IMPROVING THE SUPPLY CHAIN MANAGEMENT OF ALABAMA TURFGRASS PRODUCERS

• Sponsoring Institution: National Institute of Food and Agriculture
• Project Status: COMPLETE
• Funding Source: HATCH
• Reporting Frequency: Annual
• Accession No.: 0212887
• Project Start Date: Oct 1, 2008
• Project End Date: Sep 30, 2010
• Program Code: [(N/A)]- (N/A)

Recipient Organization
AUBURN UNIVERSITY
108 M. WHITE SMITH HALL
AUBURN,AL 36849

Performing Department
AGRI ECONOMICS & RURAL SOCIOL

Non Technical Summary
This project entails adapting the theory and practice of supply chain management (SCM) to the turfgrass industry in Alabama. The intent of this project is to improve and enhance the individual and collective efficiency of turfgrass producers in Alabama. Currently, when landscape installation companies and other buyers need to purchase sod, the most common option is calling individual producers to determine whether they have the product available and at what price. Often excessive time and effort is spent shopping for sod. In many cases buyers locate sod that must be transported across several counties when producers in closer proximity have sod available. In the long run, these inefficiencies may lead to bankruptcies and create an adverse economic environment for sod producers in this region that is not capable of effectively meeting customer demands. The challenge of turfgrass production and logistics is the coordination of supply and demand due to both yield and demand uncertainties. Furthermore, supply and demand coordination is directly related to profitability. For instance, supply shortages often result in lost revenue and may also cause a producer to lose customers over time. On the other hand, excess supply can be costly, especially for sod producers who make significant investments in watering, fertilizing, and controlling pests in order to maintain excess turfgrass. The objective of this project is to introduce SCM theory and best practices to the sod production industry through the Alabama Turfgrass Association (ATA), which, from a practical perspective, will potentially benefit several sod producers and buyers in the state. Broadly, SCM can be defined as the management of all activities such as procurement, production, and distribution that are associated with matching supply and demand for the purpose of maximizing supply chain profit. Operations research and management science (ORMS) solutions to SCM problems are often implemented in practice through decision support technologies packaged as computer software. We will also survey other supply chain decision support technologies to support this process. We expect that the software will increase the efficiency of the industry and generate greater returns for all producers, especially the small to medium size producers.

Animal Health Component

50%

Research Effort Categories

Basic

20%

Applied

50%

Developmental

30%

Classification

Knowledge Area (KA)	Subject of Investigation (SOI)	Field of Science (FOS)	Percent
603	2130	3010	25%
603	2130	3100	25%
603	6230	3010	25%
603	6230	3100	25%

Knowledge Area
603 - Market Economics;

Subject Of Investigation
2130 - Turf; 6230 - Marketing systems and sectors thereof;

Field Of Science
3010 - Economics; 3100 - Management;

Keywords

turfgrass

supply chain management

operations research

horticulture

Goals / Objectives
The broad objectives of this study are to: 1.Model the supply chain for turfgrass producers to improve its efficiency by developing optimization models for turfgrass supply chain management and forecasting models for turfgrass demand. 2. Provide electronic tools for turfgrass producers to increase profitability.

Project Methods
Our first task will be to acquaint the regional turfgrass industry of the benefits of supply chain management (SCM) and operations research and management science (ORMS) with respect to business performance. The presentation will entail fundamental supply chain topics such as managing supply and demand uncertainties, demand forecasting, supply chain contract design, pricing and revenue management, and transportation planning. Our second task is to develop ORMS models to address the needs of the turfgrass industry. We will collect and analyze relevant data in order to characterize yield, demand, and other sources of uncertainty. The focus of our study will be two problem classes: (i) farm level problems and (ii) regional level problems. The farm level problems will be related to crop planning, crop harvesting, and potentially the integrated planning and harvesting model. The regional level problem will entail supply chain contract design between sod producers and buyers for the purpose of improving the collective performance of all participants. Because the turfgrass industry is dependant upon the housing market we will forecast housing starts and incorporate that information into the model. With the model we will develop, using game theory, optimal contracts for turfgrass producers. ORMS solutions to SCM problems are often implemented in practice through decision support technologies packaged as computer software. The software program will transform model inputs into outputs by implementing optimization algorithms. We will solicit the input of participating sod producers and buyers regarding the appearance and capabilities of an ideal decision support software tool. Based on their input, Visual Basic will be used to construct prototypes of screens that would comprise a desirable decision support software tool. We will also survey other supply chain decision support technologies to support this process. This project will take place in cooperation with the Alabama Turfgrass Association (ATA). Our work with the ATA will help determine whether the research efforts are generating the intended results and reaching the producers who could benefit the most from the research.

