The feed and livestock business is notoriously competitive, one where margins are thin while risks high. Improving productivity and efficiency across the plant is paramount to keeping costs lean and quality on top.
Yet productivity plans, carried out without proper in-depth study of the business structure and dynamics of an integrated agri-food supply chain, can often hamper growth without producing the desired results This was the case for Thailand’s Betagro, which found that its previous efforts to improve productivity among various suppliers and departments proved ineffective in dealing with the challenges of managing a fully integrated livestock and processing supply chain business.
“As the company was growing bigger, we knew that we needed a system that could integrate all our productivity operations effectively,” says Vanus Taepaisitphongse, CEO of Betagro Group.
Starting primarily as an animal feed business in 1967, Betagro Group today consists of six business units spanning feed, poultry, swine, animal health, food and other businesses. In 2008, the company posted revenues of $1.3 billion, of which exports account for a significant share.
The Japanese market is among the most important for Betagro, which has a history of joint ventures with companies such as Mitsubishi, Ajinomoto and Sumitomo, in supplying frozen and processed pork and poultry products to Japan. In 1993, Betagro entered into an agreement with Sumitomo Corporation to supply Specific Pathogen Free pork products. To date, the company operates the only SPF swine farming and pork processing plant in Thailand, mainly for export to Japan.
Growth in its integrated operations soon made it necessary to improve on its first in-house productivity improvement program, established in 1998 after the Asian financial crisis. By 2000, this system was deemed “unsystematic” and ill-suited to meeting its expansion needs.
Tapping on the expertise of its Japanese joint venture partner, Betagro further developed on Quality Management system by incorporating the “Kaizen” concept into its previous productivity model. A Japanese business philosophy that espouses continuous gradual change as a strategy for improvement, Kaizen involves activities that incrementally improve all functions of a business, from manufacturing to management, and from the CEO to workers on the assembly line. By improving standardized activities and processes, Kaizen aims to eliminate waste along the lines of lean manufacturing practices.
In 2006, Betagro Group launched its latest productivity improvement initiative, the Total Productivity management or TPm, to boost efficiencies in an integrated supply chain. Applied across all levels of the corporation through a top-down management approach, one of the hallmarks of Betagro’s TPm is the setting of pre-determined, well defined targets. Resources are then allocated towards achieving these targets, according to their significance and overall contribution to the company.
Targets are first identified. These can be financial goals, such as those relating to profit or revenue, or non-financial goals such as reducing bottlenecks and packaging waste. Next, these targets must be well defined with set parameters, which are then thoroughly communicated to all workers involved. For instance, this could be about meeting a percentage profit goal or reducing packaging material used per unit by a certain quantity.
Key to the success of TPm is the effect that individual performance has on the organization’s final goal. Each unit in the plant, for instance at the slaughterhouse or packaging line, has a scoring system to track on improvements made, as well as regular self assessments within the unit. Surprise checks and audits are also conducted through the company’s food safety and quality assurance scheme.
Ultimately, all Kaizen activities arising from better floor arrangements should translate to higher profitability, says Vanus. In addition to the significant profit increase, TPm also resulted in an improved business and worker environment, better alignment of individual and organizational goals as performance improved due to a greater sense of work ownership, and improved integration through collaborations and initiatives between different lines.
Targeted improvements for growth
Programs to improve productivity are part of Betagro’s Quality Management, says Vanus. “This is an internal system that ensures that our products are safe enough for export. From our partnership with Japanese companies, we know that with increased competition, quality standards must go up. On consultation with our Japanese partners, we decided to adopt the Japanese work methodology focusing on continuous improvement, or Kaizen, as a means towards achieving higher productivity.”
Often, the incremental changes made to enhance workflow productivity are nothing more than simple measures. One of these involved reducing the distance a product moves along the cutting line. By rearranging the worker movements on the conveyor belt, the average distance moved per unit dropped from 9.61m to 5.87m, an improvement of almost 39%. This allowed a larger portion of the belt to be freed up and increased the cutting volume.
High productivity at the feed mill was realized by looking at several parameters. To raise capacity, it was necessary to enhance the Overall Equipment Effectiveness or OEE, thereby reducing bottlenecks. It was found that the bottleneck was occurring at the pelleting process, which ran at 61 tonnes per hour, compared with the higher 80 tonnes per hour for the grinding and bagging sections, and 72 tons per hour for mixing. By reconfiguring the production line, capacity was raised to 41,800 tonnes per month and pelleting OEE was improved from 70.7% to 81.7%, resulting in a reduction in operation hours and total savings of 8.1 million baht per year for the plant.
In the more labour intensive yakitori meat processing line, it was found that grouping workers of the same performance levels and efficiencies together helped raised overall productivity. Previously, due to the lapse between the production of chilled and roasted yakitori products, drip loss in the final product with a 75 gram specification meant that an extra 2 grams of meat had to be added at the start. As supervisors were better able to manage the new teams of workers of similar skill-levels, overall worker productivity across both the chilled and roasted lines improved, saving the extra 2 grams of meat per stick with an overall realized savings of Baht 12.2 million per year for the company.
Ready for 2010
Early this year, Betagro Group shared its optimistic forecast for increasing exports of chicken products, as a brighter economic outlook is helping spur demand in its existing markets, as well as create new opportunities in countries such as Spain. In line with stronger exports for Thai poultry products overall, Betagro expects its exports this year to reach 54,000 tonnes, up from 40,000 tonnes last year. Thai poultry exports are forecast to exceed 360,000 tonnes, compared with 350,000, reports the Bangkok Post.