New Supply Chain Planning Series: Current challenges for poultry processors
[00:55] Welcome, everyone, this is MTech accelerate. My name is Nicolas Shchetikhin. And I have Jim Johnson with me how you doing, Jim? I’m doing good, Nick, and you? I’m doing well. Yeah, today, another episode of our accelerate show. And today, we’re going to do something a little bit different. They will be very interesting, but quite intense on you, because I will be interviewing you on processing plant planning.
[01:21]Okay, I look forward to this challenge.
[01:24] All right. So let’s start. And, of course, we’ll start with a little bit of history, because you have quite a lot of experience. So first of all, I want to ask, was it always that hard and challenging to plan the processing plants?
[01:42] Yeah, I mean, that gets me to think it’s an interesting question, because I guess it’s always been tough. You know, I can remember a few occasions. So we used to do this many years ago. And it’s always been tough, it’s always been a battle to make sure that between the live operations you have the right weight of chickens to the plant in order for them to meet their customers orders. So it’s always been a challenging area. Obviously, when I started, people were using different tools to help them achieve that. And I can remember, the general manager of a rather large processing plant that I was supplying at the time, walking around the yard with his little black book and in his black book was not for numbers, it was it was effectively the bell curves of, of a load of chickens, that two kilos here would be the bell curve, at sort of 100 increment stages, so all the way through so he used to walk about and was very fixated on making sure he supplied his orders, but to the extent he was looking at every truckload coming across the Weybridge clicking through his black book and, and telling you whether or not they needed to change the loads this afternoon, I’ve got too much weight for the plant to whatever. So, it’s obviously been a challenge. And not just because of the process engagement, but because we’ve always been supplying customers whose demand changes, and it quite rapidly can change, you know, here in the UK when it’s sunshine people want barbecue products and you know, the weather’s not that predictable here. In the UK, we’ve always had that problem, we’ve always had that challenge. So it’s always been a key area to try and work harder to get as smooth as you possibly can.
[03:30] Yeah, I mean, and we see it quite a lot today, too. Still quite a lot of manual work. And a lot of unknowns and plans are changing. So but I like this blank book, you know, it was it was pretty smart, but a lot of manual stuff, right? Because you would need to figure out which truck is what weight and apply this curve and then see how many birds you will get into prime weight and calculate the total tonnage of production and you know, yield and everything it was, you know, quite a lot of work. And probably this guy had a very good calculator in his head.
[04:08] Yeah, no, it was tough. It was tough, you know, and retailers would change their orders for next week. I always remember taking the agricultural a week plan on a Friday afternoon either meeting with the GM in the processing plant. And I used to go with a plan that the guys had worked on for hours, days. In fact, you know, to put a plan for the hauler. Next week sorted here. You go and see them on a Friday afternoon. And he says, I know that I’ve just had a call from the retailers there. They want to go and promo on next week. That means we need to change the schedule we need more small birds less big birds. Let’s chop and change and the whole plan was up in the air on a Friday afternoon. So that was fine. But my challenge was to go down to the life haul planner. And actually tell him this isn’t good news, guys. I mean, you’re gonna have to know work in the remainder of Friday afternoon to change all of next week’s plan. So that that was that was an interesting relationship I had a Friday afternoon with a with a life haul scheduler.
[05:05] Yeah, probably, you know, the situation got a little bit intense at times. Yeah, indeed. Yeah, it looks like you know, nothing changed more or less. Right. So it’s still lots of fluctuations and lots of changes in advance, but people still trying to balance all of it. And what what are the main approaches? For for the planning, in general for the process? The plan, is it we try to push everything we have through the lines, or we’re trying to make to order and see what we can put to stock? Or we do to stock and then see what we can sell? Well, what is the what is the main major approach here?
[05:50] Yeah, I think I think that probably has changed a bit over time. I mean, we used to, we used to continually just push, push from production through into the plant and try and maximize the kilos and the tonnage through the operation to keep our overheads and cost of the end product as low as possible. And, and that used to cause its own challenges, of course, but now a days it is, it is definitely more of a move to, let’s have a look at the orders. Let’s look at forecasted orders, let’s try and get some relationship with our customers retail and foodservice about orders for different SKU’s and demand going forward, and then try to plan our production to meet that as best we can. So there is certainly much more of a pull kind of mentality coming in, particularly in integrators producing fresh product. You know, and a lot of companies are, particularly in Europe, and the Middle East, for that matter nowadays are dedicated to fresh production. So in that situation, you need to, you need to take a lot more care to make sure that your live weight profiles is reflecting what you need to satisfy your customer. So it’s probably always been a push mentality, but now started to tune in, in certain parts of the world much more to pull as a first way of making your plan. Okay,
[07:14] and what about those products, for example, I remember when I used to go in the shop, and you see all kinds of sizes of birds there, you know, there’s a whole bird and there could be small one, there will be big one, middle one, you know, all kinds of different sizes. Now, you can’t see it anymore, you will come to the shop and everything will be more or less standard way that the packages and the sizes and everything is more consistent is that because in the past, there was no way to plan it, or it’s because everything is now moving towards create the SKU’s and products to order.
