The fact that chicken production and consumption has increased nine-fold in the past 40 years while the average cost per pound to produce chickensfactoring in inflationhas declined by eight-fold, demonstrates just how far the modern chicken farm has come from humble, low-tech roots.
Over the past 50 years, chicken producers and farmers have done everything they can to reduce the costs and time it takes to grow a commercial chicken on the farm and process it into ready-to-serve pieces. Now the emphasis is on the supply chain and how to use technology such as an electronic exchange network to get a better read on demand for today’s more specialized, ready-to-serve products.
While many of the advances made in the chicken industry over the past 100 years were mainly a product of trial and error, information systems have stepped into the breach to deliver the two most important elements needed for any mass production industry: speed to market and the reduction of manufacturing costs through efficiency.
“The technology has changed everything about chickens,” said Brian Sheldon, a poultry science professor at North Carolina State University. “At every step along the way, computers and manufacturing equipment are making it possible to yield more chicken, and better chicken, in a shorter period of time without having much effect at all on the price per pound.”
Virtually every chicken produced in the U.S. comes from contract farmers who enter into partnerships with major chicken processors and distributors such as Tyson Foods, Gold Kist, Pilgrim’s Pride and ConAgra Poultry. In fact, this quartet produced more than 48% of all the chicken sold in the U.S. last year.
This form of vertical integration is perhaps the most important factor in reducing manufacturing costs in the past four decades by trimming transaction costs, increasing capacity utilization and providing better quality control as well as a more uniform product.
“For example, a Tyson farmer will know before the chicks arrive from the hatchery whether they are destined to be used for Chicken McNuggets at McDonald’s or breaded breast filets for Costco,” said Nicholas Anthony, a professor of poultry science at the University of Arkansas.
This system also virtually eliminates the costly possibility of either an oversupply or shortage of chickens for the manufacturer and, in turn, the eater of food. Combined with the electronic exchange networks, chicken manufacturers eventually will have a crystal-clear view of the level of demand from distributors and retailers and can adjust their farming specifications and schedules accordingly.