Milk(5kg/day)=1,750kg/year/grown

female camel+ Fibre (10kg/year/grown

camel)

e.) Leisure and sporting activities

Racing: 10 races/year Tourism (3 rides/week;150/year)

Boned out camelmeat

60

9.4 Product analysis The total costs are estimated to be $25.93/kg17 for a meal at a restaurant with camel steak the main component. The single largest cost activity in this supply chain is the restaurant activity ($9.26/kg), followed by maintenance of the camel breeder where costs are estimated to be $3.18/kg. The next highest cost is in early-stage processing ($2.83/kg) (chart 9.2). There is about 51 000 kg of co-products (hides, offal etc.) produced with the 73 000 kg of camel meat. The revenue from these co-products could reduce the overall supply-chain costs by $1.00/kg.

Chart 9.2: Supply chain 1: Camel meat for restaurants ($/kg CDFW)

Grandparents

Growers

Boning & separation

Co-product

Restaurant

0

2

4

6

8

10

$/kg

Elit

e flo

ck

Gra

ndpa

rent

s

Par

ents

Gro

wer

s

1st p

roce

ss

Bon

ing

&se

para

tion

Dis

t. &

mkt

g

Co-

prod

uct

Sup

erm

arke

t

Res

taur

ant

Cost/CDFW

Materials account for 13 per cent of total supply-chain costs, labour 22 per cent, expenses 22 per cent, machinery and other investments 22 per cent, and profits 7 per cent.

Chart 9.3: Resource use: Camel processing chain: breeding to restaurant

3.28

5.89 3.48

2.31

5.73

1.85

0.56

0

1

2

3

4

5

6

$/kg

Materials Labour Expenses Machinery Investments Profit Income tax

The described camel supply chain produces an estimated 62 743 kg of co-products, with a gross value

17 As described earlier, all activity costs are translated into the unit costs per kilogram of end product.

61

of $55 351 (see table 9.1). It is estimated that these would reduce the end product of the camelmeat by $0.76/kg .

Table 9.1: Co-products from the camel value chain

Skins Offal Renderables Other Moisture loss Total kg/ animal 30.33 48.22 67.91 11.32 37.00 Total (kg for supply chain) 9 772 15 533 21 878 3 646 11 914 62 743 Unit value ($/kg) 2.00 2.00 0.20 0.10 0.00 Total supply-chain value ($) 19 544 31 066 4 376 365 0 55 351

9.5 Main messages from the camel value chain

There are several important findings from the study: • An efficient camel value chain is one that meets the requirements of end markets, which have

differing requirements and it ultimately faces competition from substitute meat products, especially beef and buffalo. Product development and supply-chain management is a critical task for a successful camel value chain.

• The camel-breeding activity accounts for a significant share of the value-chain costs and value creation. Measures that improve growth rates from low valued shrubs, feed conversion, surviving of droughts and the yield of high-priced meats can improve the value added in the camel supply chain. There are, again, strong links between growing performance and breeding costs

• While supermarket returns account for a relatively high share of the camel value-chain costs, they are not excessive in the context of reaching and meeting consumer needs in a low-cost way. Direct sale to gourmet delicatessens and restaurants offers an alternative outlet when supermarket costs are too high.

• Restaurant services account for a significant share of the camel value chain and it is important to understand precisely the requirements of restaurant operators, especially in terms of quality and type of meat cuts preferred for particular consumer groups, such as people of Middle-Eastern origin.

• Co-products create significant value. The revenue from co-products (assumed to be a negative processing cost) can reduce 1st-stage processing costs of camels by more than 30 per cent.

62

10. Buffalo Value Chain 10.1 Background There are about 175 million water buffalo (Bubalus bubalis) in the world, over 95 per cent of them in Asia. Australia has a relatively small herd of around 50 000. While most buffalo in Asia are used for milk and working (pulling ploughs, carts etc.), in Australia they are run as a grazing animal for meat and hide production, although on some properties they are part of the farm or outback tourism-hunting industry.(refer, for example, to Ausafari, http://www.ausafari.com.au/).

The value chain of buffalo production and processing in Australia is at first glance relatively simple compared to many of the more intensively managed smaller new animal products. Many of the animals are sold as live animals for international trade to countries like Brunei, Indonesia and Taiwan.

There are still, however, many value-adding choices available to operators in terms of breed selection, whether to operate a self-replacing herd, age of growers when sold, which markets are to be targeted, and how much processing and value-adding takes place at the slaughter and boning stages in Australia or elsewhere. Buffalo leather is highly regarded for strength and grain and is used to make fashion boots (Westmall) and hats (KillerHats). Buffalo trophy heads and horns are used in souvenir trade (Boneroom). Buffalo milk and cheese has gained added interest in niche markets and offers an attractive return for more intensively run enterprises. In the UK, buffalo milk is selling for the equivalent of $7.70/litre, buffalo icecream for $12.80/litre and buffalo cheese for $46/kg (refer to Buffalo House and other specialty sites like Buffalo Cheese.

The starting point for this study is again the identification of a minimum-sized processing pick-up, which is judged to be just 454 head from two rangeland producers. This level of production was required to make maximum use of an elite herd of30 females and 1 male. It is assumed that the buffalo can be slaughtered in a large-scale processing facility (which might be integrated with beef to achieve economies of scale) for about $1.14/kg. (sales of skins and offal and rendered products are assumed to be the equivalent of $0.86/kg, leaving a net cost of $0.28/kg).

Chart 10.1: Buffalo meat and by-product components in Canada: $/kg

0

5

10

15

20

25

$A/kg

Farm gate Grass-fedrump stk

Grain-fedrump stk

Buffalosausage

Soup bones Steak &kidney

Source: Green-grocer.com beef prices adjusted for live prices paid, August 2004. Specific buffalo meat prices available from US based http://www.hillsfoods.com

While the grain-fed rump meat is clearly the highest-value cut it typically accounts for less than 20 per cent of the carcass weight and is not always available in all countries including Australia. Value-

63

adding opportunities exist in the recovery of bones and offal. Even though the unit prices and yields are relatively low, it can be a positive contribution to profits because this revenue can be generated with low marginal collection costs and make a valuable contribution to offsetting slaughter costs.

10.2 The flow of products and yields in the buffalo value chain The buffalo value-chain product flow is shown in flowchart 10.1, which shows only the main activity categories. The livestock, meat and by-product flow for buffalo is shown in flowchart 10.2. These are standard metrics and may vary depending on animal breeds, feeding and processing conditions.

Some activities like handling, transport and distribution of animals may have relatively low nominal costs in the overall supply-chain costs, but they can significantly create or undermine prices and the value created. Lemke (2002) identified pre-slaughter stress and bruising as two areas that can significantly reduce the value of meat and hides.

10.3 Size and structure in the buffalo value chain The breeding structure and numbers within each activity along the buffalo supply chain are based on the requirements for a minimum efficient-sized early-stage processing plant, which is judged to be similar to that of beef-cattle processing and have the capacity to process 2.5 million buffalo and cattle/year or more when operating at full capacity.

64

Flowchart 10.1: The buffalo production, processing and service value chain

1. Production

Elite breedingherd

Grandparentherd Parent herd Weaners -

yearlings - growing

2. Distribution

Freight, cartage &handling

3. Early Stage Processing

Arrival &hanging Stun/kill/skin

Offal & co-products

Gizzards, liver, heart,neck, blood, skins/hides

Chill or freeze Weigh Wrap &pack

Specialtymarkets, incl.

industrial

4. Second Stage Processing

Cutting,separation &

boning

Boneless buffalo meat, boneless leg, forequarterjoints, sirloin, scotch fillet, T-bone, rump steak,

sausages, soup bones, bone meal

Adding ingredients (e.g. stuffing)

Wrap & pack

5. Distribution

Transport Warehouse Wholesale

6a. Retail - Supermarket/Gourmet Deli

Storage Preparation Location & display Promote & sell

6b Retail - Restaurant

Storage Meal design One-to-onecustomer service

Promote & sale

Location & ambience

End consumer

Tourism?

65

Flowchart 10.2: Buffalo supply chain

a.) Production

Female buffalo (30)

Male camel (1)

1 egg/female

Non-fertile eggs(10%)

Fertile eggs(90%)

27 Buffalocalves (wt. 40kg)

26 yearlings(wt.450kg)

b.) 1st Stage Meat Processing c.) 2nd Stage Processing

Bone-in carcass(248kg)

Breast brisketmeat (57kg)

Thigh meat (55kg)

Forequarter &other (55kg)

Co-products(81kg)

Co-products(202 + 75 =

277kg transferredin from boning)

Disappearances -moisture loss etc.

(31+6 = 37kg)

Offal (50kg)

Hide, skins,feathers (32kg)

Fat (32kg)

Bone, meat, otheretc. (40kg)

Blood (5kg)

Offal products:trimmings (20kg)neck/feet (5kg)liver (3kg)heart (1kg)gizzards (3kg)other (3kg)

hide (40kg) =5m2

Rendered products:tallow (40kg)bloodmeal (1kg)meatmeal (38kg)

Effluent (37kg)

6kg

20kg

d.) Annual on-going production of harvestable products

Milk (5kg/day) =1,750kg/year/grown female

camel

Boned out buffalomeat

Cheese (1kgcheese/5kg milk)

Butter (1kg butter/10kgmilk)

Whole milk

66

10.4 Product analysis The total costs are estimated to be $20.20/kg18 for a buffalo steak by the time it reaches a customer in a restaurant. This costing does not include the value of co-products produced such as the hide and offal, which could reduce costs by $0.86/kg. The single largest cost activity in this supply chain is the restaurant activity ($9.26/kg), followed by the retail supermarket activities where costs are estimated to be $2.19/kg. The next highest cost is in the maintenance of the buffalo parents ($1.59/kg) and grandparents ($1.11/kg). The value-chain activities for buffalo production, though to the retail end, and their respective estimated costs are shown in chart 10.2.

Chart 10.2: Supply chain 1: Buffalo for restaurant meal ($/kg CDFW)

GrandparentsGrowers

Boning & separation

Co-product

Restaurant

-202468

10

$/kg

Elit

e flo

ck

Gra

ndpa

rent

s

Par

ents

Gro

wer

s

1st p

roce

ss

Boni

ng &

sepa

ratio

n

Dis

t. &

mkt

g

Co-

prod

uct

Supe

rmar

ket

Res

taur

ant

Cost/CDFW

The largest cost items in the buffalo value chain are labour (29 per cent) and general service expenses (rent, advertising, electricity, administration), which account for 25 per cent of total supply-chain costs (chart 10.3). Labour also accounts for 28 per cent of total supply-chain costs. Unlike the more intensive animal supply chains, buffaloes are run extensively and materials account for less than 16 per cent of total supply-chain costs.

The unit costs of 1st-stage processing at $1.14/kg are higher than the cash cost charged for contract processing because the value of hides and offal is added to the cash cost of $0.28/kg. The 1st-stage processing activity includes a number of opportunities for co-products such as skins or hides, giblets (gizzards, liver, heart, neck), feet, tongue, blood and fat. Co-products may account for 30 per cent of carcass weight. Hides seem to be the main co-products. Co-product revenue is estimated to be $0.86/kg.

By the time the buffalo meat reaches a customer in a restaurant it has a value of around $20.20/kg. The buffalo is now in the form of a meal that would contain about 35 per cent buffalo meat. At this point about four meals would be made from 1 kilogram of buffalo meat.

The described buffalo supply chain produces an estimated 31 231 kg of co-products, with a gross value of $96 424 (see table 10.1). It is estimated that these would reduce the end product costs of the buffalo meat by $0.89/kg (table 10.1).

18 As described earlier, all activity costs are translated into the unit costs per kilogram of end product.

67

Table 10.1: Co-products from the buffalo value chain

Skins Offal Renderables Other Moisture loss Total kg/ animal 32.50 51.66 72.77 12.13 38.39 Total (kg for supply chain) 14 469 22 999 32 393 5 399 17 091 31 231 Un it value ($/kg) 3.00 2.00 0.20 0.10 0.00 Total supply-chain value ($) 43 407 45 998 6 479 540 0 96 424

Chart 10.3: Resource use: Buffalo processing chain

0

1

2

3

4

5

6

$/kg

Materials Labour Expenses Machinery Investments Net profit Income tax

68

10.5 Main messages from the buffalo value chain

There are several important findings from the study of the buffalo value chain: • The buffalo value chain has a cost advantage over the more intensively managed NAP

industries because of its use of low-cost land in place of feed and associated labour. • An efficient buffalo value chain is, like the other value chains, driven by meeting the

requirements of the end markets, which have different requirements and can ultimately turn to substitute beef products. Product development and supply-chain management is a critical task for a successful buffalo value chain.

• Buffalo breeding activities account for a significant share of the value-chain costs and value creation. Measures that improve growth rates and feed conversion and the yield of high-priced meats can improve the value added in the buffalo supply chain. There are also strong links between growing performance and breeding. The supply-chain costs for elite breeding of high-performance animals are relatively low compared to the benefits that can flow through the whole supply chain. Similarly, the supply-chain costs for handling and distribution are relatively low, but the benefits in terms of creating high value from high-quality hides and meat are very significant.

• While supermarket returns account for a relatively high share of the buffalo value-chain costs they are not excessive in the context of reaching and meeting consumer needs in a low-cost way. Direct sales to gourmet delicatessens and restaurants offers an alternative outlet when supermarket costs are too high.

• Restaurant services account for a significant share of the buffalo value chain and it is important to understand the requirements of restaurant operators, especially in terms of quality and type of meat cuts preferred for particular consumer groups.

• Co-products can create significant value in the buffalo supply chain. The revenue from co-products (assumed to be a negative processing cost) could halve the 1st-stage processing costs of buffaloes.

69

11. Discussion of Overall Results There is great diversity in NAP supply chains in terms of the intensity of production systems, scale of operations, feed-conversion efficiency, and end-product focus, which ranges from restaurant meals to high-fashion leather garments. This diversity provides a platform for growth and adaptability to changing environmental and economic conditions. The growth potential for all industries is quite strong so long as supply chains are designed and developed to take advantage of new technologies and improve coordination between production, processing and markets.

There are some common themes across all the supply chains. Feed costs take on particular importance for intensively run operations like ducks, ostriches, squabs and yabbies. Land and pastures take on importance for extensive systems. Measures that can either reduce feed costs or improve feed conversion and the yield of higher-priced meat and skins/leather can transform the competitiveness of these value chains.

One of the most significant points to emerge, however, is that small things can have a big impact on these value chains. The two most prominent examples are genetic improvement, through an elite–grandparent stock selection system, and a livestock identification and traceability system. Advanced genetic improvement and livestock identification and traceability systems have a small direct impact on overall supply costs, but a potentially major impact on productivity and end-market product values and security. The elite breeding activity costs less than $0.50/kg (less than $0.01/kg in the case of ducks) and it is estimated that an identification and traceability system would be about the same, though more work is required in this area. A cost assessment of the National Livestock Identification System (NLIS) for Meat and Livestock Australia by Alliance Consulting and Management (2004) found the cost of compliance for the identification and traceability system amounts to less than $0.05/kg for beef cattle. Without genetic improvement and identification and traceability systems, the NAP supply chains are vulnerable to growing consumer preferences for knowing the origin and treatment of food when it is purchased from the shelf of a supermarket or in the form of a meal from a restaurant. Furthermore, livestock identification and traceability systems make it easier to implement advanced genetic improvement schemes. The supply chains of animal industries that fail to implement identification and traceability systems are likely to become increasingly uncompetitive and vulnerable to shifts in market preferences for improved food security.

The small size of NAP supply chains leads to high delivery costs and limited ability to be reliable suppliers for large retailers dealing with traditional foods. Nevertheless, smaller segmented market opportunities exist and operators have shown that consumers are prepared to pay high prices for specialty products if the products are of high quality and distinctive.

