Research Reports
A Study on Improving Logistics and Distribution of Meat Products toward Free Trade Agreement
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AuthorWoo, Byungjoon
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Publication Date2010.04.30
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Original
The main purpose of the study is to analyze feasibility and set up master plan of establishing meat products distribution center which is targeting capital area consumers. To do this, this study deals with several issues such as domestic meat products distribution and logistics problems, National Agricultural Cooperative Federation(NACF)'s future plans of improving meat produce and distribution competitiveness toward upcoming Free Trade Agreement(FTA), and other related issues.
Korean meat distributing industry faces several problems such as unorganized meat producers and their low market power, hygiene problems of meat processing industry from a rarely adopted batch processing system, delayed respond to the changing marketing environment, and high cost inducing marketing channel and its fixation. To deal with these problems, it is necessary to integrate meat producing, slaughtering, processing, and marketing activities. The integration ensures enhancing market power of meat producers. Thus fostering meat packer from an integration is a key factor to improve efficiency and competitiveness of domestic meat industry.
The meat products distribution center which is analyzed in this study is playing an important role as a link between packer and capital area consumers. More precisely, the meat products distribution center is expected to contribute to merge small less competitive brands, reduce distributing cost, foster meat packer, effectively adjust meat demand and supply.
To analyze economic benefit and financial feasibility of the meat products distribution center, this study calculates a handling capacity of the center using NACF's future domestic meat marketing plan and Korea Rural Economic Institute(KREI)'s agricultural outlook data. With the calculated handling capacity, this study analyzes three proposed site alternatives to establish the meat products distribution center. The estimated economic benefit of the center for 10 years cumulative were 67.26 billion won with NACF's plan and 58.91 billion won with KREI's data. The economic benefit is based on reduced logistics costs and boxing material costs.
Among alternatives, the study counts out "Karak Market" for its limited available space and tight regulations. Thus "Eumsung Market" and "Boocheon-Ojeong Logistics Complex" are considered remaining alternatives. With the alternatives, the study estimates the total constructional and operational cost of the facility which ranged between 23.3 billion won and 88 billion won with NACF's plan while 20.6 to 85.9 billion won with KREI's data.
The results of the financial feasibility analysis show that in a short-term, establishing the center in "Eumsung Market" is financially better than in "Boocheon-Ojeong Logistics Complex". However, "Boocheon-Ojeong Logistics Complex" can provides more available spaces and operational options than "Eumsung Market". This characteristic affected long-term financial condition and makes "Boocheon-Ojeong Logistics Complex" can earn 2.2 billion won more compare to "Eumsung Market" after 10 years of operation.
This study identifies that it is necessary to introduce the meat products distribution center to reduce marketing costs and improve meat hygiene and safety. In addition, the center facilitates restructuring of domestic meat industry by ruling out several deficit operational slaughters and processors. However, it is important to point out that acquiring adequate handling capacity and products stock is the key factor of center's success.
Researchers: Byung-Joon Woo, Seung Yong Gouk, Hyun-Joong Kim, Jun-Hyung Kyung, HAUD Engineering
Research period: 2009. 9. - 2010. 4.
E-mail address: bjwoo@krei.re.kr
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