Logistics trends and their implications for competitive strategy: The case of domestic wheat flour milling

The purpose of this study is to examine the future structure of the domestic flour milling industry in light of various trends in transportation and production currently evolving in that industry. Specific objectives of the study are: (1) to examine logistical trends in the wheat flour milling industry, in particular those relating to transportation and production economies; (2) to project the impact of these trends on the future structure of the industry in terms of location changes and industrial concentration; and (3) to recommend future strategies for survival which might be followed by firms in various size categories.; The approach taken in this study is to develop two hypothetical but realistic models of industry segments. These models represent the transportation--both inbound and outbound--and production aspects of the industry in the relevant segments. One model describes the interfirm dynamics within a single production region where all the production facilities are relatively close together, although the market territory is rather large. The other model represents the interregional dynamics among production sites where facilities in each region compete for share in common markets.; This study arrives at several conclusions. In the single production case, (1) at current capacities, the plants which can operate at the lowest costs (i.e., the largest plants) will dominate, no matter what the transportation trends look like. Furthermore, since the large plants are the ones which can probably negotiate the best transportation prices, they enjoy an even greater advantage over the small plants. (2) under an unlimited capacity scenario, plants in a good locational situation (i.e., potential for low transportation costs) might risk a major expansion in order to achieve competitive production costs. This will further exacerbate the current overcapacity situation in the industry, however.; In the multiple production region case, large, low-cost plants again dominate, but transportation costs become the deciding factor in interregional competition.