Many supply chain studies focus on the returns to supermarkets. Supermarket and restaurant returns, as we have seen, figure heavily in value-chain costs, but to meet consumer needs for convenient locations, these costs are to be expected. In any event, direct selling to gourmet delicatessens and restaurants provide alternative outlets if supermarket costs are too high. Restaurant services account for a significant share of all the value chains, but the NAP meat is part of a meal, and it is important to understand what restaurant operators need, especially in terms of quality and the type of meat cuts preferred by different groups of customers.

Co-products can result in significant value in most of the NAP supply chains. In this study we found information about the yields and product possibilities for hides, hair, feathers, shells, offal, blood and bone. Information about these yields is generally limited and more research is needed to identify the yields and conversion ratios into saleable products for NAP supply chains.

70

12. Conclusions and Recommendations Supply-chain management takes on added importance for NAP industries because of their small size, which reduces their cost competitiveness against traditional, larger animal industries. NAP industries can counter this disadvantage by developing unique and highly differentiated and branded products for specialty markets that are prepared to pay price premiums to cover the cost disadvantage.

This can be done by creating superior supply-chain management systems that take advantage of new technology in animal breeding, identification and traceability systems, operations and product and marketing development. Effective communication of information and coordination of product supplies along the value chain is a vital part of a superior supply-chain management system. Vertical integration or very close coordination of supply chain activity through a supply-chain leader with brand development capability can deliver superior supply-chain management for NAP industries.

The detailed supply-chain costs show that the cost of doing an activity in the supply chain does not convey anything about its relative importance. Activities like advanced breeding for gains in animal productivity, and implementation of identification and traceability systems have low costs and major benefits. The NAP industries are most vulnerable to competition from the larger animal industry products in these areas.

Recommendations, repeated from the Executive summary 1. The value-chain research project should be extended to all NAP industries.

2. Identification and traceability systems should be developed for all NAP industries, starting with a project to define the requirements for each industry, followed by systems design and implementation.

3. Further research should be undertaken into measuring the yields and product conversion ratios and identifying the product possibilities for NAP co-products.

71

Appendix 1: Detailed Technical Ratios: Supply Chains: Various New New animal product supply chain: comparison of key parameters

Activity Task

Farm production Elite breeders

Variable Duck Ostrich Crocodile Yabbies Squab Camel Buffalo

Males Numbers 2 1 1 1 500 1 1

Females Numbers 12 2 3 100 500 40 30

Gestation period Days 30 42 150 56 32 400 320

Feed consumption rate (per m&f average) kg/breeding unit 57.2 700 91 0.13 37 10 10

Feed consumption per elite breeding task kg 800.8 2100 364 13.13 37 000.00 410.00 310.00

Land used rate Number/hectare 120 2 20 7500 10 000.00 0.01 0.09

Land area used Hectares 0.12 1.50 0.20 0.01 0.10 4100.00 344.44

Buildings/water dams use rate Number/m2 2 0.2 0.023 2 0.5 100 100

Building/water dams area used M2 7 15 174 50.50 2000 0.41 0.31

Replacement male(s)/year purchased. Numbers 1 0.25 0.1 0.1 0.25 0.25 0.25

Replacement females/year Numbers 4 0.25 0.1 0.1 0.25 0.25 0.25

Age at start of breeding Years 1 3 7 1 0.5 3 2

Eggs/female/year Numbers 200 100 45 1000 16 0.5 1

Fertility rate % 90 90 90 75 94 100 90

Eggs fertilised/female Numbers 180 90 40.5 750 15 0.50 0.90

Total elite eggs fertilised Numbers 2 160 180 122 75 000 7520 20 27

Hatching/birthing rate % 85 75 75 75 80 100 100

Eggs hatched, births/female Numbers 153 68 30 563 12 0.50 1

Total elite births or eggs hatched Numbers 1 836 135 91 56 250 6016 20 30

Progeny culling rate % 93 50 50 69.77 50 20 20

Progeny culling number (sent to growing) Numbers 1 698 68 46 39 243 3008 4 6

Losses % 2 10 10 30 3 2 2

Losses number Numbers 37 14 10 16 905 210 1 1

Number sent to grandparent group Numbers 97 53 36 101 2797 15 23

72

Grandparent breeders Males Numbers 36 18 4 4 5 000 17 17

Females Numbers 216 36 12 400 5 000 680 510

Replacement males in 18 6 1 1 1 400 7 7

Replacement females in 79 47 35 100 1 397 8 16

Feed consumption rate (per m&f average) kg/breeding unit 57.2 700 91 0.13 37 10 10

Feed consumption per grandparent breeding task kg 14 414 37 800 1 456 53 370 000 6 970 5 270

Land used rate Number/hectare 120 2 20 7 500 10 000.00 0.01 0.09

Land area used Hectares 2.10 27.00 0.80 0.05 1.00 69 700.00 5 855.56

Buildings/dams use rate Number/m2 2 0.2 0.023 3 0.5 100 100

Building/dams area used M2 126 270 696 134.67 20 000 6.97 5.27

Age at start of breeding 1 3 7 1 0.5 3 2

Eggs/female Numbers 200 100 45 1000 16 0.5 1

Fertility rate % 90 90 90 75 94 100 90

Eggs fertilised/female Numbers 180 90 41 750 15 1 1

Total grandparent eggs fertilised Numbers 38 880 3 240 486 300 000 75 200 20 27

Hatching/birthing rate % 85 75 75 75 80 100 100

Births/eggs hatched/female Numbers 153 68 30 563 12 1 1

Total grandparent births/eggs hatched Numbers 33 048 2 430 365 225 000 60 160 340 510

Progeny culling rate % 69 25 10 69.23 50 20 20

Progenyculling number (sent to growing) Numbers 22 638 608 36 155 773 30 080 4 6

Losses % 2 10 10 30 5 2 2

Losses number Numbers 666 248 38 67 621 3 508 1 1

Number sent to parent group as replacements Numbers 9 744 1 574 290 1 605 26 572 15 23

73

Parent breeders Males Numbers 2 772 324 40 16 50 000 17 17

Females Numbers 16 632 648 120 1 600 50 000 680 510

Replacement male(s)/year from grandparents Numbers 1 386 32 4 5 13 250 4 4

Replacement females/year from grandparents Numbers 8 358 1 542 286 400 13 322 11 19

Feed consumption rate (per m&f average) kg/breeding unit 57.2 700 91 0.13 37 10 10

Feed consumption per parent breeding task kg 1 109 909 680 400 14 560 210 3 700 000 6 970 5 270

Land used rate Number/hectare 120 2 20 7 500 10 000 0.01 0.09

Land area used Hectares 162 486 8 0.22 10 69 700 5 856

Buildings/dams use rate Number/m2 2 0.2 0.023 3 0.5 100 100

Buildings/dams area used M2 9 702 4 860 6 957 539 200 000 7 5

Age at start of breeding Year 3 2

Eggs/female Numbers 200 100 45 1000 16 0.5 1

Fertility rate % 90 90 90 75 94 100 90

Eggs fertilised/female Numbers 180 90 41 750 15 1 1

Total parent eggs fertilised Numbers 2 993 760 58 320 4860 1 200 000 752 000 340 459

Hatching/birthing rate % 85 75 75 75 80 100 100

Births/eggs hatched/female Numbers 153 68 30 563 12 1 1

Total parent births/eggs hatched Numbers 2 544 696 43 740 3 645 900 000 601 600 340 459

Losses % 2 10 10 30 5 2 2

Losses number Numbers 51 282 4 471 381 270 485 35 080 21 20

Number sent to grower group from parents Numbers 2 493 414 39 269 3 265 629 515 566 520 319 439

74

Growers or stock units for sale Males Numbers 1 258 875 19 972 1 673 412 266 299 804 164 226

Females Numbers 1 258 875 19 972 1 673 412 266 299 804 164 226

Total growers Numbers 2 517 750 39 944 3 347 824 532 599 608 327 451

Turnoff period Days 50 300 630 365 20 1 825 365

Turnover/year 7.30 1.22 0.58 1.00 18.25 0.2 1

Feed consumption (per m&f average)

• starter feed kg/unit 1.4 165.2 120 0 0.5 10.00 0

• grower feed kg/unit 4.2 246.4 120 0.13 0 0 0

• finisher feed kg/unit 2.8 47.6 120 0 0 0 10

Feed consumption per grower task kg 20 112 796 17 425 083 1 144 507 91 111 292 309 3 240 4 468

Land used rate Number/hectare 219 000 1 217 67 7 500 45 625 0.05 0.09

Land area used Hectares 11 33 50 55 13 32 726 5 014

Buildings use rate Number/m2 6 0.2 0.023 3 0.5 100 100

Building area used M2 57 483 164 153 251 138 274 844 65 710 16 5

Losses % 9.8 10 10 30 5 2 2

Losses number Numbers 246 740 3 994 335 247 360 29 980 7 9

Number sent to slaughter Numbers 2 271 011 35 949 3 012 577 172 569 628 321 442

Indicators Feed-conversion ratio (feed used : live weight sold)

Grower level Ratio (feed : live wt of growers) 2.92 4.76 14.80 1.18 0.75 0.03 0.02

Full integrated enterprise Ratio (feed : live wt of integrated enterprise) 3.08 4.95 15.01 1.18 11.23 0.14 0.07

Building/dam yield Kg/M2 102.29 21.63 0.30 0.28 1.36 4 120.57 13 305.81

Land yield Kg/ha 39 256.10 6 691.46 1 305.93 1 397.59 16 160.53 0.72 11.98

75

Distribution inwards Processing 1st-stage processing

Number of farm enterprise suppliers Numbers 30 30 30 6 20 30 2

Live number arrivals/farm enterprise Numbers 76 512 1 221 103 128 698 30 136 11 227

Number picked up 2 295 347 36 624 3 094 772 189 602 716 329 454

Losses % 1 2 2 2 2 2 2

Number of losses Numbers 22 953 732 62 15 444 12 054 7 9

Number approved Numbers 2 272 393 35 892 3 032 756 745 590 661 322 445

Live weight/unit Kg 3 100 25 0.1 0.65 385 450

Co-products:

• hide/hair/feathers/shells kg/animal unit 0.10 8.8 2.21 0.02 0.02 30.33 32.50

• offal kg/animal unit 0.15 4.79 1.11 0.01 0.03 48.22 51.66

• renderable products kg/animal unit 0.51 15.93 3.68 0.00 0.10 67.91 72.77

• other byproducts kg/animal unit 0.10 3.19 0.74 0.00 0.02 11.32 12.13

• moisture loss [before recovery from coproducts] kg/animal unit 0.07 9.31 2.58 0.01 0.11 37.00 38.39

• milk 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Disappearances Kg/animal unit 0.00 0.00 0.00 0.00 0.00 0.00 0.00

Co-products totals:

• hide/hair/feathers/shells kg 226 814 315,859 6 686 15 135 10 949 9 772 14 469

• offal kg 351 679 171 931 3 352 3 784 16 976 15 533 22 999

• renderable products kg 1 169 146 571 579 11 143 2 225 56 438 21 878 32 393

• other byproducts kg 233 829 114 316 2 229 2 225 11 288 3 646 5 399

• moisture loss kg 159 125 334 165 7 821 7 567 62 529 11 914 17 091

• milk kg 0 0 0 0 0 0 0

Hot dressed carcass yield/unit % 70 65 60 60 60 60 55

Hot dressed carcass weight/unit kg 2.10 65.00 15.00 0.06 0.39 231.00 247.50

Total hot dressed weight total 4 772 026 2 332 976 45 480 45 405 230 358 74 414 110 179

Cold dressed carcass yield/unit % 98 98 98 98 98 98 98

Cold dressed weight/unit kg 2.06 63.70 14.70 0.06 0.38 226.38 242.55

Total cold dressed weight total kg 4 676 586 2 286 316 44 570 44 497 225 751 72 926 107 976

76

2nd-stage processing Boned separated meat % 60 35 35 100 35 35 35

Boned meat kg/animal unit 1.23 22.30 5.15 0.06 0.13 79.23 84.89

Bone — send to rendering 0.82 41.41 9.56 0.00 0.25 147.15 157.66

Boned separated meat total kg 2 805 951 800 211 15 600 44 497 79 013 25 524 37 792

Packaging Grams/kg meat 1 1 1 1 1 1 1

Packaging total kg 2 806 800 16 44 79 26 38

Distribution out Amount picked up kg 2 805 951 800 211 15 600 44 497 79 013 25 524 37 792

Losses % 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Losses amount kg 14 030 4 001 78 222 395 128 189

Amount delivered kg 2 791 922 796 210 15 522 44 274 78 618 25 397 37 603

Retail Stock inwards kg 2 791 922 796 210 15 522 44 274 78 618 25 397 37 603

supermarket Losses % 0.5 0.5 0.5 0.5 0.5 0.5 0.5

Disappearances % 1 1 1 1 1 1 1

Losses amount kg 27 919 7 962 155 443 786 254 376

Amount sold kg 2 764 002 788 247 15 366 43 831 77 832 25 143 37 227

Restaurant Stock inwards kg 2 764 002 788 247 15 366 43 831 77 832 25 143 37 227

Meat materials/meal kg/meal 0.3 0.3 0.3 0.3 0.3 0.3 0.3

Non-meat materials/meal kg/meal 0.6 0.6 0.6 0.6 0.6 0.6 0.6

Total materials/meal kg/meal 0.9 0.9 0.9 0.9 0.9 0.9 0.9

Total meals for restaurants Number 9 213 341 2 627 492 51 221 146 105 259 438 83 809 124 089

77

Appendix 2: Activity-Based Costs: New animal products Duck meat for restaurant meal

a) Product resource use and allocation of value added Product price: $19.03 per kg

Sales commission: $0.19 per kg

Net price: $18.84 per kg

Material cost: $5.54 per kg

Labour cost: $5.85 per kg

Expenditure cost: $5.83 per kg

Tooling cost (+ interest): $0.00 per kg

M&E cost (+ interest): $0.24 per kg

Investment cost (+ interest): $0.16 per kg

Product cost (+ interest): $17.62 per kg

Cost without markups (for info): $17.06 per kg

Gross profit: $1.22 per kg

SG&A: $0.95 per kg

Operating profit (less interest): $0.27 per kg

Taxes ( 30.0%): $0.08 per kg

Net profit (after tax): $0.19 per kg

Contribution (to fixed): $7.09 per kg

Total profit (after tax): $889 893

Cash flow (approximate): $1 438 614 Includes investment

Economic profit: $824 047 (NOPAT—int. exp)

Total investment used: $1 829 071 (Tooling, M&E, inv)

Operating profit rate: 1.43 %

Profit rate (after tax): 1 %

ROI: 48.65 %

Production volume: 4 676 586 kg

78

b) Product activities and associated resource use costs

Item Unit quantity Units Takeoff Markup Unit cost Cost unit Cost

Elite duck breeding Takeoff: 1.000 elite breeders / 334042.00 kg

Mat. Feed additives 5.4 kg 2.99E-06 1.03 $0.60 kg $0.00

Mat. Feed costs 57.2 kg 2.99E-06 1.03 $0.40 kg $0.00

Mat. Veterinary & medicinal 4.00E-05 kg 2.99E-06 1.03 $5 000.00 kg $0.00

Lab. Breeding, selection & management 1 Hour 2.99E-06 1.03 $20.00 Hour (1.0 workers) $0.00

Lab. Cleaning labour 0.83 Hour 2.99E-06 1.03 $8.00 Hour (1.0 workers) $0.00

Lab. Feeding labour 0.83 Hour 2.99E-06 1.03 $15.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 0.357 Replacement 2.99E-06 1.03 $100.00 Replacement $0.00

Exp. Electricity 0.3 kWhr 2.99E-06 1.03 $0.10 kWhr $0.00

Exp. Miscellaneous 0.1 Labour hour 2.99E-06 1.03 $10.00 Labour hour $0.00

M&E Machinery & equipment 54.776 Hour 2.99E-06 1.02 $0.13 Hour $0.00

Inv. Buildings & structures 140 Sq. ft (bldg) 2.99E-06 7.73E-02 $4.00 Sq. ft (bldg) $0.00

