Supply Chain Management, Research and Negotiation class

Introduction

It should be noted that in contemporary world sustainable fuel is attracting more and more commercial interest. Figure one illustrates the approximate allocation of the different sustainable fuel in contemporary fuel industry.

Supply Chain Management, Research and Negotiation class

This report is devoted to the examination of the company that deals with ethanol manufacturing in the United States. Mid Missouri Energy is corn farmer owned cooperative. The mission of this unity is “To Add value to our members’ production and improve the economic future of our communities” (Ultant, 2007). The organization makes a stress on the fact that it is 100% owned by farmers and operates in the sphere of creation alternative eco-fuel - ethanol. This agricultural cooperative strategic vision is perfectly reflect in the goals set by the members of the cooperative as they aim is prosperous farming: “Our goals are

- to create economic prosperity for our communities
- to foster a positive environment for our employees, and
- to maximize the return on investment for our members by adding value to area corn production.

Mid-Missouri Energy is committed to good corporate citizenship and utilizes state of the art technology to protect our environment while producing a renewable fuel that reduces America's dependence on foreign oil” (Mid-Missouri Energy, 2009). This company was chosen because of its quick development and obvious perspectives within the sustainable fuels industry. Ethanol is now becoming more and more popular fuel and winning the market. That is why the demands in such a bio-fuel is ethanol are growing significantly. The company under analysis m involved nearly 1800 workers for their manufacturing powers and their economic impact on the region increased: “Our impact in the region has increased economic activity in our state by over $169 million. And, in an effort to minimize the environmental impact of our plant, we are working to displace 90% of the energy needed to run the plant with clean-burning and naturally-renewable land-fill gas” (Mid-Missouri Energy, 2009). It goes without saying that the rapid development of the Mid Missouri Energy has great perspectives as now the car manufacturers think more and more about the alternative fuel for their production.

This report contains several parts and each of them contributes to the report fulfillment: introductory part provides brief description of the company and its current position; Industry analysis would include SWOT analysis and current position the company occupies within the industry; Supply analysis examine the company’s relations with suppliers; Price and Cost Analysis would examine the factors impacting the financial development of the company; Recommendation chapter would include recommendations, which are coming from the detailed examination of the company and the finale chapter learned lessons, would present my personal founding from the order fulfillment

Chapter One: Industry Analysis

This chapter would present industry analysis fully based on examination of the SWOT analysis, which reflects opportunities and strengths of the company as well as

SWOT Analysis of Mid Missouri Energy

Strengths

- plays significant on role in agricultural market, creating a new trend – as it was mentioned earlier ethanol is now one of the most wanted eco-fuel in the whole world. That is why it is not surprising that Mid Missouri Energy production is on the top popularity due the environmental situation

- impacts the economics of the region – the economics of the region, which is mainly agricultural is strongly dependent of MME, as it gives the farmers an ability to sell their corn on the price that satisfies them. This positively impacts the development of agriculture in the region.

- provides development of the alternative fuels – it won’t be a secret that MME and its ethanol plant make great contribution to the commercial development of alternatives fuels and their popularization.

Weaknesses

- Depending from the crops – the corn harvest, even when the contemporary agricultural technologies are used is still very unpredictable. If the harvest is poor than MME got to seek for the new suppliers and it is not an easy task as MME is formed as farmers’ cooperative.

- Seasonal performance – it’s a well known fact all the companies, working with agricultural suppliers are depending on the seasonal crops. That is really significant drawback, which prevent development of the company as corns could not be grown all the year round in this area.

- The alternative fuel is not wide spread in the area – this is also really significant drawback as MME had to seek for the customers in the other regions, this increase price and costs, due to the transportation. It also requires specifically equipped store place, which also affect the price.

Opportunities

- Provides greater perspectives for the farmers in the field of alternative fuel – as it was mentioned earlier eco-fuel is really perspective in contemporary fuel market and the interest of potential consumers grow with every passing year

- Creates opportunities for the new usage of alternative fuel in agriculture – the expansion of alternative fuel has already started, now it is high time for the company to raise its productivity due to the popularization fact.

- Raise popularization of alternative fuel – MME could significantly assist raise of alternative fuels in the area it performs. This would help to decrease price and promote development of the market.

Threats

- The weather could seriously damage corn gather – it is among the most significant threats to the development of the industry and even crop insurance could just minimize the risk

- Ethanol is not a single alternative fuel in the market – this also impact the development of alternative fuel market and some investigators consider that in this competition ethanol does not have the winning position

- The cooperative is going to meet severe competition in the nearest future – the other commercial structures understanding the perspectives of eco-fuel promotion on the fuel market are already working within the industry. That is why the cooperative fully owned by the farmers appeared in really scrutinized competition on the market. The Experts predict that the competition would increase with every passing year.