[07:54] Yeah, look, I mean, one of the fundamental changes over the last 10 or 20 years has been moving progressively, retailers and food service more into fixed weight, fixed price product and that certainly has made planning and processing plants incredibly more difficult. And, and the need for that match between the farming operation and processing to be a much closer working relationship and and why? Well, because you know, there’s a tighter spec for all these SKU’s now. And so a retailer or a food service client as a tight weight range for any of these products. And he has SKU’s that, that if you produce birds over that tight weight range, so heavier than their maximum requirement, you’re not going to get paid for the difference. It’s a it’s called giveaway effectively. And it’s a major driver now in processing plants in most processing plants around the world, because we’ve seen much more of a move towards foodservice over time and you know, more people eat no more quick service restaurants. And that is a fixed weight, fixed price item. And so that has to be manufactured to affiliate tight specification. Any weight in excess of that you’re not going to get paid for but also retailers over the last period of time have moved in that same direction. So again, when I started in the industry was all catchweight so it didn’t really matter there wasn’t tight spec, you know, you got small, medium and large birds. They would give you a price they would pay a price but it was catchweight so it didn’t matter. There was no ceiling way beyond which you didn’t get paid. You get paid for everything you produce. Now that’s changed significantly in retail. And it’s always kind of been that way in foodservice just food service volumes have increased to put considerable pressure on how we how plan at that processing plant how we execute customer orders and different SKU’s efficiently and minimize and giveaway.
[09:58] so we already started Talking about a little bit about the complexities of the planning, right. So there is a demand, there is also supply and there is everything in the middle the plant constraints. So we started talking about demand. And he said that, you know, now it’s more of a fixed weight, there is a spec of the product. And I assume also there are much more SKU’s now to produce. And this is one question why there are so many now. And the other question I have is, what is what is the reason for all almost constantly changing orders? Because for many plants, it’s a big issue. The orders are constantly changing. why customers are changing those orders?
[10:49] Yeah, okay. Well, we’ve, we’ve we definitely as an industry being very successful in selling the end product, chicken. And we’ve got, and lots of the larger producers, even medium sized ones nowadays have kind of product development teams. So there’s an awful lot of work going into innovation, developing new products, new sources, new ways of producing different chicken, SKU’s and the range has grown, grown exponentially. It’s no longer just a simple all bird. And, you know, thighs, drumsticks and wings and things. It’s like, now there’s a whole range of different stuff. And of course, you know, when retailers get involved in foodservice, they’re always trying to innovate and produce new, unique products. So that’s extended the range, quite often, we haven’t cold SKU, so it’s just the number of SKU’s just increased over time. So that that is a key area where we now have more complexity more SKU’s to manage and, you know, you got some of these larger plants now with hundreds of SKU’s that they have to produce on a daily basis, which makes that quite a lot more complex. And why why did they change their orders? You know, it’s, it’s, it’s no, an awful lot of kind of, just in time delivery through distribution centers in many parts of the world. And, you know, we sit in Europe, and that’s been the case here for a while. And they’re reading what’s selling, what’s selling on a constant basis and more, you’re just tweaking and changing orders. And that is fed back to the plant, and they’re always discussing, you know, how do we change? How do we tweak it to match what the consumers are buying. And again, if the sun comes out, they’re going to buy more barbecue products. And, you know, in the UK, we don’t have constant sunshine during the summer. So that kind of changes demand for different products. And you can find yourself having to react at very short notice to, to changes in customer consumer demand, which is we try and do within the poultry industry in order to you know, satisfy our customers and keep things moving positively. So there’s a lot of things that can impact from the weather, to what what products, consumers are buying new products, innovation, and tweaking and changing happens on a regular basis, particularly in fresh products, of course, in a lot of markets are only producing fresh, that’s a primary range of products, and that there’s a short shelf life. So again, you’re you’re getting your orders, and you probably having to pack ahead of the anticipated order coming through, so that you can meet that volume and get it get it on the truck that’s going to has to be in a distribution warehouse by a set time. And a few years ago, you know, they started to have to manage the trucks arrival off with finished goods and product going into a central distribution warehouse. And they would give you time windows when your load of chicken had to arrive at a warehouse to offload and that warehouse could be three or 400 miles away from where the plant is. So there’s a tremendous amount of coordination and planning has to go in order that you you try and maximize your order execution.
[14:08] Yeah, and I guess it’s also important to know that now there are more than one or two parties involved there could be a distributor that can be selling to the retail chain and the retail chain can work with smaller shops and all of them connecting and collecting their orders in one consolidated platform if you’re lucky. If not, then the orders will be coming from all those different directions. And you need to see Okay, which one I need to produce first this one or this one. There’s also you know, a matter of priorities markets, maybe some bonuses for for your customers and things like that.
[14:48] Yeah, Nick to you. We also think about our business as being one processing plant, but as an effect, and many of many businesses have multiple processing plants. Once again, they are trying to optimize the production in each one for the same customer ultimately, perhaps. But different product ranges, plants are more efficient than others. They’re killing different weight profiles. So there’s also the coordination of multiple processing plants to satisfy a specific order requirements. So there’s lots to think about.