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Benchmarking tools boost competitiveness, profits

Trying to keep up with the Joneses is a bad idea, unless you’re in the hog business.

After a plunge in hog prices about five years ago saw many weak hands and smaller operations fall out, Maple Leaf Agri-Farms, a division of Maple Leaf Foods, adopted a computerized benchmarking system that has helped it stay on pace — or in some cases even exceed — the top 25 per cent of the North American industry.

“This may look a bit like bragging because we have some nice numbers to show right now, but that’s not the point,” said David Kraut, the company’s business optimization manager, in a presentation at Hog Days.

“It’s about using your production data to figure out how everyone else is doing, then use it to improve your farm.”

Maple Leaf Agri-Farms, formerly Elite Swine, wasn’t spared the hard times. By 2006, its sow herd had been consolidated from 110,000 across Canada at its peak to 34,000 head in 15 separate operations staffed by a total of 150 workers mostly in Manitoba, where it also operates an 85,000-head-per-week slaughter plant.

It operates a 4,000-sow multiplication farm, makes all its own feed at two mills in the province, and runs 135 finishing barns, producing around 700,000 to 800,000 market hogs per year.

Two computer programs made by U.S.-based companies, Agri Stats Inc. and MetaFarms, are used to improve profitability, competitiveness and identify improvement opportunities.

MetaFarms is an Internet-based program that allows the user to summarize sow, nursery, and finishing data along with marketing information all in one place. Over 1.2 million sows are included in the MetaFarms database, out of the total North American herd of some seven million.

Agri Stats, which Maple Leaf mastered in 2010, is a tool used to collect day-by-day data.

“Once we figured out what Agri Stats was telling us, we had a lot of improvement opportunities,” said Kraut, who joked that the opportunities seemed “almost insurmountable” at first.

Communication and focusing resources, basically figuring out what they needed to work on and when, was a bigger challenge, he added.

As an example, using MetaFarms, Kraut was able to show that the three-month average cost of weanling production in North America from 2003-09 was C$26.95. That figure has dropped from June to August of this year to $25.20.

Maple Leaf’s weanling cost of production is a secret, but using Agri Stats, Kraut was able to say that it had dropped $3.36 over the same period of time.

“So, we can look at that and say that we’ve improved our competitiveness against the top of the industry in North America by $1.61.”

How did they do it? The figures indicated that it was due to improved cull sow returns, lower feed costs and lower breeding herd amortization costs, he said.

For example, for June-August of 2009, the top 25 per cent of the industry had production costs of $137.45 for a 266-pound hog. Fast-forward to 2011, and that figure stood at $149.63, although the average hog was 3.16 pounds heavier.

Over that same period, Maple Leaf’s efficiency improved “tremendously,” he said, with a $19.79 improvement.

“Some of that was feed hedging activities, but we had some significant productivity improvements as well,” said Kraut.

Data from the benchmarking software helped the company identify weaknesses such as uneven weaning weights and low weaning ages, which left the company with unexpected numbers of below-average, light feeder pigs that threw a wrench into finishing barn production.

Using MetaFarms, the company rebuilt its bonus system to give individual barns incentives to improve uniformity and sent back regular data updates to show the workers how they were performing.

Using some three years of accumulated data in the program, it was clear that improving weaning weights had a knock-on effect on mortality, caloric feed conversion, reduced light hog numbers and increased market weights in general.

The software’s Excel spreadsheets offer management a bird’s eye view of production, he said.

For example, they now know that every one per cent mortality in finishing is worth $1.14 per market hog produced to their operation. Also, current feed cost per pound of gain is 69.28 cents, and finishing space per hog costs 15 cents per day.

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