Inv. Elite livestock 28 Duck breeder 2.99E-06 3.64E-02 $100.00 Duck breeder $0.00

Inv. Land 0.12 Hectares 2.99E-06 7.73E-02 $5 000.00 Hectares $0.00

Subtotal: Elite duck breeding $0.00

Grandparent duck breeding Takeoff: 1.000 grandparent breeders / 18 558.00 kg

Mat. Feed additives 5.4 kg 5.39E-05 3.4 $0.60 kg $0.00

Mat. Feed 57.2 kg 5.39E-05 3.4 $0.40 kg $0.00

Mat. Veterinary & medicinal 4.00E-05 kg 5.39E-05 3.4 $5 000.00 kg $0.00

Lab. Breeding, selection & management 2 min 5.39E-05 3.4 $20.00 Hour (1.0 workers) $0.00

Lab. Feeding labour 2 min 5.39E-05 3.4 $15.00 Hour (1.0 workers) $0.00

Lab. Cleaning labour 2 min 5.39E-05 3.4 $10.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 0.385 5.39E-05 0.00E+00 $0.00 $0.00

Exp. Electricity 0.3 kWhr 5.39E-05 3.4 $0.10 kWhr $0.00

Exp. Miscellaneous 0.1 Labour hour 5.39E-05 3.4 $10.00 Labour hour $0.00

M&E Machinery & equipment 2.064 Hour 5.39E-05 1.02 $0.25 Hour $0.00

Inv. Buildings 1260.00 Sq. ft (bldg) 5.39E-05 6.95E-05 $4.00 Sq. ft (bldg) $0.00

Inv. Grandparent livestock 6479.00 Grandparent 5.39E-05 2.02E-03 $50.00 Grandparent $0.04

Inv. Land 2.1 Hectares 5.39E-05 4.50E-05 $5 000.00 Hectares $0.00

Subtotal: Grandparent duck breeding $0.04

79

Parent duck breeders Takeoff: 1.000 parent breeders / 241.000 kg

Mat. Feed additives 5.72 kg 4.15E-03 1.02 $0.60 kg $0.01

Mat. Main feed costs 57.2 kg 4.15E-03 1.02 $0.40 kg $0.10

Mat. Veterinary & medicinal 4.00E-05 kg 4.15E-03 1.02 $5 000.00 kg $0.00

Lab. Breeding, selection & management 2 min 4.15E-03 1.02 $20.00 Hour (1.0 workers) $0.00

Lab. Cleaning labour 2 min 4.15E-03 1.02 $10.00 Hour (1.0 workers) $0.00

Lab. Feeding labour 2 min 4.15E-03 1.02 $15.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 0.00108 4.15E-03 0.00E+00 $0.00 $0.00

Exp. Electricity 0.3 kWhr 4.15E-03 1.02 $0.10 kWhr $0.00

Exp. Miscellaneous 0.1 Labour hour 4.15E-03 1.02 $10.00 Labour hour $0.00

M&E Machinery & equipment 0.039126 Hour 4.15E-03 1.02 $0.25 Hour $0.00

Inv. Buildings 194040 Sq. ft (bldg) 4.15E-03 6.95E-06 $4.00 Sq. ft (bldg) $0.02

Inv. Land 162 Hectare 4.15E-03 8.53E-08 $5000.00 Hectare $0.00

Inv. Parent livestock 38 808.00 Parent 4.15E-03 1.75E-05 $25.00 Parent $0.07

Subtotal: Parent duck breeders $0.22

Grower production Takeoff: 1.000 Growers / 1.857 kg

Mat. Feed additives 0.8 kg 0.5384 1.03 $0.60 kg $0.27

Mat. Main finisher feed 2.8 kg 0.5384 1.03 $0.40 kg $0.62

Mat. Main grower feed 4.2 kg 0.5384 1.03 $0.43 kg $0.99

Mat. Main starter feed 1.4 0.5384 1.03 $0.45 $0.35

Mat. Veterinary & medicinal 4.00E-05 kg 0.5384 1.03 $5 000.00 kg $0.11

Lab. Cleaning labour 2 min 0.5384 1.03 $10.00 Hour (38.0 workers) $0.18

Lab. Feeding labour 2 min 0.5384 1.03 $15.00 Hour (38.0 workers) $0.28

Lab. Breeding, selection & management 2 min 0.5384 1.03 $20.00 Hour (38.0 workers) $0.37

Exp. Electricity 0.3 kWhr 0.5384 1.03 $0.10 kWhr $0.02

Exp. Miscellaneous 0.05 Labour hour 0.5384 1.03 $10.00 Labour hour $0.28

M&E Machinery & equipment 1.71E-04 Hour 0.5384 1.02 $1.19 Hour $0.00

Inv. Buildings 750 000 Sq. ft (bldg) 0.5384 1.39E-08 $4.00 Sq. ft (bldg) $0.02

Inv. Grower stock 375 000 Growers 0.5384 2.25E-09 $3.50 Growers $0.00

Inv. Land for growers 10 Hectare 0.5384 2.25E-09 $5 000.00 Hectare $0.00

Subtotal: Grower production $3.49

80

1st-stage processing Takeoff: 1.000 kg cold dressed weight carcass / 1.

Mat. Additives 0.01 kg 1 1.03 $5.00 kg $0.05

Mat. Packaging 0.003 kg 1 1.03 $80.00 kg $0.25

Lab. Byproducts 0.15 min 1 1.03 $15.00 Hour (3.0 workers) $0.04

Lab. Management & admin 0.04 min 1 1.03 $20.00 Hour (1.0 workers) $0.01

Lab. Slaughter, feather removal & waxing labour 0.15 min 1 1.03 $15.00 Hour (3.0 workers) $0.04

Exp. Advertising & promotion 1 kg 1 1.03 $0.25 kg $0.26

Exp. Disappearances 0.02 kg 1 1.03 $1.45 kg $0.03

Exp. Electricity 1.00E-04 kWhr 1 1.156 $0.10 kWhr $0.00

Exp. Miscellaneous costs 1.00E-04 Labour hour 1 1.03 $1.00 Labour hour $0.00

M&E Machinery & equipment 4.28E-04 Hour 1 1.02 $500.00 Hour $0.22

Inv. Buildings & structures 8 000.00 Sq. ft (bldg) 1 2.25E-08 $10.00 Sq. ft (bldg) $0.00

Inv. Land 1 Hectare 1 2.42E-09 $20 000 Hectare $0.00

Subtotal: 1st-stage processing $0.90

Boning, separation & preparing select cuts Takeoff: 1.000 boned meat / 2.000 kg

Mat. Gourmet additives 0.001 kg 0.5 1.156 $50.00 kg $0.03

Lab. Boning room labour 0.016835 min 0.5 1.061 $20.00 Hour (1.0 workers) $0.00

Lab. Boning room packing 0.016835 min 0.5 1.061 $15.00 Hour (1.0 workers) $0.00

Lab. Boning & separation labour 0.016835 min 0.5 3.184 $12.00 Hour (3.0 workers) $0.01

Exp. Advertising & promotion 0.05 kg 0.5 1.156 $0.10 kg $0.00

M&E Boning room equipment & machine 0.016835 min 0.5 1.167 $5.00 Hour $0.00

Inv. Boning & separation building 1 000.00 Sq. ft (bldg) 0.5 4.09E-10 $10.00 Sq. ft (bldg) $0.00

Subtotal: Boning, separation & preparing select cuts $0.04

81

Distribution & marketing centre Takeoff: 1.000 freighted kg / 1.000 kg

Mat. Packaging 0.004 kg 1 1.156 $80.00 kg $0.37

Lab. Marketing manager 0.01 min 1 1.072 $20.00 Hour (1.0 workers) $0.00

Lab. Packers 0.1 min 1 1.072 $15.00 Hour (3.0 workers) $0.03

Exp. Administration 1.00E-04 Labour hour 1 1.156 $0.10 Labour hour $0.00

Exp. Advertising & promotion 1 kg 1 1.156 $1.00 kg $1.16

M&E Delivery vehicles 0.01 min 1 1.179 $25.00 Hour $0.00

M&E Office & other machinery 0.01 min 1 1.179 $1.00 Hour $0.00

Inv. Office buildings 400 Sq. ft (bldg) 1 6.49E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Distribution & marketing centre $1.56

Co-product recovery Takeoff: 1.000 co-product recovered / 2.000 kg

Mat. Duck gizzards 0.056 0.5 0.00E+00 $0.00 $0.00

Mat. Duck liver 0.055 kg 0.5 0.00E+00 $0.00 kg $0.00

Mat. Ducks heart 0 kg 0.5 0.00E+00 $0.00 kg $0.00

Mat. Necks, feet 0.1 0.5 0.00E+00 $0.00 $0.00

Lab. Co-product labour 250 day 1 4.54E-07 $15.00 Hour (2.0 workers) $0.03

Subtotal: Co-product recovery $0.03

Retail supermarket Takeoff: 1.000 wrapped duck meat / 1.000 kg

Mat. Disappearances 0.02 1 1.02 $5.00 $0.10

Lab. Supermarket labour 1 min 1 1.02 $17.50 Hour (20.0 workers) $0.30

Exp. Advertising & promotion 1 kg 1 1.02 $0.35 kg $0.36

Exp. Other operating 1 kg 1 1.02 $1.00 kg $1.02

Exp. Rent 1 kg 1 1.02 $0.21 kg $0.21

Exp. Supermarket profit 1 kg 1 1.02 $0.17 kg $0.17

M&E Machinery & equipment 0.016667 Hour 1 1.02 $0.25 Hour $0.00

Subtotal: Retail supermarket $2.17

82

Restaurant service Takeoff: 1.000 meals / 1.000 kg

Mat. Vegetables, salads & other non-meat materials 0.4 kg 1 1.144 $5.00 kg $2.29

Lab. Chef service 0.076923 min 1 10.61 $15.00 Hour (20.0 workers) $0.20

Lab. Restaurant manager 0.076923 min 1 106.1 $20.00 Hour (200.0 workers) $2.72

Lab. Waiter service 0.076923 min 1 106.1 $12.00 Hour (200.0 workers) $1.63

Exp. Advertising & promotion 0.05 kg 1 1.144 $0.50 kg $0.03

Exp. Rent 1 kg 1 1.144 $2.00 kg $2.29

M&E Restaurant equipment 0.076923 min 1 1.167 $5.00 Hour $0.01

Subtotal: Restaurant service $9.17

Burden included @ 2.0% $0.35

Cost $17.62

SG&A, 5.00% $0.95

Sales commission, 1.00% $0.19

Income tax, 30.00% $0.08

Net profit, 1.00% $0.19

Price $19.03

83

Ostrich meat for restaurant meal

a) Product resource use and allocation of value added

Product price: $21.66 per kg

Sales commission: $0.43 per kg

Net price: $21.22 per kg

Material cost: $6.74 per kg

Labour cost: $5.59 per kg

Expenditure cost: $5.66 per kg

Tooling cost (+ interest): $0.00 per kg

M&E cost (+ interest): $0.93 per kg

Investment cost (+ interest): $0.34 per kg

Product cost (+ interest): $19.24 per kg

Cost without markups (for info): $18.64 per kg

Gross profit: $1.98 per kg

SG&A: $0.43 per kg

Operating profit (less interest): $1.55 per kg

Taxes ( 30.0%): $0.46 per kg

Net profit (after tax): $1.08 per kg

Contribution (to fixed): $7.67 per kg

Total profit (after tax): $2 475 559

Cash flow (approximate): $3 343 621 Includes investment

Economic profit: $2 371 392 (NOPAT—int. exp)

Total investment used: $2 893 539 (Tooling, M&E, inv)

Operating profit rate: 7.14 %

Profit rate (after tax): 5 %

ROI: 85.55 %

Production volume: 2 286 316 kg

84

b) Product activities and associated resource use costs

Elite ostrich breeding

Item Unit quantity Units Takeoff Markup Unit cost Cost unit Cost

Takeoff: 1.000 elites / 762105.00 kg

Mat. Feed additives 70 kg 1.31E-06 1.03 $0.60 kg $0.00

Mat. Feed costs 700 kg 1.31E-06 1.03 $0.40 kg $0.00

Mat. Veterinary & medicinal 4.90E-04 kg 1.31E-06 1.03 $5 000.00 kg $0.00

Lab. Breeding, selection & management 1 Hour 1.31E-06 1.03 $20.00 Hour (1.0 workers) $0.00

Lab. Cleaning labour 0.83 Hour 1.31E-06 1.03 $8.00 Hour (1.0 workers) $0.00

Lab. Feeding labour 0.83 Hour 1.31E-06 1.03 $15.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 0.25 Replacement 1.31E-06 1.03 $1 200.00 Replacement $0.00

Exp. Electricity 0.3 kWhr 1.31E-06 1.03 $0.10 kWhr $0.00

Exp. Miscellaneous 1.2 Labour hour 1.31E-06 1.03 $10.00 Labour hour $0.00

M&E Machinery & equipment 173.333 Hour 1.31E-06 1.02 $0.13 Hour $0.00

Inv. Buildings & structures 12 Sq. ft (bldg) 1.31E-06 1.70E-02 $4.00 Sq. ft (bldg) $0.00

Inv. Elite livestock 3 Ostrich breeder 1.31E-06 0.17 $1 200.00 Ostrich breeder $0.00

Inv. Land 1.5 Hectare 1.31E-06 3.78E-03 $5 000.00 Hectare $0.00

Subtotal: Elite ostrich breeding $0.00

85

Grandparent ostrich breeding Takeoff: 1.000 grandparent breeders / 42 339.00 kg

Mat. Feed additives 70 kg 2.36E-05 3.4 $0.60 kg $0.00

Mat. Feed 700 kg 2.36E-05 3.4 $0.40 kg $0.02

Mat. Veterinary & medicinal 4.90E-04 kg 2.36E-05 3.4 $5 000.00 kg $0.00

Lab. Breeding, selection & management 0.5 Hour 2.36E-05 3.4 $20.00 Hour (1.0 workers) $0.00

Lab. Feeding labour 24 min 2.36E-05 3.4 $15.00 Hour (1.0 workers) $0.00

Lab. Cleaning labour 24 min 2.36E-05 3.4 $10.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 1 2.36E-05 0.00E+00 $0.00 $0.00

Exp. Electricity 0.3 kWhr 2.36E-05 3.4 $0.10 kWhr $0.00

Exp. Miscellaneous 1.2 Labour hour 2.36E-05 3.4 $10.00 Labour hour $0.00

M&E Machinery & equipment 115.555 Hour 2.36E-05 1.02 $0.25 Hour $0.00

Inv. Buildings 216 Sq. ft (bldg) 2.36E-05 3.25E-04 $4.00 Sq. ft (bldg) $0.00

Inv. Grandparent livestock 54 Grandparent 2.36E-05 9.44E-03 $600.00 Grandparent $0.01

Inv. Land 27 Hectares 2.36E-05 2.10E-04 $5 000.00 Hectares $0.00

Subtotal: Grandparent ostrich breeding $0.04

Parent ostrich breeders Takeoff: 1.000 parent breeders / 2 352.00 kg

Mat. Feed additives 70 kg 4.25E-04 1.02 $0.60 kg $0.02

Mat. Main feed costs 700 kg 4.25E-04 1.02 $0.40 kg $0.12

Mat. Veterinary & medicinal 4.90E-04 kg 4.25E-04 1.02 $5 000.00 kg $0.00

Lab. Breeding, selection & management 24 min 4.25E-04 1.02 $20.00 Hour (1.0 workers) $0.00

Lab. Cleaning labour 24 min 4.25E-04 1.02 $10.00 Hour (1.0 workers) $0.00

Lab. Feeding labour 24 min 4.25E-04 1.02 $15.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 1 4.25E-04 0.00E+00 $0.00 $0.00

