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Essay Instructions: Vertical Integration in Beef Production

A company called Iowa Beef Products (IBP) revolutionized the value chain that linked America?s ranches with the meat counter at the local supermarket in the 1970s. As a result of how it created value by creatively using activities in the value chain, IBP?s success caused well-established firms such as Swift and Hormel to decide to exit the beef-producing business.

Prior to IBP, studying the value chain used by most competitors would find the following activities taking place. Cattle were sent by railcar to feedlots in big cities such as Chicago. After being fattened in the feedlot, the "meat packing" companies slaughtered the cattle and then sent the whole beef carcass by refrigerated railcar to the store butcher. The skilled store butcher then cut the beef for sale to end customers in the store.
IBP modernized the slaughtering process and moved the packing plants much closer to the ranch. They also revolutionized the value chain by adding a second, economically distinctive step: "boxing" the beef. Boxing the beef essentially meant that the carcass was cut into salable cuts of meat in a mass-production process rather than by the local butcher to order. The cut meat was then efficiently boxed and shipped directly to the retailer, who could quickly put much of it on the shelf without the aid of a skilled butcher. The efficiencies of these new processes allowed IBP to operate at substantially reduced costs compared to its competitors who were using the traditional set of processes described above. Indeed, IBP?s successful adaptation of activities in the value chain contributed to the fact that this firm was the best-producing stock on the New York Stock Exchange at the end of the 1970s for two years running.

To recombine activities in the value chain, IBP made a number of decisions about vertical integration. Using the discussion about vertical integration in this chapter, address the following questions in 200-250 words each.

PART ONE
What is the vertical integration logic behind each of the following moves that Iowa Beef made?

Even though they were economically distinct activities and had different desirable efficient sizes, IBP ran both slaughterhouses and boxing plants, and they located them next to teach other when they could. If these were distinct activities, why did IBP locate them physically adjacent to each other?

The boxing plants had larger ideal-efficiency capacity than the slaughterhouses, so IBP had to bring in beef carcasses to supplement those produced at an adjacent slaughterhouse they owned. Some of the shipped-in carcasses came from IBP slaughterhouses and some came from other firms? slaughterhouses. Why did IBP mix their sourcing for the boxing plants?

IBP used its own refrigerated trucks to move carcasses from distant slaughterhouses to boxing plants in the Great Plains states. Why did they not hire trucking firms that specialized in trucking when they needed this service or rent trucks as needed?

When IBP sourced cattle from feedlots in the Great Plains states, the firm bought on the spot market using their cost advantage to ensure that they could bid whatever was needed to get the cattle to keep the plants running at ideal capacity. When they went into the state of Idaho, however, they changed their approach to sourcing cattle. In this area, there were fewer cattle in general? as a result, IBP purchase a minority interest in a feedlot.

Why did the firm acquire this upstream interest in Idaho and not in other states in the Great Plains?

PART TWO
In the 1990s and early 21st century, several meat packing firms sought to transfer the vertical integration techniques perfected by IBP in beef to the pork industry. Using the Internet, develop a flow chart of the activities in an economic system that takes a pig from its pen to the supermarket meat case. Once you have done this, continue your research so that you can answer the following question: Which activities have become vertically integrated in the pork business in the last 15 years and why?

Essay Instructions: research a company??"within or outside the healthcare industry??"with a strong vertical integration process.
(Hint: To decide whether a company has a strong vertical integration process, determine how interconnected the company is with its buyers and suppliers.)

outline the vertical integration process of the company (include a flowchart). Detail your flow chart to highlight critical aspects of the integration process. You can also use color or graphic coding to identify areas that are strong or weak in the process and provide detailed rationale for your observations

include the reasons you think the integration process of the organization is near ideal. Provide the justification for your reasons

no direct quotes

Essay Instructions: Abbott labs has problems with vertical integration.
These are the following problems and the solutions that have been identified to fix the issues.

Problem: Increased managerial costs in coordinating integration over multiple stages of the value chain;Solution: Strategic outsourcing and/or mergers and acquisitions

Problem:The potential for either excess capacity or underutilization of resources because of unevenly balanced productivity across different value chain activities; Solution: Improve stability of supply chain through communication to prevent deterioration into bull whip effect.

Problem:Technological obsolescence; Solution: Improve and upgrade when benefits of change outweighs costs while maintaining communication avenues with distributors.

Problem: Strategic inflexibility; Solution: Company must constantly evaluate supply chain flexibility, responsiveness and overall performance

Problem:Increased mobility and exit barriers; Solution: Lease distribution locations. Provides options on locations and finances

Problem:Tight coupling to poor performing business units; Solution:. Improve unit performance, evaluate alternative avenues, or investigate opportunities to divestiture unit

Problem: Lack of information and feedback from suppliers and distributors; Solution: Communication is key to successful chain management. Encourage and reward feedback

What is needed:

Now that the problems have been identified and the solutions to remedy those problems have been identified, write a two page paper of the mini business plan, one inch margins, (no direct quotes), on how abbott labs will implement the suggested solutions.Include any issues they may encounter as they try and implement those solutions and also include timelines and task owners for the steps involved. Also explain how they can measure the effectiveness of the solutions (so they know whether or the solutions are working).

I will upload the business plan that has the written section for the problems and the solutions so you can see how it ties together.

Essay Instructions: Background: identify problems related to the vertical integration process in your
selected organization-ciba vision. Next, you will propose solutions to solve the identified problems. Further, you will create a plan for implementing and evaluating the effectiveness of the solutions identified. I will be uploading the identification section of this plan.

Two page paper, one inch margins and no direct quotes.

Draft the Recommended Solutions section of the mini business plan, including the rationale for selecting the solutions to be included in the plan, and send it to the team leader.
Draft the Solution Evaluation section of the mini business plan and send it to the team leader.