A recent news story in the Brazilian press drew my attention. It reported on the Pilgrim’s Pride huge Q3 loss – US$162.5 million – and on the plan the company’s board architected to overcome the recent bad results experienced by the poultry processor giant. According to the news, JBS’s CEO, Mr. Wesley Batista, must execute a plan to restore the company’s financial health includes a dramatic cost reduction approach in parallel with an increase in the operational productivity, which targets primarily at operational efficiency gains.
As part of the effort to increase the operational productivity, Pilgrim’s will be the remodeling its plants deboning lines to increase the overall processing yield. Currently, most of company’s deboning lines are fully automatic, which from the CEO’s standpoint is not the most suitable solution for this kind of process.
“In spite the automation being helpful in reducing the labor costs, it has at the same time a tremendously negative impact on the processing yield, given the machine cannot perform a job as careful and meticulous as an employee, whom is able to carve out every single piece of meat from the chicken carcasses,” says Mr. Batista. In the stream of this meaningful change, Pilgrim’s claims it could generate some US$100 million annually, only from the future partial manualization of the deboning lines, thanks to the increase in the deboning yield of 8 million carcasses a day.
Even in countries like Brazil, where labor costs are still relatively lower compared to USA and EU and, thanks to it, the manual cut-up and deboning lines still predominate over the automatic ones. The degree of processes automation has been growing slowly but steadily thanks to a gradual reduction in the human capital availability. No doubt Pilgrim’s strategy goes in the opposite direction to what has been seen and done around the world. However, we’d better wait and see what the experience will teach them and to some extent the poultry industry as a whole!