Reducing Shrink in 2014

With the New Year just weeks away, many facilities are looking at improving their operating efficiencies heading into 2014. Over the last 5 years we have helped numerous companies measure their operating procedures by assisting them with a plant audit study.  The output from these audits has produced several interesting results that appear to be common to most companies.  We thought we would share some general findings that you might benchmark to your plant.

 

As a reminder the current standards for shrink in the various types of plants are as follows:

Fluid Milk                            1.0%

Cheese                                2.0%

Cultured Products                3.0%

Ice Cream                           5.0%

 

Finding # 1 – Efforts Wasted

Most plants we audit have a quality improvement team that has spent a lot of effort trying to assess loss in the plant.  Improvements are made, but after a few months the team becomes adrift as the initial results reveal some opportunities. The attack lacks a sufficient means of measuring the changes for results. Quite often the team lacks the experience of working with a variety of plants to know the places for providing the most bang for the buck.  This is where an experienced, industry-specific consultant can make a world of difference.  Mass balance experts who have done plant audits before know the importance of six sigma concepts.  This might cost money on the front end but can often teach the skills to the plant and enable them to attack the problem in an organized and reproducible manner for years to come.

 

Finding # 2 – Quality Counts

The amount of degraded product and waste created by a production department quickly adds up.  Many places don’t really appreciate the full cost of this waste.  Items such as loss of sales margins (average about 6% during our audits) higher inventory costs (2 – 3%) of the non-dairy inventory value.  Does production management know what the cost of waste is?  Do the line employees know the product standards and the causes of the degraded product?  What options exist for reducing this waste?  Most of the time this does NOT require buying new hardware but implementation of a good cause and effect analysis can help reduce this dramatically.

 

Finding #3 – Procurement Shrink

Plants buying milk from a host of sources such as producer milk, outside co-op milk, condensed skim, etc. are struggling to pull all of this information together. This entails quantifying how much procurement shrink they have by source and quantifying that shrink at the weight and component level.  Spreadsheets are rampant and the information is usually suspect.  Some plants don’t believe it is important to quantify this if their source contract for milk is on producer weights and tests. But if you can’t quantify the procurement loss, how can you adequately manage quantity and control the plant shrink?

 

Finding #4 – The Unknowns

Just about every audit has found a disconnection of information from the time the dairy liquids are tracked into the raw silo and the batch or vat.  What goes on in the middle is not always understood, tracked or controlled due to lack of ability to track the liquids at the component level.  The time to realize a return on investment in this area is usually very short – two months or less is the norm.  Some people will tell you it would take a six-figure investment to tackle this area; it is simply not true.

 

If you would like more information on our consulting services or other offerings from Data Specialists, Inc, please visit our website at www.dataspecialists.com or call 262-723-5726 for more information.

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