The Industry analysis revealed that the company is operating in the highly perspective and competitive market. Alongside with the strengths there could be observed a number of factors that create real threats to the development of the company within the industry. Hence it should be noted that in the present day situation the company successfully overcomes the difficulties, using its strengths and opportunities.

Chapter Two: Demand Analysis

Supply Chain Management, Research and Negotiation class

As it was noted earlier the demands of alternative fuel within the fuel industry is really high and the following graph illustrates the increase of the ethanol production during the 7 years in the United States. Hence it should be noted that the industry in the United Sates could not actually fulfill the demand of the market, despite the significant increase. Unfortunately alternative fuel industry is considered to be only perspective one and at the present moment could hardly fulfill the demands of the market in quantity of the fuel. The same time understanding the role of agriculture industry in the development of the alternative fuels the perspectives of this industry are really great: “Ethanol can be made from virtually any starch feed stock but is typically made from corn in the United States. A bushel of field corn will yield 1.6 pounds of corn oil or 2.7 gallons of fuel ethanol. But no increase in plantings will help satisfy the demand for fuel” (Zaleski, 2007). The core problem raised within the industry is the lack of the commodity; - in our case it is ethanol. As it was noted earlier the contemporary demands in fuel is really high and unfortunately contemporary development of the alternative fuel industry could not provide fully provide the supply by this resource of the demands. Some investigators consider that ethanol has no future in the fuel market and it would be immediately replaced by the new sustainable solution as far as it would be found. But in contemporary realities with lack of commodity (ethanol) determined creation and quick development of Mid Missouri Energy as a contributor to the demand fulfillment.

Chapter Three: Supply Analysis

As it was mentioned earlier Mid Missouri Energy is farmers owned cooperative and it goes without saying that the suppliers of the Ethanol Plant are the farmers, who are the members of this cooperative. It should be noted that such relations between the government of the plant and the suppliers provide as advantages as disadvantages to MME. MME is farmers’ cooperative and that is very important as it helps to participate collaboratively on the market of sustainable fuels manufacturing. It creates a number benefits to those who participate in MME/ It should be noted that the participants sell their products equally and get the income which is corresponding to their input. Everything is fair, especially when it goes to the relations manufacturer – supplier. Mid Missouri Energy as a manufacturer creates reliable and fair relationship between the suppliers of grain (as it was noted MME manufactures ethanol on its own plant) and the customers (who are actually the suppliers of the fuel). MME describes itself as the creator of the strategic alliance between the all types of suppliers involved: “MME buys grain only from shareholders and grain merchants” (Utlaut, 2007). This fact makes the company depending from the shareholders and the company could not work with the other suppliers of corn, instead of the shareholders. The same time we should take into consideration that more than 700 farmers became involved in MME and this makes the company rather independent from the every single supplier

Chapter Four: Price Analysis

The Ethanol price in the United States rates from 2.1925 US dollars per E – 100 gallon to 1.6666 US dollars per E – 100 gallon, the average price According to Ethanol Market Observer (2010) bids on 1.8392 US dollars per E – 100 gallon. It should be noted that Missouri, represented by Mid Missouri Energy provides a bid on ethanol price lower than the average 1.7847 US dollars per E – 100 gallon, which puts the MME in more preferable position than those whose bids are more than the average price and makes the commodity provided by MME more competitive. The following table gives a brief observation of the current ethanol prices for the different states:

Supply Chain Management, Research and Negotiation class


According to the analysts’ prognosis the ethanol price has tension to increase and some of them consider it would raise twice as much. Mid Missouri energy in such facilities is in more advantageous position, operating directly from the suppliers, who own MME. It should be noted that this significantly assist MME effective manipulation with the price, putting the company in the more favorable position than the other competitors. The same time it would be essential to take into consideration that the huge amount of commodity should be sold in the lower price for the huge amount.

Chapter Five: Cost Analysis

The effective cost analysis should implement a number of significant factors dealing with different expenses calculation, labor hours and rates and many other factors as for the MME itself as well for the suppliers, who enumerates more than 700 farmers. It goes without saying that such information would be really hard achieve and evaluate appropriately. But it would be essential focus on the partnership relations between the company and its suppliers it would be essential to note that they showed themselves as good and reliable suppliers, who keep to the terms of agreement and assist the development of the company within the industry.

