Managing Variation To Enhance Profits – for Sep. 23, 2010

Bernie Peet is president of Pork Chain Consulting Ltd. of Lacombe, Alberta, and editor of Western Hog Journal. His columns will run every second week in the Manitoba Co-operator.

After three years of severe losses, a much smaller Canadian pork industry has been enjoying moderate profits for most of 2010. However, the key word is “moderate” because, thanks to a near-par dollar, the hog price in Canada has been reasonable, but not exciting. Producers are making modest profits and trying hard to regain the massive amount of equity lost from their businesses.

With significant expansion of production in North America unlikely over the next couple of years at least, profitability will likely remain positive but modest over that period. This means that Canadian producers must look hard at how to squeeze additional margin from their system. While there are many obvious areas to address, notably feed and energy costs, reducing production variation and achieving key production targets more consistently is a very effective route to higher profits.

Large swine operations are becoming more and more like industrial manufacturing facilities, but often fail to have effective management processes in place to ensure the desired outcomes from the system. Implementing some quality-management procedures can improve effectiveness and produce more consistent results.

WRITE IT DOWN

One of the biggest causes of variation is that people carry out tasks in the barn in different ways, according to the way they were originally taught and their subsequent experience. Therefore, the first step is to define the way in which tasks should be carried out, when they occur and the measurements of success or failure. Many larger operations have Standard Operating Procedures (SOPs) for key tasks and, while writing these is extremely time consuming, it is very worthwhile. Not only do they define each stage of critical tasks, but they allow staff to contribute to deciding exactly how processes are carried out, creating “buy-in” to the final result.

Also, once written, SOPs should be reviewed periodically by management and staff to incorporate any improvements, for example to implement new research findings or from staff suggestions. Having staff involved at all stages of this process empowers then to contribute to better outcomes and also improves motivation.

Alongside a given set of SOPs, for example for farrowing procedures, some key targets should be set, again with staff involvement. These might be common production measures such as the percentage of stillborn piglets or pre-weaning death loss. They can also be less widely used measures which are still critical to success, such as the total amount of feed the sow consumes in lactation or weaning weight. The most important aspect of target setting is that staff agrees that targets are realistic and achievable and that they are regularly reviewed and modified if necessary.

CONTROLLING CHANGE

Effective use of SOPs and targets results in greater consistency and more motivated staff, but the most powerful part of the methodology is to create controlled change. Note that I said change, not improvement: when a change is made, the outcome must be accurately measured and a decision taken as to whether the change is positive, neutral or negative. Ideas for changes must come from everyone in the production system and be thoroughly discussed and agreed before implementation. Creating a culture of change will result in greater staff involvement and more rapid improvements in performance, cost savings and profitability.

Central to active staff involvement in the process of monitoring outcomes is the need for good information. Key production data should be provided to staff and reviewed regularly.

For example, Henrik Jensen, a Danish producer who consistently achieves well over 30 pigs weaned per sow, uses a “focus board” to display key output targets such as the number of sows and gilts bred, number of farrowings, pigs born alive and pigs weaned. For each parameter, if the weekly figure is equal to or above the target, it is written in green. If it is below target it is written in red. Staff write in the figures on the board for the area of the barn they are responsible for. They also set the targets themselves through discussion, resulting in complete commitment to the target figures and the motivation to improve them. Once a week the actual performance data is compared with targets and a plan of action decided to rectify any deviations.

TRAINING

Another valuable function of SOPs is for use in training new staff, even where they have previous pig experience. All new staff must be trained to carry out tasks in the way they are defined in the SOPs, otherwise variation will start to creep in. Experienced staff will accept this more readily where they can see that the system will allow them to contribute to future improvements, but only based on the existing procedures. It is also vital when carrying out training of new staff that people know why tasks are done in a specific way and the potential outcomes if they deviate from the defined routine.

Where staff is closely involved in defining and monitoring the production process, they are better able to understand how what they do and the way that they do it impacts the performance parameters that most impact profitability. This enables them to prioritize their work routines and focus on what makes the biggest impact on the bottom line.

Implementing a system of SOPs, defining expectations and targets clearly and encouraging creativity and development through controlled change can have a major impact on the ability of a business to improve efficiency and profitability. Adopting management processes like the ones described could make the difference between success and failure in an increasingly competitive industry.

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Creatingaculture ofchangewillresult ingreaterstaff

involvementandmore rapidimprovements inperformance, costsavingsand profitability.

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