A comprehensive dairy valorization model

Summary

Dairy processors face numerous challenges resulting from both unsteady dairy markets and some specific characteristics of dairy supply chains. To maintain a competitive position on the market, companies must look beyond standard solutions currently used in practice. This paper presents a comprehensive dairy valorization model that serves as a decision support tool for mid-term allocation of raw milk to end products and production planning. The developed model was used to identify the optimal product portfolio composition. The model allocates raw milk to the most profitable dairy products while accounting for important constraints (i.e., recipes, composition variations, dairy production interdependencies, seasonality, demand, supply, capacities, and transportation flows). The inclusion of all relevant constraints and the ease of understanding dairy production dynamics make the model comprehensive. The developed model was tested at the international dairy processor FrieslandCampina (Amersfoort, the Netherlands). The structure of the model and its output were discussed in multiple sessions with and approved by relevant FrieslandCampina employees. The elements included in the model were considered necessary to optimally valorize raw milk. To illustrate the comprehensiveness and functionality of the model, we analyzed the effect of seasonality on milk valorization. A large difference in profit and a shift in the allocation of milk showed that seasonality has a considerable impact on the valorization of raw milk