Why do dairy manufacturers want to benchmark?
Should dairy Manufacturers benchmark
Is there a benefit to dairy manufacturers benchmarking?
Why do dairy manufacturers benchmark
What’s The Problem With Benchmarking?
Benchmarking, if we aren’t careful, can waste our time and even be counter-productive to our lean efforts.
Consider the two results of benchmarking:
1) If the benchmark is better than your current performance it will drive you to improve, BUT benchmarking does not provide the necessary information on how to improve.
2) If your current performance is better than the benchmark, this does not incentivise you as there is little incentive to improve. At best, it drives the same behaviour that lean thinking would drive, but contains a risk of inviting apathy into your staff.
Targeting dairy manufacturer costing activities and understanding dairy market competition can be beneficial to an organization trying to level set their pricing and procedures with customer expectations. Some benchmarking can help an organization prioritize where improvement efforts should be focused, but this benchmarking should be done with extreme caution.
If we truly believe there is ALWAYS room to improve, and want our organization to be relentlessly dedicated to continuous improvement, what value does an external benchmark provide? Would it not be better to use your metrics from last year, last month, or last week to provide a foundation from which to drive improvement?
Is it not more beneficial for us to always be raising our own bar, and never be satisfied with our current state?
Dairy Manufacturing Key Performance Indicators (KPI's)
Dairy Key performance indicators
There are two main types of KPIs when benchmarking Dairy Factories - financial and physical.
A benchmarking report is an ideal starting point for discussion with your fellow Directors or Managenent team. Benchmarking helps by more clearly understanding how much room there is for improvement. Benchmarks also assists dairy due diligence / dairy investors in establishing the potential upside of an acquisition.
Carry out a review of the Dairy manufacturing operations to confirm that the processes are stabilized (Dairy Operational Efficiency. Review the Dairy Factory flow (logistics) to ensure it is optimized for organizational efficiency. Review who does what and prepare a detailed organization chart (if not available), if available confirm that the chart is optimizing resources across the group Dairy Factory performance management systems are standard practice amongst most large dairy manufacturing companies as these increase communication efficiency, management control and enable continuous improvement. These are integrated into the organization as way of working during meetings, by means of learning on the job up until it becomes second nature.
Back to Basics Prioritization:
Concentrate on the quickest wins first.
Separate genuine constraints from operating assumptions and leverage human capital. (make best use of staff)
Split operating constraints into two lists, those that improve the cost performance of what is done now and can impact immediately.
The second is those longer term constraints that require some cost and profit analysis to determine things you may stop or change as a result of negotiations with the Sales group and customers in the future.
The former should be established first, with the second being the things that could be improved in a second wave.
Improve those constraints that have an immediate Impact:
In order to drive productivity we must probe deeper into where opportunities are. e.g. there is little change that can be made on input or commodity costs, “they will be what they will be”. Likewise the cost per hour of energy and labour is fixed.
You need to establish how to run the equipment you have today, better and produce more with it, replacing or re engineering specific pieces only when you can prove the improvement exceeds the investment. The focus becomes making better use of the assets you have, so we need to keep a very close track of what goes wrong, for how long and what causes it.
Throughput analysis of key “bottleneck assets” will uncover “point improvement” opportunities.
These are all tactical and possible to address in weeks and without negotiation with customers: Put simply: Can you do the same with less cost (you can, but it important that managers provide the answers to this in order to own it for their department and they need to be “led” into this by the consultant working with your team).
ASK the questions:
- Same volume, fewer personnel or in less time?
- Same volume, fewer materials, stop- overfilling and yield losses?
- Same case count in less time, by speeding up changeovers, preventing speed adjustments and repetitive downtime incidents?
Consider changing what you do based on an analysis of its profit contribution:
- Same stock keeping unit, (SKU) less costly materials or share the same materials across more product lines??
- Fewer SKU’s, longer, simpler to manage production runs??
- Fewer pack size and materials variations, leading to longer, simpler more cost effective production runs??
