Other more aggressive packers are simply buying their way down the supply chain, installing their own genetics, information, and logistic systems in order to create brand equity. Supply insurance strategies become important in these approaches. All three approaches have pros and cons. Spot markets offer the advantage of allowing firms to underpay for specific quality traits, as these traits are not rewarded in commodity market prices. Spot markets also lower search costs as animals are brought to the market, and hence, to buyers.
Spot markets are also flexible.
The problem with this approach is that as animals are being contractually committed to other producers in the chain there is a high variance in quality, supplies, and measurement costs. These machines collect a considerable amount of data on each animal passing through at line speed. The goal is to analyze the quality of each carcass, as supplies are not consistent. A coordinated approach has developed from US cooperatives and other entities that engage in flexible, short and long-term contracts with producers. Cooperatives often compromise economies of scale and scope because their members are smaller-scale producers.