Chapter Six: Recommendations

Taking into consideration all the following factors a number recommendations were driven in order to optimize and improve the current situation. It would be essential to note that the current situation with Mid Missouri Energy could be referred to as rapid development. The leaders are understand that they development and implementation of changes would make a good contribution for their efficiency. Perosnally I would like to focus attention on the fact that MME leaders should not forget about the alternative developmental strategy for the company:

Alternative Strategy for the Mid Missouri Corporation

Ethanol is not the only one product the Mid Missouri Energy Inc is providing, as it usually happens the co-products are also present in such type of manufacturing: “Carbon Dioxide and Distillers Grains are the primary co-products created during the production of ethanol. Carbon dioxide (CO2) is a colorless, odorless, tasteless, naturally-occurring chemical

Supply Chain Management, Research and Negotiation class

compound composed of one carbon and two oxygen atoms. The follow is the partial list of carbon Dioxide usage: Beverage Carbonate, Food Preservative (in gaseous form), Fire Extinguisher, Oil Recovery Tool etc. Distiller's grains are the non-fermentable components of corn. These components are rich in essential nutrients. The concentrations of the essential nutrients are generally around three times that found in the corn meal used to produce it” (Mid-Missouri Energy, 2009). It is essential that alternative strategy helps the Mid Missouri Energy Inc to reach the set goals and make a use of the co-products, making farming more efficient and perspective. Personally I think that rational use of certain resources supposes that the co-products also could be used for a good advantage of the cooperative

The Recommended Strategy for Mid Missouri Energy Inc.

Personally I support the idea to develop in the field of eco-fuel and use the alternative strategy just as alternative one and supportive. The contemporary environmental situation and situation on the market of oil show that in the nearest future the alternative fuels such as ethanol would be one of the most wanted on the fuel market. That is why the core strategy of the company would help the founders of the cooperative to reach the goals set. The active participation of the company in different activities in their professional sphere helps them to promote themselves on the alternative fuel market. The perspectives of this idea are really great and what the company should focus on is on the development of the price strategy that can significantly decrease the risks. Alternative strategy for MME could significantly assist such a development. Understanding of the significant of all factors and taking into consideration the suppliers’ needs has always been the strong part in MME Strategy. Making some improvements in the vision on the demands and price the company could optimize its task performance and raise profitability. The use of different analysis methods, examination of the industry and company in details added a lot to the development of the whole recommendations vision. Every chapter of this report

Chapter Seven Lessons Learned

In the end I would like to focus on the lessons I have learned when the provided the investigation. I came to the understanding that sometimes from the first look even effective performing company could face significant developmental and organizational problem. And situation from the first look is pretty different, when you provide a thorough investigation. Before starting the investigation I could hardly imagine that the sustainable fuels market is so very much competitive environment, regulated legally by the government and it won’t be easy to survive in such environment. I also understood that in some cases the company, which made a perfect start later, may face significant financial difficulties due to the legal regulation and severe competency. The same time I understood that equality became a good ground for the fair and effective relations between the partners and successfully developed discount system could benefit a lot to the price strategy, which is not among the easy ones. I came to the conclusion that different analysis let me understand the situation the company occurred in details. These different analysis methods changed my vision on the company and in future I plan to use different methods as this helps to avoid common mistakes and learn the real problems and advantages as they may differ a lot from the first vision on the situation. The use of different analysis methods, examination of the industry and company in details added a lot to the development of the whole recommendations vision. Every chapter of this report made a significant contribution to my understanding of the company’s current situation and making the right conclusions.

Reference List

1. Utlaut R. (March 2, 2007). Mid Missouri Energy. Agricultural Outlook Forum . U.S. Department of Agriculture
2. Mid Missouri Energy (2009). Products. Retrieved April 19, 2010 from Mid Missouri Energy official web site: http://www.midmissourienergy.com/products/index.asp
3. Mid Missouri Energy (2009). Mid Missouri Energy Welcome. Retrieved April 19, 2010 from Mid Missouri Energy official web site: http://www.midmissourienergy.com/index.asp
4. Zoller C., Bruynis C. (2007). Conducting a SWOT Analysis of Your Agricultural Business. The Ohio State University
5. Denis N. (November 2008). McKinsey’s Integrated Perspective on Bioenergy and Land Use. Workshop on biofuels and Land Use Change. São Paulo, Brazil.
6. Zaleski G. (March 4, 2007).Pumping demand for alternative fuels. The Times and Democrat. Orangeburg, SC
7. Pollik M. (2010). What are the Advantages and Disadvantages of Ethanol Fuel? Conjecture Corporation
8. Tay M. (September 27). Case Study: Reduce Energy Costs, Increase Production with Model Predictive Control. Ethanol Producer Magazine. BBI International Media
9. Reinhardt F., Weber, J., Shelman, M. L. (2007). Case Study: Mid Missouri Energy. Harvard Business Publishing
10. Ethanol Market Observer. Live Commodity Prices. Retrieved October 10th, 2010 from http://www.ethanolmarket.com/fuelethanol.html
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Supply Chain Management, Research and Negotiation class 7.9 of 10 on the basis of 3423 Review.