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Projects

Supply Chain Project

Introduction

The supply chain project is new way of helping dairy farmers look at their businesses. It is delivered individually using lean management techniques and involves the active participation of the farmers taking part.


Background

Up till now, lean management techniques have been used across many industries to minimise waste and increase competitiveness. The system has never been adapted for use on farm but having seen it work, SAOS initiated a trial project on a farm. Another intervention was funded by AHDB Dairy. Both projects proved very effective in highlighting a significant number of opportunities for cost and waste reduction.


This project

The aim of the project is to improve and secure the viability of the participating farmers and the wider MSA milk field by creating more resilient businesses with embedded capacity for ongoing improvement.

The key objective of the project is to introduce the principles of lean management into the dairy sector through the delivery of a series of individual lean management training sessions. The project will also:

  • Provide tailored work improvement plans for those who participate.
  • Provide farmers with the new approach to undertake their own lean management reviews and thus the opportunity for continuous improvement.
  • Share the knowledge established in the course of the project with the wider MSA membership.
  • Reduce the costs of milk production on the participating farms.

Project partners

The supply chain project will be delivered by three partners:

  • SAOS will manage the overall project. They are experts on farmer co-ops and food industry collaboration. For more about SAOS see http://www.saos.coop/
  • Cara Consultants. Cara provide farm and business management expertise and have wide experience of the dairy sector. For more about Cara see http://www.cara.co.uk/index1.htm
  • LEAN TeamGB was established with the aim of delivering high impact LEAN education, training, coaching and mentoring. They have extensive experience working in the manufacturing sector and lean management.

Cara Consultants and LEAN TeamGB undertake the work with individual farmers.

Case Studies

Case Study 15 – A Change of Business Structure to Enable Greater Control

General background:

This farm is a small to medium sized dairy unit running a herd of Holstein/Friesian cows. The livestock are grazed outside for as long as conditions allow and housed during the winter. Calving takes place throughout the year to maintain a level profile.


Project delivery:

Two farm visits were undertaken. The first visit established the key challenges facing the farm while the second visit considered how the challenges might be addressed using a simple linear approach. The key characteristics and challenges identified on the initial visit were:

  • Sound technical performance with cows yielding more than 8,000 litres/annum
  • A strong balance sheet providing an opportunity for additional borrowing to finance changes and improvements
  • Variable costs have been reduced significantly in recent years with the largest reductions coming from feed and fertiliser
  • Although variable costs have been reduced, they were recorded at 17.6ppl, 2.1ppl above similar sized units
  • Fixed costs have also been reduced but were higher than average with labour costs providing a significant opportunity to tackle

Improvement plan:

On the second visit the key challenges were examined in more detail. This was done using a “walk the wall” approach where the key processes of the farm were described, mapped and examined. Solutions were identified and an improvement plan was developed which included:

  • A change of business structure to enable greater control and more freedom to determine the future farming policy and related work/life balance
  • Preparation of a five year business plan to consider and determine policies for, herd size and output, land requirements, capital expenditure, labour and skills and key performance indicators (KPI’s)
  • Preparation of a financial plan with sensitivity analysis to enable the business to determine its ability to withstand periods of lower milk prices
  • Preparation of forward budgets to enable the ongoing monitoring of performance and a better understanding of the financial nuts and bolts of the business
  • A review of silage making to improve volumes and quality to enable further reductions in the use of concentrate feeds

Producer comment:

The supply chain project helped me reflect on a number of challenges which faced the dairy business. It was useful day and since the work was completed we have developed a business plan, changed the milking routine, stopped our cereal growing and tried harder to maximize our silage output and quality. The day helped me look at our farm in a new light and we have further changes to consider.  

Case Study 14 – Planning, Communicate Better and Join a Benchmarking Group

General background:

The farm is a family run dairy unit milking Holstein cows.  The cows are grazed for as long as the weather and field conditions will allow.  Calving takes place on a year round basis with milk output following a reasonably level profile.


Project delivery:

Two farm visits were undertaken.  The first visit established the key challenges facing the farm while the second visit considered how the challenges might be addressed using a simple linear approach.  The key characteristics and challenges identified on the initial visit were:

  • Variable costs running a little above the target range with feed costs being the largest challenge
  • Commendable control of fixed costs which have been reduced in recent years, power costs in particular were well below benchmark values
  • Sound technical performance from the business with average yields above 8,000 litres per cow
  • A number of small opportunities exist for ongoing improvement with low levels of debt providing a sound platform for future development

Improvement plan:

On the second visit the key challenges were examined in more detail.  This was done using a “walk the wall” approach where the key processes of the farm were described, mapped on the wall and then examined.  Solutions were identified and an improvement plan was developed which included:

  • Developing a 5 – 10 year business plan which included sections on forward strategy, finance and succession
  • The financial plan needed to include some sensitivity testing to understand what impact a volatile milk price might have and how it could be managed
  • Budgeting and monitoring performance to help aid the financial understanding of the next generation as they start take on more responsibilities
  • Improving communications between family members by resurrecting the farm diary so that everyone knew each other’s movements
  • Costing a range of different options to evaluate the best way to increase output
  • Members of the next generation joining a benchmarking group to gain more knowledge to help them look critically at their own business and find improvements

Producer comment:

The discussion at the mapping day pulled loads of valuable information together and helped to refocus our attention into key areas.  The report that came afterwards was a great summary and was useful in recent discussions with our bank, it made us look more professional.  The exercise was also valuable to help develop the next generations’ overall understanding of the farm. 