- In summary, attack the things that can be done in weeks and which have an immediate impact on the cost of current production activity. ?
- The priority must be to identify and monetiz these ‘core’ opportunities and understand the key barriers to improvement.?
So, what are these “core” activities that we know matter in a typical production run’s cost performance?
- Downtime & minor stoppage avoidance
- Changeovers over-running
- Machine settings adjusted by operators
- Slow running of the line
- Over filling of the SKU
- Yield loss through waste
Lack of intervention action taking place during the run when these things occur as they will occur. Addressing the last of these can provide the best opportunity for improvement in the shortest timeframe and can unlock potential improvements in all other areas: Human Capital is the key.
Back to Basics people productivity
Leverage your number one asset to generate long lasting improvements.
Most hourly paid workers and supervisors are smart people. They don’t need an ‘expert’ continuous improvement management committee to guide them in every aspect of their jobs.
If staff were 10% more productive you could remove the 10% most disruptive, least productive and make everyone’s life that much more pleasant. Your staff are your untapped “innovation”. Some Managers are in wrong locations, good people but playing in the wrong or multiple positions so consider is it time for a small “management reshuffle” Line staff can tell us exactly what causes equipment rate reductions, changeover delays, minor stoppages that go unrecorded and reasons for scrapped product. Line staff are able to pinpoint the problem and do something about it. Very often we just don’t ask them to do this, let alone equip them to systematically improve processes.
Obstacles – remove them
What prevents line staff from acting?
Visibility by the line staff, of the occurrence at the time it occurs, and the absence of an organized working practice to follow when such issues occur.
A “Blame and penalty” culture is present in many businesses and this behaviour MUST be actively discouraged as staff who perceive a threat in attempting to do something will avoid doing anything so as not to incur the wrath and punishment of the company. (everybody wants to be safe and hide from controversy)
Let people make mistakes and instead of looking for blame look to learn and strengthen from the mistake and avoid a reoccurrence. (we all make mistakes and poor not thought out decisions every day but without actually doing things, making decisions you will agree staff will not advance) If someone makes the same mistake more than twice without good reason then it is time to consider the individuals future with the company and he will know this and likely move on without help. It is the duty of senior management to see to it that these factors are addressed.
Basic issues such as:
- Increase visibility of efficiency to line workers during their shift.
- Increase visibility of recoverable production losses and ensure it is recorded against the line operators.
- End of shift meetings, do they happen and are they based on actual performance not “all is ok”.
- Monitor changeovers times and if they vary dramatically and also go unchallenged from shift to shift.
- Equipment settings should be fixed from shift to shift, and monitored.
- Data capture in useful KPI’s per shift should be implemented.
- Comparison of individual and team performance by shift helps identify training and discipline issues.
Dairy Production Key Performance indicators (KPI’s)
Reporting formats & reporting frequency to be established with the consultant E.g.
- Cost of labour per tonne produced.
- Tonnes per employee
- Milk cost per tonne
- Packaging cost per tomme
- Milk wastage cost per tonne
- Line utilization.
- Line Efficiency.
- Cost of Electricity per tonne of milk processed
- Cost of Water per tonne (m3) for a dairy manufacturer
It is important to relate it to cost per tonne as this gives a perspective as volunes fluctuate. These KPI's then become the benchmark for your plant to compare with similar sized busnesses. Care needs to be taken with benchmarking as the experience of staff, product mix, volumes, degree of automation, milk quality etc are all factors that need to be taken into account when comparing best in class dairy manufacturers with your poerformance. e.g. a best in class dairy manufacturer processsing liquid milk would use 1 litre or less of water per litre of milk processed.
Dairy Water and Waste Water consumption
Water consumption is an excellent indicator of the overall efficiency of the plant
Most of the Dairy production processes consume water and consumptioon can fluctuate between 1 litre or less and more then seven litres per litre of milk processed. The more water used then the more electricity, the more labour, the more waste water etc. A focus on water consumption will bring operational costs down across all areas but do not lose focus on other areas.
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