Concept of Production Function
The production function is a mathematical formula that describes the optimal relationship between the variables and quantity of input for production and the output quantity. This idea was chosen because it explains questions about marginal productivity, output, and the most cost-effective manufacturing means. Entrepreneurship, labor, land, and capital are the four main components of this economic model because it relies heavily on them as inputs (Kalkuhl & Wenz, 2020). Producers usually use the production function to determine how much they can make with the four variables above. Furthermore, it helps choose the optimal combination of inputs to maximize output while keeping costs low.
Producers observe the price factor and output levels, another rationale for selecting production. In addition, the production process in every factory involves transforming raw materials into finished goods. So, the components define the quantity of output that optimizes output concerning cost and profit (Kalkuhl & Wenz, 2020). Knowing how much output a company has to create to make a profit at a given price of goods is, thus, dependent on the production function. The output and the combination of inputs at a fixed cost of capital and labor are established using this method.
Additionally, the choice of production function was motivated by diminishing returns to scale, in which a company’s marginal cost grows as output levels increase. Due to diminishing returns to scale, raising the output quantity in response to a similar increase in the input amount has less effect. It can be done using the production function (Kalkuhl& Wenz, 2020). In addition, this function can be used to calculate the marginal cost increase.
Production Function of Sanderson Farms
The Laurel, Mississippi-based Sanderson Farms is a primary chicken and turkey producer in the United States. With 13.65 million chickens per week, it is the United States third-largest poultry producer (“About,” 2022). They joined with Wayne Farms on July 22, 2022, to form Wayne-Sanderson Farms. A partnership between Cargill and Conti controls the new firm (also known as Continental Grain Co. or ContiGroup) (“About”, 2022). Sanderson Farms has locations spread out over the Southeast to provide the freshest chicken to its consumers.
The majority of the feed mill’s grain comes from the Midwest. A 75-car train on the Norfolk-Southern line brings the corn to the processing plant. Corn is sourced from within the country as well. The plant can accept around 45,000 bushels of grain per hour. Before being utilized as a breeder or broiler feed, whole grain corn is ground into coarse and fine types. For the grinding, a hammermill of CPM RoskampChampion is used (“About,” 2022).
Hayes & Stolz 12t mixers combine the materials once accurately measured. If pelletization is the goal, the mixture is sent to an 80-tonne mash bin above the pellet mills. Otherwise, it is sent to the loading dock for breeding material (“About,” 2022). A conditioner prepares the feed before it is sent to a pellet mill. The pellet mill can process up to 85 tons of material per hour(“About,” 2022). After going through a cooler and a crumbler, the pellets are ready to be loaded into storage containers.
Feedmill manufacturing relies on corn, machine workers, and several machines (including a pellet mill, conditioner, cooler, and clumber). The Production function establishes how much of a feed mill’s output is generated for a given number of inputs. Since all three factors influence the company’s output, they collectively form the Sanders firm’s “production function.” Feedmill output is only maximized by finding the optimal configuration of corn, machine operators, and machinery.
If a business wants to stay ahead of the competition, it must prioritize the production function above all others. Profitability in business is directly proportional to the extent to which the variables in the production function are optimized. Sanders Farm has successfully maintained its competitive edge because it has found the optimum combination of the three factors that comprise its production costs. Consequently, increasing productivity is guaranteed by optimally setting up the variables in the production function.
References
About. (2022). Sanderson Farms. Web.
Kalkuhl, M., & Wenz, L. (2020). The impact of climate conditions on economic production. Evidence from a global panel of regions. Journal of Environmental Economics and Management, 103. Web.