Limitations in Production and Stocks and their Effect on the Profitability of the Slaughterhouses

The pig industry is important for the Danish economy with an export value of more than DKK 28 billions in 2006 [Danish Meat Association (2007)] and the competition is increasing. Therefore it is more important than ever to optimize all aspects of Danish pig production, slaughtering processes and delivery. The cost of logistical limitations in the equalization room has been estimated to DKK 0.072 per kg or approximately DKK 145 million per year in total for the Danish slaughterhouses The main conclusion is that even relatively simple optimization models can be used to improve the basis of the slaughterhouses for decision making considerably, both regarding computing the costs of having limitations in the production as well as the value of improved measurements and increased slaughter weight. Prices vary from one week to another, and consequently a price and cost study should be performed before the computations are used for actual decision support and more products and product alternatives should be included. Estimations of the economic consequences of improved measurements and of a general increase in the slaughter weight have been improved among other things by taking the logistic limitations into consideration. Compared to the previous model regarding improved measurements [Kjærsgaard, N. (2008a)], the new model uses the entire pig and not just the middle piece. Furthermore, the weights of different products are estimated in much more detail based on the actual registered fat layer and the slaughter weight for each pig. Regarding increased slaughter weight, the model is now improved by taking the important logistic limitations into consideration. This paper concerns the aspects of optimization at the slaughterhouses and addresses the modelling of physical logistic conditions. The description of the production processes and the logistic flow in this paper is primarily based on the conditions in one of the largest Danish slaughterhouses, used as model slaughterhouse. The model is based on the model described in the paper regarding the value of a general increase in the slaughter weight for pigs [Kjærsgaard, N. (2008b)] but is more accurate by taking physical limitations at the slaughterhouses into consideration. The model is a Mixed Integer Programming (MIP) model and is used to estimate the costs of logistical limitations in the equalization room being the central cooling room where the carcasses should hang for a period of approx. 16 hours. Furthermore, the model is used to find economic effects of improved measurements as well as a general increase in the slaughter weight. This paper concerns the use of Operations Research to solve these practical problems, which is of major importance for the industry.