Exp. Electricity 0.3 kWhr 4.25E-04 1.02 $0.10 kWhr $0.00

Exp. Miscellaneous 1.2 Labour hour 4.25E-04 1.02 $10.00 Labour hour $0.01

M&E Machinery & equipment 0.78107 Hour 4.25E-04 1.02 $0.25 Hour $0.00

Inv. Buildings 7 776.00 Sq. ft (bldg) 4.25E-04 1.39E-04 $4.00 Sq. ft (bldg) $0.00

Inv. Land 486 Hectare 4.25E-04 1.70E-06 $5 000.00 Hectare $0.00

Inv. Parent livestock 1 944.00 Parent 4.25E-04 3.50E-04 $600.00 Parent $0.17

Subtotal: Parent ostrich breeders $0.33

86

Ostrich grower production Takeoff: 1.000 growers / 60.000 kg

Mat. Feed additives 0.8 kg 1.67E-02 1.03 $0.60 kg $0.01

Mat. Finisher feed 47.6 1.67E-02 1.156 $0.50 $0.46

Mat. Main finisher feed 2.8 kg 1.67E-02 1.03 $0.40 kg $0.02

Mat. Main grower feed 246 kg 1.67E-02 1.03 $0.43 kg $1.80

Mat. Main starter feed 165 kg 1.67E-02 1.03 $0.45 kg $1.28

Mat. Veterinary & medicinal 4.00E-04 kg 1.67E-02 1.03 $5 000.00 kg $0.03

Lab. Cleaning labour 24 min 1.67E-02 1.03 $10.00 Hour (7.0 workers) $0.07

Lab. Feeding labour 24 min 1.67E-02 1.03 $15.00 Hour (7.0 workers) $0.10

Lab. Breeding, selection & management 24 min 1.67E-02 1.03 $20.00 Hour (7.0 workers) $0.14

Exp. Electricity 0.3 kWhr 1.67E-02 1.03 $0.10 kWhr $0.00

Exp. Miscellaneous 0.6 Labour hour 1.67E-02 1.03 $10.00 Labour hour $0.10

M&E Machinery & equipment 0.083071 Hour 1.67E-02 1.02 $1.19 Hour $0.00

Inv. Buildings 320000 Sq. ft (bldg) 1.67E-02 3.54E-06 $4.00 Sq. ft (bldg) $0.08

Inv. Grower stock 39 944.00 Growers 1.67E-02 1.49E-07 $42.00 Growers $0.00

Inv. Land for growers 33 Hectare 1.67E-02 2.97E-07 $5 000.00 Hectare $0.00

Subtotal: Ostrich grower production $4.09

87

1st-stage processing Takeoff: 1.000 kg cold dressed weight ducks / 1.00

Mat. Additives 0.01 kg 1 1.03 $5.00 kg $0.05

Mat. Co-products 0.047619 kg 1 0.00E+00 $0.00 kg $0.00

Mat. Other co-products 0.375 kg 1 0.00E+00 $0.00 kg $0.00

Mat. Packaging 0.001 kg 1 1.03 $80.00 kg $0.08

Lab. Byproducts 0.01 min 1 10.3 $15.00 Hour (10.0 workers) $0.03

Lab. Management & admin 0.01 min 1 1.03 $20.00 Hour (1.0 workers) $0.00

Lab. Slaughter, feather removal & waxing labour 0.01 min 1 37.09 $15.00 Hour (36.0 workers) $0.09

Exp. Advertising & promotion 1 kg 1 1.03 $0.25 kg $0.26

Exp. Disappearances 0.001 kg 1 1.03 $1.45 kg $0.00

Exp. Electricity 0.0012 kWhr 1 1.156 $0.10 kWhr $0.00

Exp. Miscellaneous costs 0.0012 Labour hour 1 1.03 $1.00 Labour hour $0.00

M&E Machinery & equipment 0.00175 Hour 1 1.02 $500.00 Hour $0.89

Inv. Buildings & structures 128000 Sq. ft (bldg) 1 5.56E-08 $10.00 Sq. ft (bldg) $0.07

Inv. Land 1 Hectare 1 4.96E-09 $20 000 Hectare $0.00

Subtotal: 1st-stage processing $1.48

Boning, separation & preparing select cuts Takeoff: 1.000 kg / 1.000 kg

Mat. Gourmet additives 0.001 kg 1 1.156 $50.00 kg $0.06

Lab. Boning room labour 0.16835 min 1 1.061 $20.00 Hour (2.0 workers) $0.06

Lab. Boning room packing 0.16835 min 1 1.061 $15.00 Hour (2.0 workers) $0.04

Lab. Boning & separation labour 0.16835 min 1 3.184 $12.00 Hour (6.0 workers) $0.11

Exp. Advertising & promotion 0.05 kg 1 1.156 $0.10 kg $0.01

M&E Boning room equipment & machine 0.16835 min 1 1.167 $5.00 Hour $0.02

Inv. Boning & separation building 1 000.00 Sq. ft (bldg) 1 4.09E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Boning, separation & preparing select cuts $0.29

88

Distribution & marketing centre Takeoff: 1.000 kg / 1.000 kg

Mat. Packaging 0.004 kg 1 1.156 $80.00 kg $0.37

Lab. Marketing manager 0.01 min 1 1.072 $20.00 Hour (1.0 workers) $0.00

Lab. Packers 0.1 min 1 1.072 $15.00 Hour (1.0 workers) $0.03

Exp. Administration 1.00E-04 Labour hour 1 1.156 $0.10 Labour hour $0.00

Exp. Advertising & promotion 1 kg 1 1.156 $1.00 kg $1.16

M&E Delivery vehicles 0.01 min 1 1.179 $25.00 Hour $0.00

M&E Office & other machinery 0.01 min 1 1.179 $1.00 Hour $0.00

Inv. Office buildings 400 Sq. ft (bldg) 1 6.49E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Distribution & marketing centre $1.56

Retail supermarket Takeoff: 1.000 kg / 1.000 kg

Mat. Disappearances 0.02 1 1.03 $5.00 $0.10

Lab. Supermarket labour 1 min 1 1.03 $17.50 Hour (10.0 workers) $0.30

Exp. Advertising & promotion 1 kg 1 1.03 $0.35 kg $0.36

Exp. Other operating 1 kg 1 1.03 $1.00 kg $1.03

Exp. Rent 1 kg 1 1.03 $0.21 kg $0.22

Exp. Supermarket profit 1 kg 1 1.03 $0.17 kg $0.18

M&E Machinery & equipment 0.016835 Hour 1 1.02 $0.25 Hour $0.00

Subtotal: Retail supermarket $2.19

89

Restaurant service Takeoff: 1.000 kg / 1.000 kg

Mat. Vegetables, salads & other non-meat materials 0.4 kg 1 1.156 $5.00 kg $2.31

Lab. Chef service 0.076923 min 1 10.72 $15.00 Hour (10.0 workers) $0.21

Lab. Restaurant manager 0.076923 min 1 107.2 $20.00 Hour (100.0 workers) $2.75

Lab. Waiter service 0.076923 min 1 107.2 $12.00 Hour (100.0 workers) $1.65

Exp. Advertising & promotion 0.05 kg 1 1.156 $0.50 kg $0.03

Exp. Rent 1 kg 1 1.156 $2.00 kg $2.31

M&E Restaurant equipment 0.076923 min 1 1.179 $5.00 Hour $0.01

Subtotal: Restaurant service $9.26

Burden included @ 2.0% $0.38

Cost $19.24

SG&A, 2.00% $0.43

Sales commission, 2.00% $0.43

Income tax, 30.00% $0.46

Net profit, 5.00% $1.08

Price $21.66

90

Crocodile meat for restaurant meal

a) Product resource use and allocation of value added

Product price: $29.67 per kg

Sales commission: $0.59 per kg

Net price: $29.08 per kg

Material cost: $6.75 per kg

Labour cost: $9.80 per kg

Expenditure cost: $6.03 per kg

Tooling cost (+ interest): $0.00 per kg

M&E cost (+ interest): $2.10 per kg

Investment cost (+ interest): $1.69 per kg

Product cost (+ interest): $26.37 per kg

Cost without mark-ups (for info): $25.63 per kg

Gross profit: $2.71 per kg

SG&A: $0.59 per kg

Operating profit (less interest): $2.12 per kg

Taxes ( 30.0%): $0.64 per kg

Net profit (after tax): $1.48 per kg

Contribution (to fixed): $8.82 per kg

Total profit (after tax): $77 041

Cash flow (approximate): $136 068 Includes investment

Economic profit: $69 958.00 (NOPAT — int. exp)

Total investment used: $196 755 (Tooling, M&E, inv)

Operating profit rate: 7.14 %

Profit rate (after tax): 5 %

ROI: 39.16 %

Production volume: 51 928 kg

91

b) Product activities and associated resource use costs

Item Unit quantity Units Takeoff Markup Unit cost Cost unit Cost

Elite crocodile breeding Takeoff: 1.000 elites / 12 982.00 kg

Mat. Feed additives 10.5 kg 7.70E-05 1.03 $0.35 kg $0.00

Mat. Feed costs 156 kg 7.70E-05 1.03 $0.25 kg $0.00

Mat. Veterinary & medicinal 4.00E-04 kg 7.70E-05 1.03 $5 000.00 kg $0.00

Lab. Breeding & selection & management 1 Hour 7.70E-05 1.03 $20.00 Hour (1.0 workers) $0.00

Lab. Cleaning labour 0.83 Hour 7.70E-05 1.03 $8.00 Hour (1.0 workers) $0.00

Lab. Feeding labour 0.83 Hour 7.70E-05 1.03 $15.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 0.1 Replacement 7.70E-05 1.03 $1 200.00 Replacement $0.01

Exp. Electricity 0.1 kWhr 7.70E-05 1.03 $0.10 kWhr $0.00

Exp. Miscellaneous 1.2 Labour hour 7.70E-05 1.03 $10.00 Labour hour $0.00

M&E Machinery & equipment 130 Hour 7.70E-05 1.02 $0.13 Hour $0.00

Inv. Buildings & structures 40 Sq. ft (bldg) 7.70E-05 1.28E-02 $4.00 Sq. ft (bldg) $0.00

Inv. Elite livestock 4 Crocodile breeders 7.70E-05 1.28E-01 $1 200.00 Crocodile breeders $0.05

Inv. Land 0.2 Hectare 7.70E-05 2.83E-03 $500.00 Hectare $0.00

Subtotal: Elite crocodile breeding $0.07

Grandparent crocodile breeding Takeoff: 1.000 grandparent breeders / 3 246.00 kg

Mat. Feed additives 10.5 kg 3.08E-04 3.4 $0.35 kg $0.00

Mat. Feed 156 kg 3.08E-04 3.4 $0.25 kg $0.04

Mat. Veterinary & medicinal 4.00E-04 kg 3.08E-04 3.4 $5 000.00 kg $0.00

Lab. Breeding & selection & management 0.5 Hour 3.08E-04 3.4 $20.00 Hour (1.0 workers) $0.01

Lab. Feeding labour 0.83 Hour 3.08E-04 3.4 $15.00 Hour (1.0 workers) $0.01

Lab. Cleaning labour 0.83 Hour 3.08E-04 3.4 $10.00 Hour (1.0 workers) $0.01

Exp. Breeder replacement 0.0625 3.08E-04 0.00E+00 $0.00 $0.00

Exp. Electricity 0.1 kWhr 3.08E-04 3.4 $0.10 kWhr $0.00

Exp. Miscellaneous 1.2 Labour hour 3.08E-04 3.4 $10.00 Labour hour $0.01

M&E Machinery & equipment 250.039 Hour 3.08E-04 1.02 $0.25 Hour $0.02

Inv. Buildings 160.00 Sq. ft (bldg) 3.08E-04 1.10E-03 $4.00 Sq. ft (bldg) $0.00

Inv. Grandparent livestock 16 Grandparent 3.08E-04 3.19E-02 $800.00 Grandparent $0.13

Inv. Land 0.8 Hectares 3.08E-04 7.08E-04 $500.00 Hectares $0.00

Subtotal: Grandparent crocodile breeding $0.24

92

Parent crocodile breeders Takeoff: 1.000 parent breeders / 324.000 kg

Mat. Feed additives 15.6 kg 3.09E-03 1.02 $0.35 kg $0.02

Mat. Main feed costs 156 kg 3.09E-03 1.02 $0.25 kg $0.12

Mat. Veterinary & medicinal 4.00E-04 kg 3.09E-03 1.02 $5 000.00 kg $0.01

Lab. Breeding & selection & management 24 min 3.09E-03 1.02 $20.00 Hour (1.0 workers) $0.03

Lab. Cleaning labour 24 min 3.09E-03 1.02 $10.00 Hour (1.0 workers) $0.01

Lab. Feeding labour 24 min 3.09E-03 1.02 $15.00 Hour (1.0 workers) $0.02

Exp. Breeder replacement 0.333333 3.09E-03 0.00E+00 $0.00 $0.00

Exp. Electricity 0.3 kWhr 3.09E-03 1.02 $0.10 kWhr $0.00

Exp. Miscellaneous 1.2 Labour hour 3.09E-03 1.02 $10.00 Labour hour $0.04

M&E Machinery & equipment 4.745 Hour 3.09E-03 1.02 $0.25 Hour $0.00

Inv. Buildings 3 200.00 Sq. ft (bldg) 3.09E-03 8.41E-04 $4.00 Sq. ft (bldg) $0.03

Inv. Land 1 Hectare 3.09E-03 1.03E-05 $5 000.00 Hectare $0.00

Inv. Parent livestock 320.00 Parent 3.09E-03 2.12E-03 $600.00 Parent $1.26

Subtotal: Parent crocodile breeders $1.54

Crocodile grower production Takeoff: 1.000 growers / 14.700 kg

Mat. Feed additives 10.56 kg 6.80E-02 1.03 $0.35 kg $0.26

Mat. Finisher feed 9 kg 6.80E-02 1.156 $0.25 kg $0.18

Mat. Main finisher feed 156 kg 6.80E-02 1.03 $0.25 kg $2.73

Mat. Main starter feed 15 kg 6.80E-02 1.03 $0.25 kg $0.26

Mat. Veterinary & medicinal 4.00E-04 kg 6.80E-02 1.03 $5 000.00 kg $0.14

Lab. Cleaning labour 24 min 6.80E-02 1.03 $10.00 Hour (1.0 workers) $0.28

Lab. Feeding labour 24 min 6.80E-02 1.03 $15.00 Hour (1.0 workers) $0.42

Lab. Breeding & selection & management 24 min 6.80E-02 1.03 $20.00 Hour (1.0 workers) $0.56

Exp. Electricity 0.1 kWhr 6.80E-02 1.03 $0.10 kWhr $0.00

Exp. Miscellaneous 0.6 Labour hour 6.80E-02 1.03 $10.00 Labour hour $0.42

M&E Machinery & equipment 0.920447 Hour 6.80E-02 1.02 $1.19 Hour $0.08

Inv. Buildings 7 230 Sq. ft (bldg) 6.80E-02 3.82E-05 $4.00 Sq. ft (bldg) $0.08

Inv. Grower stock 3 615 Growers 6.80E-02 1.60E-06 $100.00 Growers $0.04

Inv. Land for growers 2 Hectare 6.80E-02 3.21E-06 $500.00 Hectare $0.00

Subtotal: Crocodile grower production $5.45

93

1st-stage processing Takeoff: 1.000 kg cold dressed weight crocodiles / 1.00

Mat. Additives 0.01 kg 1 1.03 $5.00 kg $0.05

Mat. Co-products 0.047619 kg 1 0.00E+00 $0.00 kg $0.00

Mat. Other co-products 0.375 kg 1 0.00E+00 $0.00 kg $0.00

Mat. Packaging 0.001 kg 1 1.03 $80.00 kg $0.08

Lab. By-products 0.1 min 1 2.061 $15.00 Hour (2.0 workers) $0.05

Lab. Management & admin 2 min 1 1.03 $20.00 Hour (1.0 workers) $0.69

Lab. Slaughter, feather removal & waxing labour 1 min 1 9.273 $15.00 Hour (9.0 workers) $2.32