Case Study 12 – Monthly Management Accounts

General background:

The farm is a medium sized family run dairy unit milking Holstein cows on an indoor based system. Calving takes place on a year round basis with milk output following a reasonably level profile.


Project delivery:

Two farm visits were undertaken.  The first visit established the key challenges facing the farm while the second visit considered how they might be addressed using a simple linear approach.  The key characteristics and challenges identified in the initial visit were:

  • Excellent control of fixed costs which are at or below target benchmark levels and which have been reducing on a year by year basis
  • Solid technical performance from the herd delivering above average yields and a tight calving pattern
  • Variable costs running above target with feed and vet costs being the key opportunities for improvement
  • Costs of production running above the 2016 milk price, but with additional income from the single farm payment the business was profitable
  • Opportunities to reduce variable costs while maintaining the technical performance of the dairy that will increase margins going forward
    A need to reduce debt to improve the financial security of the business

Improvement plan:

On the second visit the key challenges were examined in more detail. This was done using a “walk the wall” approach where the key processes of the farm were described, mapped on the wall and then examined. Solutions were identified and an improvement plan was developed which included:

  • Developing a 5 – 10 year business plan which included sections on forward strategy, finance, improving profit and succession
  • Supporting the business plan, a need to expand the current financial recording system to produce monthly management accounts
  • Employing a nutritionist and using monthly costings to advise and improve the feeding regime for the dairy cows with the key aim of reducing costs while maintaining output
  • Consider selling an underutilized asset to reduce debt and to provide finance to invest in robotic milking which will help to increase output and maintain high welfare standards

Producer comment:

The project helped to confirm that our direction of travel was correct and it was helpful to have an external opinion of our future plans. I have already implemented two of the key recommendations from the work undertaken at the farm.

Case Study 11 – Improve Grass Utilisation

General background:

The farm is a family run dairy unit milking Ayrshire Friesian cross cows.  The cows are grazed for as long as the weather and fields will allow.  Calving takes place on a year round basis with milk output following a reasonably level profile.


Project delivery:

Two farm visits were undertaken. The first visit established the key challenges facing the farm while the second visit considered how the challenges might be addressed using a simple linear approach. The key characteristics and challenges identified on the initial visit were:

  • Excellent progress expanding the dairy herd and in developing the farm steading but this has resulted in higher property costs
  • Good levels of cash generation which have supported the family members but which are vulnerable to volatile milk prices
  • Judicious control of fixed and variable costs that have not increased markedly over the last four years but which need to be reduced
  • Reasonable technical performance with feed costs under control but with a calving interval which has the potential to be reduced
  • Low levels of debt providing a sound platform for efficiency focused investment

Improvement plan:

On the second visit the key challenges were examined in more detail. This was done using a “walk the wall” approach where the key processes of the farm were described, mapped on the wall and then examined. Solutions were identified and an improvement plan was developed which included:

  • Developing a 5 – 10 year business plan which included sections on forward strategy, finance, improving profit and succession
  • Supporting the business plan, a need to expand the current financial recording system to produce monthly management accounts
  • Improving grass utilization through tighter grazing management and by making better quality silage
  • Consider reducing the number of sheep to allow the better matching of stocking rate and forage acres to improve quality
  • Aim to increase milk volumes using better forage which will help to dilute costs and reduce the need for purchased feed

Producer comment:

The project really opened our eyes and it was helpful to have someone external to the business looking at what we did. Seeing all our costs written down was also very enlightening. We have been making changes in a number of key areas including feeding and will be using more management information in the future to guide our decision making.

Case Study 10 – Business Planning

General background:

The farm is a medium sized family run dairy unit milking Holstein Friesian cows on an indoor based system.  Additional enterprises on the farm bring other sources of income.  Calving takes place on a year round basis with milk output following a reasonably level profile.  Forage production is a key area for the enterprise.


Project delivery:

Two farm visits were undertaken.  The first visit established the key challenges facing the farm while the second visit considered how they might be addressed using a simple linear approach.  The key characteristics and challenges identified in the initial visit were:

  • Excellent control of fixed costs which are at or below target benchmark levels
  • Variable costs running above target but which have been reducing over the last two years
  • Feed costs contributing towards the higher variable costs but which were challenging to allocate to different enterprises due to insufficient detail in the farm accounts (the enterprises included the dairy, beef cattle, young stock and calves)
  • Costs of production running slightly above the current milk price, but with additional income from other enterprises and the single farm payment the business was profitable
  • Opportunities to improve the technical performance of the dairy that will increase margins going forward

Improvement plan:

On the second visit the key challenges were examined in more detail.  This was done using a “walk the wall” approach where the key processes of the farm were described, mapped on the wall and then examined.  Solutions were identified and an improvement plan was developed which included:

  • Developing a 5 – 10 year business plan which includes sections on strategy, technical performance, finance and succession
  • Supporting the business plan, a need to expand the current financial recording system to produce management accounts
  • Once the financial system is augmented, hold regular meetings to monitor, manage and improve performance
  • Undertake a costed review to consider the viability of 3x milking to boost output
  • Review forage production costs and the silage making system with an aim to increase the use of home grown forage and purchase less concentrate feed

Producer comment:

The discussion stimulated by the mapping day was very useful and helped to highlight a range of actions which provided an opportunity to improve performance.  The subsequent report also helped to summarise some of the key actions which we have already started to implement.  The whole exercise was extremely valuable and I would recommend it to anyone, particularly if you have a young family member joining the business.