Abstract
Improving the performance and economic sustainability of agricultural producers requires the integration of many dimensions, one of which is logistics. Establishing efficient and cost-effective transportation is a key element of establishing sustainable linkages along food supply chains between farmers, storage and transport companies, and consumers. In this regard, infrastructural constraints to sustainability in agricultural production exacerbate transportation costs and risks, and thus result in lower performance of agricultural producers. As fuel consumption is, first, the most significant cost in agricultural logistics and, second, particularly sensitive to disruptions of transport, loading, and storage infrastructure, management of fuel costs is crucial to assure profit margin of an agricultural enterprise. By transforming the standard economic order quantity (EOQ) model, the authors attempt to build an approach to the optimization of fuel costs. The analysis made in the cases of twelve large crop farms in three territories of Southern Russia allowed the consideration of: (1) fragmentation in storage infrastructure; (2) variations in fuel consumption depending on the vehicle load ratio; (3) the use of their own fleet of vehicles against the outsourcing of transport operations. The authors find that the tactics of optimization of fuel costs vary depending on the location of a farm in relation to grain storage facilities. Particularly, the farms located in areas of high concentration of storage facilities benefit from using their own fleet of vehicles, while those experiencing longer distances of transportation should outsource the performance of logistics operations to third parties. To overcome a site-specific nature, the transformed EOQ model should accommodate country-specific requirements, specifically, the level of fragmentation of transport and storage infrastructure, average distance of transportation from a farm to receival site, and average fuel consumption rates depending on the types of trucks commonly used by farmers. The key recommendation is that sustainability-aimed management of logistics costs should consider combining the operation of trucks by a farm with the outsourcing of transportation operations to address the fragmentation of transport and storage infrastructure.
Highlights
Logistics costs often represent a large portion of total supply chain costs [1], which is why cost reduction has always been one of the major performance objectives in logistics management [2,3,4]
In the Rostov region, grain storage infrastructure is more fragmented compared to Krasnodar, as the majority of grain elevators are concentrated in the south around the main distribution and transport hubs of Rostov-on-Don and Aksay (Figure 2)
Fragmentation provides competitive advantages to agricultural enterprises located in Aksaysky (Donskoy farm) and Egorlyksky (Zarya farm) districts in the forms of a shorter distance of transportation and more destination alternatives
Summary
Logistics costs often represent a large portion of total supply chain costs [1], which is why cost reduction has always been one of the major performance objectives in logistics management [2,3,4]. Total logistic costs reveal much about the locational dynamics of logistics activities, distribution centers, since they indicate the weight of the most important factors [5]. There have been several levels suggested on which the components of logistics costs can be broken down. Sople [8] identified three cost components, transportation, storage, and inventories, while. Rushton et al [9] added administration costs to those three. Ayers [10] identified five components of logistics costs: purchased materials and the associated labor, transportation, warehousing, inventories, and packaging. Lambert et al [11] and Zeng and Rossetti [12] ended up with another set of five key logistics cost elements: transportation, warehousing, order processing/customer service, administration, and inventory holding
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