Exp. Advertising & promotion 1.00E+00 kg 1 1.03 $0.25 kg $0.26

Exp. Disappearances 1.00E-03 kg 1 1.03 $1.45 kg $0.00

Exp. Electricity 0.0012 kWhr 1 1.156 $0.10 kWhr $0.00

Exp. Miscellaneous costs 0.00 Labour hour 1 1.03E+00 $1.00 Labour hour $0.00

M&E Machinery & equipment 0.07703 Hour 1 1.02E+00 $25 Hour $1.96

Inv. Buildings & structures 32 000.00 Sq. ft (bldg) 1 3.37E-07 $10.00 Sq. ft (bldg) $0.11

Inv. Land 1 Hectare 1 2.18E-07 $20 000 Hectare $0.00

Subtotal: 1st-stage processing $5.53

Boning, separation & preparing select cuts Takeoff: 1.000 kg / 1.000 kg

Mat. Gourmet additives 0.001 kg 1 1.156 $50.00 kg $0.06

Lab. Boning room labour 0.336703 min 1 1.061 $20.00 Hour (1.0 workers) $0.12

Lab. Boning room packing 0.505055 min 1 2.122 $15.00 Hour (2.0 workers) $0.27

Lab. Boning and separation labour 0.168352 min 1 2.122 $12.00 Hour (2.0 workers) $0.07

Exp. Advertising & promotion 0.05 kg 1 1.16E+00 $0.10 kg $0.01

M&E Boning room equipment & machine 0.168352 min 1 1.167 $5.00 Hour $0.02

Inv. Boning & separation building 1 000.00 Sq. ft (bldg) 1 4.09E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Boning, separation & preparing select cuts $0.54

94

Distribution & marketing centre Takeoff: 1.000 kg / 1.000 kg

Mat. Packaging 0.004 kg 1 1.156 $80.00 kg $0.37

Lab. Marketing manager 1.00E-02 min 1 1.072 $20.00 Hour (1.0 workers) $0.00

Lab. Packers 0.1 min 1 1.072 $15.00 Hour (1.0 workers) $0.03

Exp. Administration 1.00E-04 Labour hour 1 1.156 $0.10 Labour hour $0.00

Exp. Advertising & promotion 1 kg 1 1.156 $1.00 kg $1.16

M&E Delivery vehicles 0.01 min 1 1.18E+00 $25.00 Hour $0.00

M&E Office & other machinery 0.01 min 1 1.179 $1.00 Hour $0.00

Inv. Office buildings 400 Sq. ft (bldg) 1 6.49E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Distribution & marketing centre $1.56

Retail supermarket Takeoff: 1.000 kg / 1.000 kg

Mat. Disappearances 0.02 1 1.03 $5.00 $0.10

Lab. Supermarket labour 1 min 1 1.03 $17.50 Hour (1.0 workers) $0.30

Exp. Advertising & promotion 1 kg 1 1.03 $0.35 kg $0.36

Exp. Other operating 1 kg 1 1.03 $1.00 kg $1.03

Exp. Rent 1 kg 1 1.03 $0.21 kg $0.22

Exp. Supermarket profit 1 kg 1 1.03 $0.17 kg $0.18

M&E Machinery & equipment 0.016835 Hour 1 1.02 $0.25 Hour $0.00

Subtotal: Retail supermarket $2.19

95

Restaurant service Takeoff: 1.000 kg / 1.000 kg

Mat. Vegetables, salads & other non-meat materials 0.4 kg 1 1.156 $5.00 kg $2.31

Lab. Chef service 0.076923 min 1 10.72 $15.00 Hour (10.0 workers) $0.21

Lab. Restaurant manager 0.076923 min 1 107.2 $20.00 Hour (100.0 workers) $2.75

Lab. Waiter service 0.076923 min 1 107.2 $12.00 Hour (100.0 workers) $1.65

Exp. Advertising & promotion 0.05 kg 1 1.156 $0.50 kg $0.03

Exp. Rent 1 kg 1 1.156 $2.00 kg $2.31

M&E Restaurant equipment 0.076923 min 1 1.179 $5.00 Hour $0.01

Subtotal: Restaurant service $9.26

Burden included @ 2.0% $0.52

Cost $26.37

SG&A, 2.00% $0.59

Sales commission, 2.00% $0.59

Income tax, 30.00% $0.64

Net profit, 5.00% $1.48

Price $29.67

Income tax, 30.00% $0.12

Net profit, 1.00% $0.29

Price $28.66

96

Yabby tail meat for restaurant meal

a) Product resource use and allocation of value added

Product price: $28.66 per kg

Sales commission: $0.29 per kg

Net price: $28.37 per kg

Material cost: $4.36 per kg

Labour cost: $11.12 per kg

Expenditure cost: $7.38 per kg

Tooling cost (+ interest): $0.00 per kg

M&E cost (+ interest): $0.98 per kg

Investment cost (+ interest): $2.71 per kg

Product cost (+ interest): $26.53 per kg

Cost without markups (for info): $25.75 per kg

Gross profit: $1.84 per kg

SG&A: $1.43 per kg

Operating profit (less interest): $0.41 per kg

Taxes ( 30.0%): $0.12 per kg

Net profit (after tax): $0.29 per kg

Contribution (to fixed): $9.29 per kg

Total profit (after tax): $12 752

Cash flow (approximate): $61 881 Includes investment

Economic profit: $6 856.14 (NOPAT—int. exp)

Total investment used: $163 766 (Tooling, M&E, inv)

Operating profit rate: 1.43 %

Profit rate (after tax): 1 %

ROI: 7.79 %

Production volume: 44 497 kg

97

b) Product activities and associated resource use costs

Item Unit quantity Units Takeoff Markup Unit cost Cost unit Cost

Elite yabby breeding Takeoff: 1.000 elite breeders / 815.000 kg

Mat. Feed additives 0.02 kg 1.23E-03 1.03 $0.60 kg $0.00

Mat. Feed costs 0.1 kg 1.23E-03 1.03 $0.55 kg $0.00

Mat. Veterinary & medicinal 1.00E-06 kg 1.23E-03 1.03 $5 000.00 kg $0.00

Lab. Breeding, selection & management 1.75 min 1.23E-03 1.03 $20.00 Hour (1.0 workers) $0.00

Lab. Cleaning labour 1.75 min 1.23E-03 1.03 $8.00 Hour (1.0 workers) $0.00

Lab. Feeding labour 1.75 min 1.23E-03 1.03 $15.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 0.1 Replacement 1.23E-03 1.03 $10.00 Replacement $0.00

Exp. Electricity 0.02 kWhr 1.23E-03 1.03 $0.10 kWhr $0.00

Exp. Miscellaneous 0.1 Labour hour 1.23E-03 1.03 $10.00 Labour hour $0.00

M&E Machinery & equipment 5.841 Hour 1.23E-03 1.02 $0.13 Hour $0.00

Inv. Buildings & structures 500 Sq. ft (bldg) 1.23E-03 1.98E-02 $1.00 Sq. ft (bldg) $0.01

Inv. Elite livestock 101 Yabby breeder 1.23E-03 9.34E-03 $10.00 Yabby breeder $0.01

Inv. Land 0.04 Hectares 1.23E-03 1.98E-02 $2 000.00 Hectares $0.00

Subtotal: Elite yabby breeding $0.03

Grandparent yabby breeding Takeoff: 1.000 grandparent breeders / 203.000 kg

Mat. Feed additives 0.02 kg 4.93E-03 3.4 $0.60 kg $0.00

Mat. Feed 0.1 kg 4.93E-03 3.4 $0.55 kg $0.00

Mat. Veterinary & medicinal 1.00E-06 kg 4.93E-03 3.4 $5 000.00 kg $0.00

Lab. Breeding, selection & management 1.5 min 4.93E-03 3.4 $20.00 Hour (1.0 workers) $0.01

Lab. Feeding labour 1.5 min 4.93E-03 3.4 $15.00 Hour (1.0 workers) $0.01

Lab. Cleaning labour 1.5 min 4.93E-03 3.4 $10.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 0.25 4.93E-03 0.00E+00 $0.00 $0.00

Exp. Electricity 0.02 kWhr 4.93E-03 3.4 $0.10 kWhr $0.00

Exp. Miscellaneous 0.1 Labour hour 4.93E-03 3.4 $10.00 Labour hour $0.02

M&E Machinery & equipment 1.825 Hour 4.93E-03 1.02 $0.25 Hour $0.00

Inv. Buildings 2 020.00 Sq. ft (bldg) 4.93E-03 2.33E-04 $1.00 Sq. ft (bldg) $0.00

Inv. Grandparent livestock 404 Grandparent 4.93E-03 2.33E-03 $5.00 Grandparent $0.02

Inv. Land 0.16 Hectares 4.93E-03 5.17E-05 $2 000.00 Hectares $0.00

Subtotal: Grandparent yabby breeding $0.06

98

Parent yabby breeders Takeoff: 1.000 parent breeders / 20.000 kg

Mat. Feed additives 0.02 kg 5.00E-02 1.02 $0.60 kg $0.00

Mat. Main feed costs 0.1 kg 5.00E-02 1.02 $0.55 kg $0.00

Mat. Veterinary & medicinal 1.00E-06 kg 5.00E-02 1.02 $5 000.00 kg $0.00

Lab. Breeding, selection & management 1.25 min 5.00E-02 1.02 $20.00 Hour (1.0 workers) $0.02

Lab. Cleaning labour 1.25 min 5.00E-02 1.02 $10.00 Hour (1.0 workers) $0.01

Lab. Feeding labour 1.25 min 5.00E-02 1.02 $15.00 Hour (1.0 workers) $0.02

Exp. Breeder replacement 0.25 5.00E-02 0.00E+00 $0.00 $0.00

Exp. Electricity 0.01 kWhr 5.00E-02 1.02 $0.10 kWhr $0.00

Exp. Miscellaneous 0.01 Labour hour 5.00E-02 1.02 $10.00 Labour hour $0.01

M&E Machinery & equipment 0.144554 Hour 5.00E-02 1.02 $0.25 Hour $0.00

Inv. Buildings 20 200.00 Sq. ft (bldg) 5.00E-02 2.29E-05 $1.00 Sq. ft (bldg) $0.02

Inv. Land 2 Hectare 5.00E-02 4.10E-06 $2 000.00 Hectare $0.00

Inv. Parent livestock 4 040.00 Parent 5.00E-02 1.53E-04 $2.00 Parent $0.06

Subtotal: Parent yabby breeders $0.14

Grower yabby production Takeoff: 17.000 growers / 1.000 kg

Mat. Feed additives 0.02 kg 17 1.03 $0.60 kg $0.21

Mat. Main finisher feed 0.04 kg 17 1.03 $0.55 kg $0.39

Mat. Main grower feed 0.05 kg 17 1.03 $0.55 kg $0.48

Mat. Main starter feed 0.01 17 1.03 $0.55 $0.10

Mat. Veterinary & medicinal 1.00E-06 kg 17 1.03 $5 000.00 kg $0.09

Lab. Cleaning labour 0.2 min 17 1.03 $10.00 Hour (2.0 workers) $0.58

Lab. Feeding labour 0.5 min 17 1.03 $15.00 Hour (3.0 workers) $2.19

Lab. Breeding, selection & management 1 sec 17 1.03 $20.00 Hour (1.0 workers) $0.10

Exp. Electricity 0.01 kWhr 17 1.03 $0.10 kWhr $0.02

Exp. Miscellaneous 0.01 Labour hour 17 1.03 $10.00 Labour hour $1.75

M&E Machinery & equipment 0.001741 Hour 17 1.02 $1.19 Hour $0.04

Inv. Buildings 1 766 528 Sq. ft (bldg) 17 6.74E-08 $1.00 Sq. ft (bldg) $2.02

Inv. Grower stock 1 766 528 Growers 17 3.75E-09 $0.10 Growers $0.01

Inv. Land for growers 71 Hectare 17 7.49E-09 $2 000.00 Hectare $0.02

Subtotal: Grower yabby production $7.99

99

1st-stage yabby processing Takeoff: 1.000 kg cold dressed weight carcass / 1.

Mat. Additives 0.01 kg 1 1.03 $5.00 kg $0.05

Mat. Packaging 0.003 kg 1 1.03 $80.00 kg $0.25

Lab. Byproducts 0.15 min 1 1.03 $15.00 Hour (1.0 workers) $0.04

Lab. Management & admin 1 min 1 1.03 $20.00 Hour (1.0 workers) $0.34

Lab. Preparing 0.15 min 1 1.03 $15.00 Hour (1.0 workers) $0.04

Exp. Advertising & promotion 1 kg 1 1.03 $0.25 kg $0.26

Exp. Disappearances 0.02 kg 1 1.03 $1.45 kg $0.03

Exp. Electricity 1.00E-04 kWhr 1 1.156 $0.10 kWhr $0.00

Exp. Miscellaneous costs 1.00E-04 Labour hour 1 1.03 $1.00 Labour hour $0.00

M&E Machinery & equipment 0.089894 Hour 1 1.02 $10.00 Hour $0.92

Inv. Buildings & structures 1 120.00 Sq. ft (bldg) 1 3.03E-06 $150.00 Sq. ft (bldg) $0.51

Inv. Land 1 Hectare 1 2.55E-07 $20 000 Hectare $0.01

Subtotal: 1st-stage yabby processing $2.44

Boiled yabby Takeoff: 1.000 boiled / 2.000 kg

Mat. Gourmet additives 0.001 kg 0.5 1.156 $50.00 kg $0.03

Lab. Cooking and separation labour 0.016835 min 0.5 3.184 $12.00 Hour (3.0 workers) $0.01

Lab. Cooking room labour 0.016835 min 0.5 1.061 $20.00 Hour (1.0 workers) $0.00

Lab. Cooking and separation labour 0.016835 min 0.5 1.061 $10.00 Hour (1.0 workers) $0.00

Exp. Advertising & promotion 1 kg 0.5 1.156 $0.10 kg $0.06

M&E Cooking room equipment & machine 0.016835 min 0.5 1.167 $5.00 Hour $0.00

Inv. Cooking & separation Building 1 000.00 Sq. ft (bldg) 0.5 4.09E-10 $10.00 Sq. ft (bldg) $0.00

Subtotal: Boiled yabby $0.10

100

Distribution & marketing centre Takeoff: 1.000 freighted kg / 1.000 kg

Mat. Packaging 0.004 kg 1 1.156 $80.00 kg $0.37

Lab. Marketing manager 0.01 min 1 1.072 $20.00 Hour (1.0 workers) $0.00

Lab. Packers 0.1 min 1 1.072 $15.00 Hour (1.0 workers) $0.03

Exp. Administration 1.00E-04 Labour hour 1 1.156 $0.10 Labour hour $0.00

Exp. Advertising & promotion 1 kg 1 1.156 $1.00 kg $1.16

M&E Delivery vehicles 0.01 min 1 1.179 $25.00 Hour $0.00

M&E Office & other machinery 0.01 min 1 1.179 $1.00 Hour $0.00

Inv. Office buildings 400 Sq. ft (bldg) 1 6.49E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Distribution & marketing centre $1.56

