Retailer based aggregation

Whereas a reduction in production may actually increase the aggregate farm income and produce serious income distribution problems, the consequent reduction in marketable surplus would cause a significant rise in the cost to consumers, because of the inelastic consumer demand for most agricultural crops. Therefore, at the consumer level, losses based on farm prices are not appropriate and are likely to be conservative. Because of percentage markups and fixed wholesale and retail marketing costs, the cost to the consumer of agricultural losses could be twice as great as that observed at the farm level—i.e., a 300 million loss at the farm level in 1974 could represent a 600 million loss to the consumer. 

Let DP denote the set of desired products (or aggregated product families) of the system. These can be manufactured at plants, P, by utilising various resources, RS. The products are subsequently transported to and stored at warehouses, W. Products ftom warehouses are transported upon customer demand, either to distribution centres, D, or directly to retailers, R. Retailers receive time-varying orders from different customers for different products. Satisfaction of customer demand is the primary target in the supply chain management mechanism. Unsatisfied demand is recorded as back-orders for the next time period. A discrete time difference model is used to describe the supply chain network dynamics. The duration of the base time period depends on the dynamic characteristics of the network. 

Typically shelves are manually checked, orders are raised by hand and are sent, generally by e-mail, to the regional warehouses rather than direct to the distributors. The regional warehouses manually load orders received from retailers into a computer system. The computer system aggregates orders which are e-mailed to the distributors. As stock outs at retail are unacceptable, to avoid late deliveries regional warehouses find it prudent, indeed necessary, to carry stock in anticipation of orders, and to order ahead of actual demand in anticipation based on past seasonal danand, and late delivery from suppliers further up the supply chain. 

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