Information and material delays effect on price setting, operating contribution margins and cash conversion cycles in feed ingredients supply chain

Abstract

PurposeThe purpose of this report was to evaluate the effectiveness and practicality of system dynamics modeling in integrating econometric equations to describe the effects of supply chain material and information delays on pricing decisions and consequent financial results in an animal feed export business.Design/methodology/approachAn empirical dynamic model, loaded with econometric theory of price effect on competitive demand, was used to describe the input data.FindingsThe model simulation outputs proved themselves relevant in analyzing the complex interconnections of multiple variables affecting the profitability in a commercial routine, supporting the decision process among sales managers. The impact of information delay on price decisions and business financial results were estimated using the model proposed.Originality/valueThis paper describes an empirical model, based on system dynamics, that predicts operating contribution margins and cash conversion cycles based on estimation of information and material delays in a supply chain. The method is pragmatic and simple for business routine implementation.