Co-product recovery Takeoff: 1.000 co-product recovered / 2.000 kg

Mat. Shells 0.1 0.5 0.00E+00 $0.00 $0.00

Lab. Co-product labour 250 day 1 4.77E-05 $15.00 Hour (2.0 workers) $2.86

Subtotal: Co-product recovery $2.86

Retail supermarket Takeoff: 1.000 cooked yabbies / 1.000 kg

Mat. Disappearances 0.02 1 1.02 $5.00 $0.10

Lab. Supermarket labour 1 min 1 1.02 $17.50 Hour (1.0 workers) $0.30

Exp. Advertising & promotion 1 kg 1 1.02 $0.35 kg $0.36

Exp. Other operating 1 kg 1 1.02 $1.00 kg $1.02

Exp. Rent 1 kg 1 1.02 $0.21 kg $0.21

Exp. Supermarket profit 1 kg 1 1.02 $0.17 kg $0.17

M&E Machinery & equipment 0.016667 Hour 1 1.02 $0.25 Hour $0.00

Subtotal: Retail supermarket $2.17

101

Restaurant service Takeoff: 1.000 yabby meals / 1.000 kg

Mat. Vegetables, salads & other non-meat materials 0.4 kg 1 1.144 $5.00 kg $2.29

Lab. Chef service 0.076923 min 1 10.61 $15.00 Hour (10.0 workers) $0.20

Lab. Restaurant manager 0.076923 min 1 106.1 $20.00 Hour (100.0 workers) $2.72

Lab. Waiter service 0.076923 min 1 106.1 $12.00 Hour (100.0 workers) $1.63

Exp. Advertising & promotion 0.05 kg 1 1.144 $0.50 kg $0.03

Exp. Rent 1 kg 1 1.144 $2.00 kg $2.29

M&E Restaurant equipment 0.076923 min 1 1.167 $5.00 Hour $0.01

Subtotal: Restaurant service $9.17

Burden included @ 2.0% $0.52

Cost $26.53

SG&A, 5.00% $1.43

Sales commission, 1.00% $0.29

Income tax, 30.00% $0.12

Net profit, 1.00% $0.29

Price $28.66

102

Squab meat for restaurant meal

a) Product resource use and allocation of value added

Product price: $40.11 per kg

Sales commission: $0.40 per kg

Net price: $39.71 per kg

Material cost: $13.17 per kg

Labour cost: $8.13 per kg

Expenditure cost: $6.45 per kg

Tooling cost (+ interest): $0.00 per kg

M&E cost (+ interest): $4.54 per kg

Investment cost (+ interest): $3.41 per kg

Product cost (+ interest): $35.70 per kg

Cost without markups (for info): $34.78 per kg

Gross profit: $4.01 per kg

SG&A: $2.01 per kg

Operating profit (less interest): $2.01 per kg

Taxes ( 30.0%): $0.60 per kg

Net profit (after tax): $1.40 per kg

Contribution (to fixed): $10.58 per kg

Total profit (after tax): $316 921

Cash flow (approximate): $854 963 Includes investment

Economic profit: $252 356 (NOPAT—int. exp)

Total investment used: $1 793 474 (Tooling, M&E, inv)

Operating profit rate: 5 %

Profit rate (after tax): 3.5 %

ROI: 17.67 %

Production volume: 225 751 kg

103

b) Product activities and associated resource use costs

Item Unit quantity Units Takeoff Markup Unit cost Cost unit Cost

Elite squab breeding Takeoff: 1.000 elite breeders / 226.000 kg

Mat. Feed additives 3.7 kg 4.43E-03 1.03 $0.60 kg $0.01

Mat. Feed costs 33 kg 4.43E-03 1.03 $0.40 kg $0.06

Mat. Veterinary & medicinal 3.00E-05 kg 4.43E-03 1.03 $5 000.00 kg $0.00

Lab. Breeding, selection & management 0.5 Hour 4.43E-03 1.03 $20.00 Hour (1.0 workers) $0.05

Lab. Cleaning labour 0.5 Hour 4.43E-03 1.03 $8.00 Hour (1.0 workers) $0.02

Lab. Feeding labour 0.5 Hour 4.43E-03 1.03 $15.00 Hour (1.0 workers) $0.03

Exp. Breeder replacement 0.25 Replacement 4.43E-03 1.03 $10.00 Replacement $0.01

Exp. Electricity 0.2 kWhr 4.43E-03 1.03 $0.10 kWhr $0.00

Exp. Miscellaneous 0.05 Labour hour 4.43E-03 1.03 $10.00 Labour hour $0.00

M&E Machinery & equipment 0.766868 Hour 4.43E-03 1.02 $0.08 Hour $0.00

Inv. Buildings & structures 400 Sq. ft (bldg) 4.43E-03 1.08E-03 $4.00 Sq. ft (bldg) $0.01

Inv. Elite livestock 2 000.00 Squab breeder 4.43E-03 5.11E-04 $10.00 Squab breeder $0.05

Inv. Land 0.1 Hectares 4.43E-03 1.08E-03 $5 000.00 Hectares $0.00

Subtotal: Elite squab breeding $0.24

Grandparent squab breeding Takeoff: 1.000 grandparent breeders / 23.000 kg

Mat. Feed additives 3.7 kg 4.35E-02 3.4 $0.60 kg $0.33

Mat. Feed 33 kg 4.35E-02 3.4 $0.40 kg $1.95

Mat. Veterinary & medicinal 3.00E-05 kg 4.35E-02 3.4 $5 000.00 kg $0.02

Lab. Breeding, selection & management 1 min 4.35E-02 3.4 $20.00 Hour (1.0 workers) $0.05

Lab. Feeding labour 1 min 4.35E-02 3.4 $15.00 Hour (1.0 workers) $0.04

Lab. Cleaning labour 1 min 4.35E-02 3.4 $10.00 Hour (1.0 workers) $0.02

Exp. Breeder replacement 0.28 4.35E-02 0.00E+00 $0.00 $0.00

Exp. Electricity 0.2 kWhr 4.35E-02 3.4 $0.10 kWhr $0.00

Exp. Miscellaneous 0.05 Labour hour 4.35E-02 3.4 $10.00 Labour hour $0.07

M&E Machinery & equipment 0.052979 Hour 4.35E-02 1.02 $0.13 Hour $0.00

Inv. Buildings 20 000.00 Sq. ft (bldg) 4.35E-02 1.79E-06 $4.00 Sq. ft (bldg) $0.01

Inv. Grandparent livestock 10 000.00 Grandparent 4.35E-02 5.20E-05 $10.00 Grandparent $0.23

Inv. Land 1 Hectares 4.35E-02 1.16E-06 $5 000.00 Hectares $0.00

Subtotal: Grandparent squab breeding $2.72

104

Parent squab breeders Takeoff: 1.000 parent breeders / 2.260 kg

Mat. Feed additives 3 kg 0.4425 1.02 $0.60 kg $0.81

Mat. Main feed costs 33 kg 0.4425 1.02 $0.40 kg $5.96

Mat. Veterinary & medicinal 2.00E-05 kg 0.4425 1.02 $5 000.00 kg $0.05

Lab. Breeding, selection & management 1 min 0.4425 1.02 $20.00 Hour (1.0 workers) $0.15

Lab. Cleaning labour 1 min 0.4425 1.02 $10.00 Hour (1.0 workers) $0.08

Lab. Feeding labour 1 min 0.4425 1.02 $15.00 Hour (1.0 workers) $0.11

Exp. Breeder replacement 0.25 0.4425 0.00E+00 $0.00 $0.00

Exp. Electricity 0.2 kWhr 0.4425 1.02 $0.10 kWhr $0.01

Exp. Miscellaneous 0.05 Labour hour 0.4425 1.02 $10.00 Labour hour $0.23

M&E Machinery & equipment 0.007592 Hour 0.4425 1.02 $0.13 Hour $0.00

Inv. Buildings 40 000.00 Sq. ft (bldg) 0.4425 1.35E-06 $4.00 Sq. ft (bldg) $0.10

Inv. Land 10 Hectare 0.4425 1.66E-08 $5 000.00 Hectare $0.00

Inv. Parent livestock 200000 Parent 0.4425 3.40E-06 $10.00 Parent $3.01

Subtotal: Parent squab breeders $10.50

Grower production Takeoff: 1.000 growers / 0.380000 kg

Mat. Feed additives 0.05 kg 2.632 1.03 $0.60 kg $0.08

Mat. Main finisher feed 0.5 kg 2.632 1.03 $0.40 kg $0.54

Mat. Main grower feed 0 kg 2.632 0.00E+00 $0.43 kg $0.00

Mat. Main starter feed 0 2.632 0.00E+00 $0.45 $0.00

Mat. Veterinary & medicinal 2.00E-05 kg 2.632 1.03 $5 000.00 kg $0.27

Lab. Cleaning labour 1 min 2.632 1.03 $10.00 Hour (5.0 workers) $0.45

Lab. Feeding labour 1 min 2.632 1.03 $15.00 Hour (5.0 workers) $0.68

Lab. Breeding, selection & management 1 min 2.632 1.03 $20.00 Hour (5.0 workers) $0.90

Exp. Electricity 0.2 kWhr 2.632 1.03 $0.10 kWhr $0.05

Exp. Miscellaneous 0.02 Labour hour 2.632 1.03 $10.00 Labour hour $0.54

M&E Machinery & equipment 1.71E-04 Hour 2.632 1.02 $0.59 Hour $0.00

Inv. Buildings 0 Sq. ft (bldg) 2.632 0.00E+00 $4.00 Sq. ft (bldg) $0.00

Inv. Grower stock 100000 Growers 2.632 4.77E-09 $3.50 Growers $0.00

Inv. Land for growers 0 Hectare 2.632 0.00E+00 $5 000.00 Hectare $0.00

Subtotal: Grower production $3.53

105

1st-stage processing Takeoff: 1.000 kg cold dressed weight carcass / 1.

Mat. Additives 0.01 kg 1 1.03 $5.00 kg $0.05

Mat. Packaging 0.003 kg 1 1.03 $80.00 kg $0.25

Lab. Byproducts 0.15 min 1 1.03 $15.00 Hour (1.0 workers) $0.04

Lab. Management & admin 0.04 min 1 1.03 $20.00 Hour (1.0 workers) $0.01

Lab. Slaughter, feather removal & waxing labour 0.15 min 1 1.03 $15.00 Hour (1.0 workers) $0.04

Exp. Advertising & promotion 1 kg 1 1.03 $0.25 kg $0.26

Exp. Disappearances 0.02 kg 1 1.03 $1.45 kg $0.03

Exp. Electricity 1.00E-04 kWhr 1 1.156 $0.10 kWhr $0.00

Exp. Miscellaneous costs 1.00E-04 Labour hour 1 1.03 $1.00 Labour hour $0.00

M&E Machinery & equipment 0.008859 Hour 1 1.02 $500.00 Hour $4.52

Inv. Buildings & structures 8 000.00 Sq. ft (bldg) 1 7.76E-08 $10.00 Sq. ft (bldg) $0.01

Inv. Land 1 Hectare 1 5.02E-08 $20 000 Hectare $0.00

Subtotal: 1st-stage processing $5.20

Boning, separation & preparing select cuts Takeoff: 1.000 boned Meat / 2.000 kg

Mat. Gourmet additives 0.001 kg 0.5 1.156 $50.00 kg $0.03

Lab. Boning room labour 0.016835 min 0.5 1.061 $20.00 Hour (1.0 workers) $0.00

Lab. Boning room packing 0.016835 min 0.5 1.061 $15.00 Hour (1.0 workers) $0.00

Lab. Boning & separation labour 0.016835 min 0.5 3.184 $12.00 Hour (3.0 workers) $0.01

Exp. Advertising & promotion 0.05 kg 0.5 1.156 $0.10 kg $0.00

M&E Boning room equipment & machine 0.016835 min 0.5 1.167 $5.00 Hour $0.00

Inv. Boning & separation building 1 000.00 Sq. ft (bldg) 0.5 4.09E-10 $10.00 Sq. ft (bldg) $0.00

Subtotal: Boning, separation & preparing select cuts $0.04

106

Distribution & marketing centre Takeoff: 1.000 freighted kg / 1.000 kg

Mat. Packaging 0.004 kg 1 1.156 $80.00 kg $0.37

Lab. Marketing manager 0.01 min 1 1.072 $20.00 Hour (1.0 workers) $0.00

Lab. Packers 0.1 min 1 1.072 $15.00 Hour (1.0 workers) $0.03

Exp. Administration 1.00E-04 Labour hour 1 1.156 $0.10 Labour hour $0.00

Exp. Advertising & promotion 1 kg 1 1.156 $1.00 kg $1.16

M&E Delivery vehicles 0.01 min 1 1.179 $25.00 Hour $0.00

M&E Office & other machinery 0.01 min 1 1.179 $1.00 Hour $0.00

Inv. Office buildings 400 Sq. ft (bldg) 1 6.49E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Distribution & marketing centre $1.56

Co-product recovery Takeoff: 1.000 co-product recovered / 2.000 kg

Mat. Necks, feet 0.1 0.5 0.00E+00 $0.00 $0.00

Mat. Squab gizzards 0.056 0.5 0.00E+00 $0.00 $0.00

Mat. Squab liver 0.055 kg 0.5 0.00E+00 $0.00 kg $0.00

Mat. Squab heart 0 kg 0.5 0.00E+00 $0.00 kg $0.00

Lab. Co-product labour 250 day 1 9.40E-06 $15.00 Hour (2.0 workers) $0.56

Subtotal: Co-product recovery $0.56

Retail supermarket Takeoff: 1.000 Wrapped squab meat / 1.000 kg

Mat. Disappearances 0.02 1 1.02 $5.00 $0.10

Lab. Supermarket labour 1 min 1 1.02 $17.50 Hour (1.0 workers) $0.30

Exp. Advertising & promotion 1 kg 1 1.02 $0.35 kg $0.36

Exp. Other operating 1 kg 1 1.02 $1.00 kg $1.02

Exp. Rent 1 kg 1 1.02 $0.21 kg $0.21

Exp. Supermarket profit 1 kg 1 1.02 $0.17 kg $0.17

M&E Machinery & equipment 0.016667 Hour 1 1.02 $0.25 Hour $0.00

Subtotal: Retail supermarket $2.17

107

Restaurant service Takeoff: 1.000 Meals / 1.000 kg

Mat. Vegetables, salads & other non-meat materials 0.4 kg 1 1.144 $5.00 kg $2.29

Lab. Chef service 0.076923 min 1 10.61 $15.00 Hour (10.0 workers) $0.20

Lab. Restaurant manager 0.076923 min 1 106.1 $20.00 Hour (100.0 workers) $2.72

Lab. Waiter service 0.076923 min 1 106.1 $12.00 Hour (100.0 workers) $1.63

Exp. Advertising & promotion 0.05 kg 1 1.144 $0.50 kg $0.03

Exp. Rent 1 kg 1 1.144 $2.00 kg $2.29

M&E Restaurant equipment 0.076923 min 1 1.167 $5.00 Hour $0.01

Subtotal: Restaurant service $9.17

Burden included @ 2.0% $0.70

Cost $35.70

SG&A, 5.00% $2.01

Sales commission, 1.00% $0.40

Income tax, 30.00% $0.60

Net profit, 3.50% $1.40

Price $40.11

108

Camel meat for restaurant meal

a) Product resource use and allocation of value added

Product price: $25.93 per kg

Sales commission: $0.52 per kg

Net price: $25.41 per kg

Material cost: $3.28 per kg

Labour cost: $5.89 per kg

Expenditure cost: $5.83 per kg

Tooling cost (+ interest): $0.00 per kg

M&E cost (+ interest): $2.31 per kg

Investment cost (+ interest): $5.73 per kg

Product cost (+ interest): $23.04 per kg

Cost without markups (for info): $22.37 per kg

Gross profit: $2.37 per kg

SG&A: $0.52 per kg

Operating profit (less interest): $1.85 per kg

Taxes (30.0%): $0.56 per kg

Net profit (after tax): $1.30 per kg

Contribution (to fixed): $8.43 per kg

Total profit (after tax): $94 543

Cash flow (approximate): $270 407 Includes investment

Economic profit: $73 439 (NOPAT—int. exp)

Total investment used: $586 215 (Tooling, M&E, inv)