Progress 10/01/08 to 09/30/10

Outputs
OUTPUTS: In this project we have completed the simulations of turf grass model. We advised one student in a masters project in Industrial Engineering, and we mentored masters students in agricultural economics and industrial engineering through this project. David Han gave a presentation on the early findings to the Alabama Turfgrass Association Annual meeting in October 2009. Though the project has terminated, we have to complete the paper, which will be done by summer. We will submit for review at that time. PARTICIPANTS: Norbert Wilson-Co-PI, Emmett Lodree-Co-PI University of Alabama, Tuscaloosa, Deacue Fields-Co-PI, David Han-Co-PI, Malick Diarrassouba-graduate student, Kandace Ballard-graudate student, Ermanno Affuso-graduate student, Kenisha Reynolds-graduate student TARGET AUDIENCES: Turfgrass producers in Alabama and beyond are to receive science-based findings concerning marketing and production. The academic community is to also gain from the findings of the research. PROJECT MODIFICATIONS: Not relevant to this project.

Impacts
We have experienced a change in knowledge. Our modeling results provide evidence that, under the right conditions, a contracting scheme between turf grass producers and retailers (consumers) can generate greater profits for both parties. We also discovered that the contracts discourage over production which will reduce waste and the environmental costs of production.

Publications

• No publications reported this period

Progress 01/01/09 to 12/31/09

Outputs
OUTPUTS: Activities: Over the last year, we developed a model to evaluate a contracting plan for turfgrass producers and buyers. The paper for this work is underdevelopment. We also surveyed producers in the Alabama green industry about their production and marketing choices as related to the turfgrass industry. Dissemination: David Han spoke to representatives of the turfgrass industry on contracting issues based on this project at the Turfgrass Producers International meeting in Point Clear AL in February and the Alabama Turfgrass Association meeting in Auburn, AL in October. PARTICIPANTS: Dr. Norbert Wilson, Co-PI & PD Agricultural Economics and Rural Sociology, Dr. Deacue Fields, Co-PI, Agricultural Economics and Rural Sociology, Dr. David Han, Co-PI, Agronomy and Soils Emmett Lodree, Co-PI, University of Alabama, Tuscaloosa, Operations Management, Ms. Kandace Ballard, graduate student, Industrial and Systems Engineering TARGET AUDIENCES: As metioned earlier, David Han spoke to turfgrass producers of the Alabama Turfgrass Associate and Turfgrass Producers International on the research project. PROJECT MODIFICATIONS: We have decided to add an agronomic component to our project. We will look at how different wetting agents help with the maintenance of the finished turf. This addition will enhance the supply chain modeling work, and will be directly beneficial for the industry.

Impacts
We have experienced a change in knowledge as we were not sure if a model of mutual beneficial effects of contracting were possible. While an earlier, simpler model showed that some producers and consumers could benefit from contracting, we have developed a more comprehensive model that shows that a buyback contract under a newsvendor type model generates equal gains from both producers and consumers. These results will provide information to the industry on possible contract structures that could be beneficial.

Publications

• No publications reported this period

Progress 01/01/08 to 12/31/08

Outputs
OUTPUTS: We have one masters student to complete a masters project on the supply chain aspects of this turfgrass. This research and the ideas of supply chain management will be disseminated in the 2009 calendar year. PARTICIPANTS: Not relevant to this project. TARGET AUDIENCES: Not relevant to this project. PROJECT MODIFICATIONS: Nothing significant to report during this reporting period.

Impacts
We are still in the early phases of this research. However, one preliminary research finding is that a contract between turfgrass producers and buyers may be beneficial for both agents under certain conditions. We are still refining this model.

Publications

• No publications reported this period