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A simulation study of grain assembly from farm to elevator at six elevator points in Alberta Groundwater, Richard Austin

Abstract

The Canadian grain trade is faced with the prospect of change. It is therefore important to analyze the system for current efficiency and for efficiency under alternative configurations of physical facilities, alternative methods of operating, and alternative regulations. This study is concerned with a somewhat narrow subject, that of grain movement from the farm to elevator. Total costs associated with the assembly of grain were estimated at six elevator points: for the current configuration of facilities, after changes in number and capacity of elevators, after changes in farm storage capacity, after changes in hauling distance and truck size, and after changes in elevator location. The technique of simulation was used, and a model was constructed to provide a simulator of the system. The model was by necessity, simple, incorporating data to represent crop production, farm storage cost, ground storage cost, hauling cost, elevator cost, and rail shipments. Each change necessitated an additional computer run to determine the costs resulting from the change. It was concluded that a model using the technique of simulation could be constructed for the entire grain marketing system to capture the essence of the interdependencies. Ten experiments were conducted to estimate the costs associated with alternative configurations. The resulting estimates indicated that the current configuration is inefficient and that lower costs would occur following: (1) reduction in the number of elevators at each point, (2) a reduction in the number of points, (3) a reduction in farm storage capacity, and (4) by an increase in farm truck size. The cost of assembling grain with the current configuration was estimated to be 24.38 cents per bushel. It is possible given the validity of the model to reduce these costs to 13.76 cents per bushel by decreasing the number of elevators at each point, reducing farm storage capacity, and increasing farm truck size. The complete response surface was not mapped because of the great number of potential permutations, hence only ten discrete experiments were completed. However, indications were that one of the more important ways to achieve a lower per bushel cost of assembly is to increase the volume of grain through a fixed capacity country elevator system. It is important to examine these results in terms of the limited scope of the study for not all costs were accounted. That is, there may be external costs to the rest of the economy due to interdependence.

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