Operating profit rate: 7.14 %

Profit rate (after tax): 5 %

ROI: 16.13 % -

Production volume: 72 926 kg

109

b) Product activities and associated resource use costs

Item Unit quantity Units Takeoff Markup Unit cost Cost unit Cost

Elite camel breeding Takeoff: 1.000 elites / 1 779.00 kg

Mat. Feed additives 1 kg 5.62E-04 1.03 $0.60 kg $0.00

Mat. Feed costs 10 kg 5.62E-04 1.03 $0.30 kg $0.00

Mat. Veterinary & medicinal 4.90E-04 kg 5.62E-04 1.03 $5 000.00 kg $0.00

Lab. Breeding, selection & management 1 Hour 5.62E-04 1.03 $20.00 Hour (1.0 workers) $0.01

Lab. Cleaning labour 0 Hour 5.62E-04 0.00E+00 $8.00 Hour (0.0 workers) $0.00

Lab. Feeding labour 0.01 Hour 5.62E-04 1.03 $15.00 Hour (1.0 workers) $0.00

Exp. Breeder replacement 0.25 Replacement 5.62E-04 1.03 $1 200.00 Replacement $0.17

Exp. Electricity 0 kWhr 5.62E-04 0.00E+00 $0.10 kWhr $0.00

Exp. Miscellaneous 0.2 Labour hour 5.62E-04 1.03 $10.00 Labour hour $0.00

M&E Machinery & equipment 12.685 Hour 5.62E-04 1.02 $0.05 Hour $0.00

Inv. Buildings & structures 12 Sq. ft (bldg) 5.62E-04 1.24E-03 $4.00 Sq. ft (bldg) $0.00

Inv. Elite livestock 31 Camel breeder 5.62E-04 1.24E-02 $1 200.00 Camel breeder $0.26

Inv. Land 344 Hectare 5.62E-04 2.77E-04 $100.00 Hectare $0.01

Subtotal: Elite camel breeding $0.46

Grandparent camel breeding Takeoff: 1.000 grandparent breeders / 105.000 kg

Mat. Feed additives 1 kg 9.52E-03 3.4 $0.60 kg $0.02

Mat. Feed 10 kg 9.52E-03 3.4 $0.30 kg $0.10

Mat. Veterinary & medicinal 4.90E-04 kg 9.52E-03 3.4 $5 000.00 kg $0.08

Lab. Breeding, selection & management 0.5 Hour 9.52E-03 3.4 $20.00 Hour (1.0 workers) $0.32

Lab. Feeding labour 10 min 9.52E-03 3.4 $15.00 Hour (1.0 workers) $0.08

Lab. Cleaning labour 0 min 9.52E-03 0.00E+00 $10.00 Hour (0.0 workers) $0.00

Exp. Breeder replacement 1 9.52E-03 0.00E+00 $0.00 $0.00

Exp. Electricity 0 kWhr 9.52E-03 0.00E+00 $0.10 kWhr $0.00

Exp. Miscellaneous 0.2 Labour hour 9.52E-03 3.4 $10.00 Labour hour $0.06

M&E Machinery & equipment 5.759 Hour 9.52E-03 1.02 $0.08 Hour $0.00

Inv. Buildings 216 Sq. ft (bldg) 9.52E-03 2.52E-05 $4.00 Sq. ft (bldg) $0.00

Inv. Grandparent livestock 527 Grandparent 9.52E-03 7.34E-04 $600.00 Grandparent $2.21

Inv. Land 5 856.00 Hectares 9.52E-03 1.63E-05 $100.00 Hectares $0.09

Subtotal: Grandparent camel breeding $2.97

110

Parent camel breeders Takeoff: 1.000 Parent breeders / 105.000 kg

Mat. Feed additives 1 kg 9.52E-03 1.02 $0.60 kg $0.01

Mat. Main feed costs 10 kg 9.52E-03 1.02 $0.30 kg $0.03

Mat. Veterinary & medicinal 4.90E-04 kg 9.52E-03 1.02 $5 000.00 kg $0.02

Lab. Breeding, selection & management 24 min 9.52E-03 1.02 $20.00 Hour (1.0 workers) $0.08

Lab. Cleaning labour 0 min 9.52E-03 0.00E+00 $10.00 Hour (0.0 workers) $0.00

Lab. Feeding labour 24 min 9.52E-03 1.02 $15.00 Hour (1.0 workers) $0.06

Exp. Breeder replacement 1 9.52E-03 0.00E+00 $0.00 $0.00

Exp. Electricity 0.3 kWhr 9.52E-03 0.00E+00 $0.00 kWhr $0.00

Exp. Miscellaneous 0.2 Labour hour 9.52E-03 1.02 $10.00 Labour hour $0.02

M&E Machinery & equipment 1.089 Hour 9.52E-03 1.02 $0.08 Hour $0.00

Inv. Buildings 500 Sq. ft (bldg) 9.52E-03 1.94E-04 $4.00 Sq. ft (bldg) $0.00

Inv. Land 5 856.00 Hectare 9.52E-03 2.37E-06 $100.00 Hectare $0.01

Inv. Parent livestock 1 054.00 Parent 9.52E-03 4.90E-04 $600.00 Parent $2.95

Subtotal: Parent camel breeders $3.18

111

Camel grower production Takeoff: 1.000 growers / 223.000 kg

Mat. Feed additives 1 kg 4.48E-03 1.03 $0.60 kg $0.00

Mat. Finisher feed 10 4.48E-03 1.156 $0.30 $0.02

Mat. Main finisher feed 5 kg 4.48E-03 1.03 $0.30 kg $0.01

Mat. Main grower feed 5 kg 4.48E-03 1.03 $0.30 kg $0.01

Mat. Main starter feed 5 kg 4.48E-03 1.03 $0.30 kg $0.01

Mat. Veterinary & medicinal 4.00E-04 kg 4.48E-03 1.03 $5 000.00 kg $0.01

Lab. Cleaning labour 0 min 4.48E-03 0.00E+00 $10.00 Hour (0.0 workers) $0.00

Lab. Feeding labour 24 min 4.48E-03 1.03 $15.00 Hour (1.0 workers) $0.03

Lab. Breeding, selection & management 24 min 4.48E-03 1.03 $20.00 Hour (1.0 workers) $0.04

Exp. Electricity 0 kWhr 4.48E-03 0.00E+00 $0.10 kWhr $0.00

Exp. Miscellaneous 0.6 Labour hour 4.48E-03 1.03 $10.00 Labour hour $0.03

M&E Machinery & equipment 20.017 Hour 4.48E-03 1.02 $0.36 Hour $0.03

Inv. Buildings 3 000.00 Sq. ft (bldg) 4.48E-03 4.12E-04 $4.00 Sq. ft (bldg) $0.02

Inv. Grower stock 451 Growers 4.48E-03 2.60E-05 $300.00 Growers $0.02

Inv. Land for growers 5 014.00 Hectare 4.48E-03 3.47E-05 $100.00 Hectare $0.08

Subtotal: Camel grower production $0.29

112

1st-stage processing Takeoff: 1.000 kg cold dressed weight camel / 1.00

Mat. Additives 0.01 kg 1 1.03 $5.00 kg $0.05

Mat. Co-products 0.095238 kg 1 0.00E+00 $0.00 kg $0.00

Mat. Other co-products 0.375 kg 1 0.00E+00 $0.00 kg $0.00

Mat. Packaging 0.001 kg 1 1.03 $80.00 kg $0.08

Lab. Byproducts 0.01 min 1 10.3 $15.00 Hour (10.0 workers) $0.03

Lab. Management & admin 0.01 min 1 1.03 $20.00 Hour (1.0 workers) $0.00

Lab. Slaughter, feather removal & waxing labour 0.01 min 1 37.09 $15.00 Hour (36.0 workers) $0.09

Exp. Advertising & promotion 1 kg 1 1.03 $0.25 kg $0.26

Exp. Disappearances 0.001 kg 1 1.03 $1.45 kg $0.00

Exp. Electricity 0.0012 kWhr 1 1.156 $0.10 kWhr $0.00

Exp. Miscellaneous costs 0.0012 Labour hour 1 1.03 $1.00 Labour hour $0.00

M&E Machinery & equipment 0.05485 Hour 1 1.02 $40.00 Hour $2.24

Inv. Buildings & structures 32 000.00 Sq. ft (bldg) 1 2.40E-07 $10.00 Sq. ft (bldg) $0.08

Inv. Land 1 Hectare 1 1.55E-07 $20 000 Hectare $0.00

Subtotal: 1st-stage processing $2.83

Boning, separation & preparing select cuts Takeoff: 1.000 kg / 1.000 kg

Mat. Gourmet additives 0.001 kg 1 1.156 $50.00 kg $0.06

Lab. Boning room labour 0.168351 min 1 1.061 $20.00 Hour (1.0 workers) $0.06

Lab. Boning room packing 0.168351 min 1 1.061 $15.00 Hour (1.0 workers) $0.04

Lab. Boning & separation labour 0.168351 min 1 3.184 $12.00 Hour (3.0 workers) $0.11

Exp. Advertising & promotion 0.05 kg 1 1.156 $0.10 kg $0.01

M&E Boning room equipment & machine 0.168351 min 1 1.167 $5.00 Hour $0.02

Inv. Boning & separation building 1 000.00 Sq. ft (bldg) 1 4.09E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Boning, separation & preparing select cuts $0.29

113

Distribution & marketing centre Takeoff: 1.000 kg / 1.000 kg

Mat. Packaging 0.004 kg 1 1.156 $80.00 kg $0.37

Lab. Marketing manager 0.01 min 1 1.072 $20.00 Hour (1.0 workers) $0.00

Lab. Packers 0.1 min 1 1.072 $15.00 Hour (1.0 workers) $0.03

Exp. Administration 1.00E-04 Labour hour 1 1.156 $0.10 Labour hour $0.00

Exp. Advertising & promotion 1 kg 1 1.156 $1.00 kg $1.16

M&E Delivery vehicles 0.01 min 1 1.179 $25.00 Hour $0.00

M&E Office & other machinery 0.01 min 1 1.179 $1.00 Hour $0.00

Inv. Office buildings 400 Sq. ft (bldg) 1 6.49E-09 $10.00 Sq. ft (bldg) $0.00

Subtotal: Distribution & marketing centre $1.56

Retail supermarket Takeoff: 1.000 kg / 1.000 kg

Mat. Disappearances 0.02 1 1.03 $5.00 $0.10

Lab. Supermarket labour 1 min 1 1.03 $17.50 Hour (1.0 workers) $0.30

Exp. Advertising & promotion 1 kg 1 1.03 $0.35 kg $0.36

Exp. Other operating 1 kg 1 1.03 $1.00 kg $1.03

Exp. Rent 1 kg 1 1.03 $0.21 kg $0.22

Exp. Supermarket profit 1 kg 1 1.03 $0.17 kg $0.18

M&E Machinery & equipment 0.016835 Hour 1 1.02 $0.25 Hour $0.00

Subtotal: Retail supermarket $2.19

114

Restaurant service Takeoff: 1.000 kg / 1.000 kg

Mat. Vegetables, salads & other non-meat materials 0.4 kg 1 1.156 $5.00 kg $2.31

Lab. Chef service 0.076923 min 1 10.72 $15.00 Hour (10.0 workers) $0.21

Lab. Restaurant manager 0.076923 min 1 107.2 $20.00 Hour (100.0 workers) $2.75

Lab. Waiter service 0.076923 min 1 107.2 $12.00 Hour (100.0 workers) $1.65

Exp. Advertising & promotion 0.05 kg 1 1.156 $0.50 kg $0.03

Exp. Rent 1 kg 1 1.156 $2.00 kg $2.31

M&E Restaurant equipment 0.076923 min 1 1.179 $5.00 Hour $0.01

Subtotal: Restaurant service $9.26

Burden included @ 2.0% $0.45

Cost $23.04

SG&A, 2.00% $0.52

Sales commission, 2.00% $0.52

Income tax, 30.00% $0.56

Net profit, 5.00% $1.30

Price $25.93

115

Buffalo meat for restaurant meal

a.) Product resource use and allocation of value added

Product Price: $20.20 /kg

Sales Commission: $0.40 /kg

Net Price: $19.80 /kg

Material Cost: $3.15 /kg

Labor Cost: $5.94 /kg

Expenditure Cost: $5.70 /kg

M&E Cost (+ interest): $0.72 /kg

Investment Cost (+ interest): $2.43 /kg

Product Cost (+ interest): $17.95 /kg

Cost Without Markups (for info): $17.38 /kg

Gross Profit: $1.85 /kg

SG&A: $0.40 /kg

Operating Profit (less interest): $1.44 /kg

Taxes ( 30.0%): $0.43 /kg

Net Profit (After Tax): $1.01 /kg

Contribution (to Fixed): $7.65 /kg

Total Profit (After Tax): $109,054

Cash Flow (Approximate): $211,063 Includes investment

Economic Profit: $103,018 (NOPAT - Int. Exp.)

Total Investment Used: $340,028 (Tooling, M&E, Inv.)

Operating Profit Rate: 7.14 %

Profit Rate (after tax): 5 %

ROI: 32.07 %

116

Production volume 107,976 kg b) Product activities and associated resource use costs

Item Unit Quantity Units Takeoff Markup Unit Cost Cost Unit Cost

Elite Buffalo Breeding Takeoff: 1.000 Elites / 3,483.00 kg Mat. Feed Additives 1 kg 2.87E-04 1.03 $0.60 kg $0.00 Mat. Feed Costs 10 kg 2.87E-04 1.03 $0.30 kg $0.00 Mat. Veterinary & Medicinal 4.90E-04 kg 2.87E-04 1.03 $5,000.00 kg $0.00 Lab. Breeding & Selection & Management 1 hour 2.87E-04 1.03 $20.00 hour (1.0 Workers) $0.01 Lab. Cleaning Labour 0 hour 2.87E-04 0.00E+00 $8.00 hour (0.0 Workers) $0.00 Lab. Feeding Labour 0.01 hour 2.87E-04 1.03 $15.00 hour (1.0 Workers) $0.00 Exp. Breeder Replacement 0.25 Replacement 2.87E-04 1.03 $1,200.00 Replacement $0.09 Exp. Electricity 0 kWhr 2.87E-04 0.00E+00 $0.10 kWhr $0.00 Exp. Miscellaneous 0.2 labor hour 2.87E-04 1.03 $10.00 labor hour $0.00 M&E Machinery & Equipment 8.32 hour 2.87E-04 1.02 $0.05 hour $0.00 Inv. Buildings and Structures 12 sq. ft (Bldg) 2.87E-04 8.11E-04 $4.00 sq. ft (Bldg) $0.00 Inv. Elite Livestock 31 Buffalo Breeder 2.87E-04 8.11E-03 $1,200.00 Buffalo Breeder $0.09 Inv. Land 344 Hectare 2.87E-04 1.80E-04 $100.00 Hectare $0.00 Subtotal: Elite Buffalo Breeding $0.19

Grandparent Buffalo Breeding Takeoff: 1.000 Grandparent Breeders / 205.000 kg Mat. Feed Additives 1 kg 4.88E-03 3.4 $0.60 kg $0.01 Mat. Feed 10 kg 4.88E-03 3.4 $0.30 kg $0.05 Mat. Veterinary & Medicinal 4.90E-04 kg 4.88E-03 3.4 $5,000.00 kg $0.04 Lab. Breeding & Selection &

Managem 0.5 hour 4.88E-03 3.4 $20.00 hour (1.0 Workers) $0.17

Lab. Feeding Labour 10 min 4.88E-03 3.4 $15.00 hour (1.0 Workers) $0.04 Lab. Cleaning Labour 0 min 4.88E-03 0.00E+00 $10.00 hour (0.0 Workers) $0.00 Exp. Breeder Replacement 1 4.88E-03 0.00E+00 $0.00 $0.00 Exp. Electricity 0 kWhr 4.88E-03 0.00E+00 $0.10 kWhr $0.00 Exp. Miscellaneous 0.2 labor hour 4.88E-03 3.4 $10.00 labor hour $0.03 M&E Machinery & Equipment 3.767 hour 4.88E-03 1.02 $0.07 hour $0.00 Inv. Buildings 216 sq. ft (Bldg) 4.88E-03 1.64E-05 $4.00 sq. ft (Bldg) $0.00 Inv. Grandparent Livestock 527 Grandparent 4.88E-03 4.78E-04 $600.00 Grandparent $0.74 Inv. Land 5,856.00 Hectares 4.88E-03 1.06E-05 $100.00 Hectares $0.03 Subtotal: Grandparent Buffalo Breeding $1.11

117

Parent Buffalo Breeders Takeoff: 1.000 Parent Breeders / 205.000 kg Mat. Feed Additives 1 kg 4.88E-03 1.02 $0.60 kg $0.00 Mat. Main Feed Costs 10 kg 4.88E-03 1.02 $0.30 kg $0.01 Mat. Veterinary & Medicinal 4.90E-04 kg 4.88E-03 1.02 $5,000.00 kg $0.01 Lab. Breeding & Selection &

Managem 24 min 4.88E-03 1.02 $20.00 hour (1.0 Workers) $0.04

Lab. Cleaning Labour 0 min 4.88E-03 0.00E+00

$10.00 hour (0.0 Workers) $0.00

Lab. Feeding Labour 24 min 4.88E-03 1.02 $15.00 hour (1.0 Workers) $0.03 Exp. Breeder Replacement 1 4.88E-03 0.00E+

00$0.00 $0.00

Exp. Electricity 0.3 kWhr 4.88E-03 0.00E+00

$0.00 kWhr $0.00

Exp. Miscellaneous 0.2 labor hour 4.88E-03 1.02 $10.00 labor hour $0.01 M&E Machinery & Equipment 1.089 hour 4.88E-03 1.02 $0.07 hour $0.00 Inv. Buildings 750 sq. ft (Bldg) 4.88E-03 1.26E-

04$4.00 sq. ft (Bldg) $0.00

Inv. Land 5,856.00 Hectare 4.88E-03 2.36E-06

$100.00 Hectare $0.01

Inv. Parent Livestock 1,581.00 Parent 4.88E-03 3.18E-04

$600.00 Parent $1.47

Subtotal: Parent Buffalo Breeders $1.59

118

Buffalo Grower Production Takeoff: 1.000 growers / 238.000 kg Mat. Feed Additives 1 kg 4.20E-03 1.03 $0.60 kg $0.00 Mat. Finisher Feed 10 4.20E-03 1.156 $0.30 $0.01 Mat. Main Finisher Feed 5 kg 4.20E-03 1.03 $0.30 kg $0.01 Mat. Main Grower Feed 5 kg 4.20E-03 1.03 $0.30 kg $0.01 Mat. Main Starter Feed 5 kg 4.20E-03 1.03 $0.30 kg $0.01 Mat. Veterinary & Medicinal 4.00E-04 kg 4.20E-03 1.03 $5,000.00 kg $0.01 Lab. Cleaning Labour 0 min 4.20E-03 0.00E+

00$10.00 hour (0.0 Workers) $0.00

Lab. Feeding Labour 24 min 4.20E-03 1.03 $15.00 hour (1.0 Workers) $0.03 Lab. Breeding & Selection &

Managem 24 min 4.20E-03 1.03 $20.00 hour (1.0 Workers) $0.03

Exp. Electricity 0 kWhr 4.20E-03 0.00E+00

$0.10 kWhr $0.00

Exp. Miscellaneous 0.6 labor hour 4.20E-03 1.03 $10.00 labor hour $0.03 M&E Machinery & Equipment 20.017 hour 4.20E-03 1.02 $0.35 hour $0.03 Inv. Buildings 9,000.00 sq. ft

(Bldg) 4.20E-03 1.47E-

04$4.00 sq. ft (Bldg) $0.02

Inv. Grower Stock 1,353.00 Growers 4.20E-03 9.24E-06

$300.00 Growers $0.02

Inv. Land for Growers 5,014.00 Hectare 4.20E-03 1.23E-05

$100.00 Hectare $0.03

Subtotal: Buffalo Grower Production $0.23

119

1st Stage Processing Takeoff: 1.000 kg cold dressed weight ducks / 1.00 Mat. Additives 0.01 kg 1 1.03 $5.00 kg $0.05 Mat. Coproducts 0.095238 kg 1 0.00E+

00$0.00 kg $0.00

Mat. Other Coproducts 0.375 kg 1 0.00E+00

$0.00 kg $0.00

Mat. Packaging 0.001 kg 1 1.03 $80.00 kg $0.08 Lab. By-products 0.01 min 1 5.152 $15.00 hour (5.0 Workers) $0.01 Lab. Management & Admin 0.01 min 1 1.03 $20.00 hour (1.0 Workers) $0.00 Lab. Slaughter, feather removal & w 0.01 min 1 20.61 $15.00 hour (20.0

Workers) $0.05

Exp. Advertising & Promotion 1 kg 1 1.03 $0.25 kg $0.26 Exp. Disappearances 0.001 kg 1 1.03 $1.45 kg $0.00 Exp. Electricity 0.0012 kWhr 1 1.156 $0.10 kWhr $0.00 Exp. Miscellaneous Costs 0.0012 labor hour 1 1.03 $1.00 labor hour $0.00 M&E Machinery & Equipment 0.018374 hour 1 1.02 $35.00 hour $0.66 Inv. Buildings & Structures 32,000.00 sq. ft

(Bldg) 1 8.00E-

08$10.00 sq. ft (Bldg) $0.03

Inv. Land 1 Hectare 1 5.18E-08

$20,000 Hectare $0.00

Subtotal: 1st Stage Processing $1.14

Boning, Separation & Preparing Select Cuts Takeoff: 1.000 kg / 1.000 kg Mat. Gourmet Additives 0.001 kg 1 1.156 $50.00 kg $0.06 Lab. Boning Room Labour 0.168351 min 1 1.061 $20.00 hour (1.0 Workers) $0.06 Lab. Boning Room Packing 0.168351 min 1 2.122 $15.00 hour (2.0 Workers) $0.09 Lab. Boning and Separation Labour 0.336701 min 1 5.306 $15.00 hour (5.0 Workers) $0.45 Exp. Advertising & Promotion 0.05 kg 1 1.156 $0.10 kg $0.01 M&E Boning Room Equiment &

Machine 0.168351 min 1 1.167 $5.00 hour $0.02

Inv. Boning & Separation Building 1,000.00 sq. ft (Bldg)

1 4.07E-09

$10.00 sq. ft (Bldg) $0.00

Subtotal: Boning, Separation & Preparing Select Cuts $0.68

120

Distribution & Marketing Centre Takeoff: 1.000 kg / 1.000 kg Mat. Packaging 0.004 kg 1 1.156 $80.00 kg $0.37 Lab. Marketing Manager 0.01 min 1 1.072 $20.00 hour (1.0 Workers) $0.00 Lab. Packers 0.1 min 1 1.072 $15.00 hour (1.0 Workers) $0.03 Exp. Administration 1.00E-04 labor hour 1 1.156 $0.10 labor hour $0.00 Exp. Advertising & Promotion 1 kg 1 1.156 $1.00 kg $1.16 M&E Delivery Vehicles 0.01 min 1 1.179 $25.00 hour $0.00 M&E Office & Other Machinery 0.01 min 1 1.179 $1.00 hour $0.00 Inv. Office Buildings 400 sq. ft

(Bldg) 1 6.45E-

09$10.00 sq. ft (Bldg) $0.00

Subtotal: Distribution & Marketing Centre $1.56

Retail Supermarket Takeoff: 1.000 kg / 1.000 kg Mat. Disappearances 0.02 1 1.03 $5.00 $0.10 Lab. Supermarket Labour 1 min 1 1.03 $17.50 hour (1.0 Workers) $0.30 Exp. Advertising & Promotion 1 kg 1 1.03 $0.35 kg $0.36 Exp. Other Operating 1 kg 1 1.03 $1.00 kg $1.03 Exp. Rent 1 kg 1 1.03 $0.21 kg $0.22 Exp. Supermarket Profit 1 kg 1 1.03 $0.17 kg $0.18 M&E Machinery & Equipment 0.016835 hour 1 1.02 $0.25 hour $0.00 Subtotal: Retail Supermarket $2.19

121

Restaurant Service Takeoff: 1.000 kg / 1.000 kg Mat. Vegatables, salads & other

non 0.4 kg 1 1.156 $5.00 kg $2.31

Lab. Chef Service 0.076923 min 1 10.72 $15.00 hour (10.0 Workers)

$0.21

Lab. Restaurant Manager 0.076923 min 1 107.2 $20.00 hour (100.0 Workers)

$2.75

Lab. Waiter Service 0.076923 min 1 107.2 $12.00 hour (100.0 Workers)

$1.65

Exp. Advertising and Promotion 0.05 kg 1 1.156 $0.50 kg $0.03Exp. Rent 1 kg 1 1.156 $2.00 kg $2.31M&E Restaurant Equipment 0.076923 min 1 1.179 $5.00 hour $0.01Subtotal: Restaurant Service $9.26Burden Included @ 2.0% $0.35Cost $17.95SG&A, 2.00% $0.40Sales Commission, 2.00% $0.40Income Tax, 30.00% $0.43Net Profit, 5.00% $1.01Price $20.20

122

References Abareconomics 2002, Australian Fisheries Statistics, AFFA, Canberra. Ackefors, H.E.G. 2000, ‘Freshwater crayfish farming technology in the 1990s: a European and global

perspective’, Fish and Fisheries vol. 1, no. 4, pp. 337–359. Alliance Consulting 2004, Cost Analysis of NLIS Compliance for Beef Producers, Report for Meat and

Livestock Australia. Australian Bureau of Statistics, catalogue 8622. Australian Bureau of Statistics 2001, Manufacturing Industry, catalogue 8221. Blythman J. 2002, ‘Are you being served?’, The Guardian, 20 July. Coase, R. 1937, ‘The nature of the firm’, Economica. CrocProfit 2001, Decision Tools for Farmers and Investors, Queensland Government Department of

Primary Industries. Benson, F. & Holle, D. 2003, ‘Commercial Ostrich Production’, Presentation to the World Ostrich

Association Conference 2003. BSM Agri 2003, ‘Duck flooring’, BSM Agri Limited, Arthur, Ontario. Farhat, A.; Normand, L.; Chavez, E.R., Touchburn, S.P. and Lague, P.C., 2003, ‘Performance and

Carcass characteristics of Pekin and Muscovy Ducks Fed diets Based on Food Wastes, Anon. source

Feedback 2003, ‘Making the most of supply chain opportunities’, January/February, MLA, Sydney. Food and Agriculture Organisation 2003, Small Scale Poultry Processing: Introduction to the Poultry

Processing Industry, FAO Animal Production and Health, paper 98, http://www.fao.org/docrep/003/t0561e/T0561E01.htm

Flynn P. 2003, ‘The XML FAQ’, http://www.ucc.ie:8080/cocoon/xmlfaq - acro Freebairn, J.W., Edwards, G.W. & Davis J.S. 1982, ‘Distribution of Research Gains in Multistage

Production Systems’, American Journal of Agricultural Economics, February pp. 39–46 Gooch M. 2002, ‘A theoretical analysis of leveraging competitive advantage through physical and

virtual value chain interaction’, Agricultural Adaptation Council, Ontario. (Reproduced on http://www.agrifood.info/ChainsNet/Indexes/supplychains.htm)

Gottliebsen R. 2003, ‘Supply chain’s new gravy train’, The Weekend Australian, 29–30 March , p. 42. Hines P. 1994, Creating World Class Suppliers, Pitman, London (cited in Gooch 2002). Industry Search 2001, ‘Supply-chain management: More strategies for adding value’,

http://www.industrysearch.com.au/ JM Poultry Technology BV, The Netherlands, (personal communication) Kermode, D. 1998, ‘Planning for Profit: Squab’, British Columbia Ministry of Agriculture and Food,

Agdex 454-810 Koch, C. 2002, ‘The ABCs of Supply Chain Management’, Executive Editor, CIO,

http://www.cio.com/research/scm/edit/012202_scm.html Koontz H. & O’Donnell C. 1976, Management: A systems and contingency analysis of managerial

functions, p. 686, McGraw-Hill Kogakusha, Tokyo. Lawson M. 2003, ‘Customer-power drives changes’, Australia Financial Review (special report: ‘New

Supply Chain’), 13 March, p. 3. Lemke 2002, Water Buffalo Handling: Property to abattoir, Agdex no. 487/20, Primary Industry,

Northern Territory, Darwin. Leuck, D., Haley, M. & Harvey, D. 2004, ‘US 2003 and 2004 Livestock and Poultry Trade Influenced

by Animal Disease and Trade Restrictions’, USDA, LDPM-120-01, July. Metzer Farms: Duck and Goose Hatchery 2003, ‘Raising Ducks and Geese’, Gonzales, California Meyn Turkey & Duck Processing, The Netherlands, Personal communication Mills, K. 2003, ‘Coles upgrades its supply chain’, The Australian, April 1, p. 31. http://www.agrifood.info/ChainsNet/Indexes/supplychains.htm Noor, Z.A.M. 2003, ‘Duck Meat Production’, Department of Veterinary Services, Malaysia O’Keefe M. & McEachern, S. 2001, ‘The Perishable Food Industry: Ripe for Success’, Reproduced on

http://www.agribusiness.asn.au/ChainsNet/Indexes/oKeeffe1.pdf Peucker, S. 2004, ‘Conversion rates for crocs’, personnel communication via Dr Peter McInnes Porter M.E. 1985, ‘Competitive Advantage Creating and Sustaining Superior Performance’,

123

Macmillan, NY. Poultry Online, 2003, Cessnock, Australia, http://www.poultryonline.com.au/contact.htm Queensland Department of Primary Industries, 1998, ‘ ‘Queensland Value Chain Analysis Series’,

Brisbane. RIRDC 2001, R&D Plan for New Animal Products 2002–2005 Robertson R. 2003, ‘Banksia beefs up prime exports to South-East Asia’, Australia Financial Review,

‘Special Report:New Supply Chain’, 13 March, p. 4. Ruello, N. 2003, ‘Report on the Yabby Marketing Cooperative Feasibility Study’, Prepared for NSW

Fisheries and Department of State and Regional Development Russell, J. 2003, ‘Suppliers and partners are the missing links’, Australia Financial Review, ‘Special

Report:New Supply Chain’, 13 March, p. 6. SAC, 2001, ‘Ducks for the Table’, Scottish Agricultural College, http://www.sac.ac.uk Scottish Agricultural College 2003, ‘Ducks for the Table,

http://www.sac.ac.uk/management/external/diversification/Novstock/ducktableprod.asp Strassmann P.A. 2003, ‘Enterprise Software’s End’, h

http://www.computerworld.com/developmenttopics/development/webservices/story/0,10801,81145,00.html?

Van Barneveld, R.J., Peucker, S., Davis, B. and Myer, R., 2004, ‘Development of manufactured feeds for Crocodylus porosus’, to be released.

Van Dalen 1997, ‘Chain Theory Deployment: Searching for productive chain knowledge’, Wageningen Agricultural University, August. Cited in Gooch 2002

Walters & Lancaster 2000, http://www.agrifood.info/ChainsNet/Indexes/supplychains.htm Wondu Holdings 2001, Benchmarks for New Animal Products: Alpaca, Buffalo and Rabbit Production and Duck Processing’, RIRDC Publication No. 01/113, p. 40 Wondu Holdings 2002, Benchmarks for New Animal Products: Crocodile, Squab and Yabby’, RIRDC

Publication No. 02/113, p. 57 Wondu Holdings 2001, Benchmarks for New Animal Products: Alpaca, Buffalo and Rabbit

Production and Duck Processing, RIRDC Publication No. 01/113 Wondu Holdings 2000, Benchmarks for New Animal Products: Ostrich Processing, RIRDC

Publication No. 00/37, restricted publication Woodhead B. 2003, ‘Reliable data helps capture key to success’, Australia Financial Review, ‘Special

Report: New Supply Chain’, 13 March, p. 8.