Using Lean to Improve the Performance of Your Agribusiness Supply Chain
Agribusiness supply chains are always complex and dynamic. The chaotic operating environment faced by agribusiness globally in the past two and a half years has challenged many like never before. Regardless of size, market dominance or sophistication all agribusiness supply chains have been impacted.
It’s evident that the disruption (initially driven by the pandemic) now compounded by the conflict in the Ukraine, will continue for the foreseeable future. Unfortunately, this means there will be no short-term relief from the high input costs, labour issues, freight disruption and marketplace turbulence.
Only those able to identify and remove the waste within their supply chain have a prospect of improving and maintaining their profitability.
Defining Waste within Agribusiness Supply Chains
Waste presents itself in various forms within primary production operations. It can be hard to spot, but once you learn where and how to look, you’ll begin to see it everywhere and recognise just how much it’s impacting on your agribusiness.
Some examples of waste commonly found in agribusiness supply chains include:
· Tasks being performed incorrectly or ineffectively
· Using more labour, machine time, energy or production inputs than are absolutely necessary
· Chain partners or functions having to wait for upstream activity, raw material, maintenance or instructions/information
· Excessive inventory of production inputs, spare parts, plant and equipment, packing or consumables
· Storing raw material, work in progress or finished goods for longer than optimal
· Producing more/less raw material than target customers require
· Producing/utilising raw material that does not meet or exceeds quality specifications
The Financial Impact of Waste in Agribusiness
In isolation, these wastes only have a modest impact on the financial performance of a supply chain. However, the reality is, that most, if not all the wastes exist within each and every enterprise and occur to some extent at least every other day.
Cumulatively these wastes erode productivity, reduce quality and raw material utilisation, raise the cost of goods, working capital requirements and increase the likelihood of customers being short delivered or dissatisfied. The impact on an enterprise’s profitability is profound.
Taking Control - Manage What you Measure
The waste within your agribusiness supply chain represents an opportunity. Unlike customer quality expectations, marketplace competition, rising input and labour costs, removing much of the waste in your supply chain is within your control.
So why has it never been looked at this way before? Because the traditional financial statements businesses use to measure
performance were never designed to measure specific systems and processes. Consequently, much of the waste we are talking about
remains hidden.
Conversely, Lean process metrics measure the performance of the underlying operational systems and processes that ultimately deliver an enterprise’s financial results.
With Lean, information is fed straight to the responsible team member in real time – delivering process metrics that provide your front line management with the insight they need to make informed operational changes or strategic corrective action.
Your Opportunity to Improve
PSVC Managing Director, Simon Drum, has over 25 years’ experience in Australian and international agribusiness. Based in Melbourne, Simon has built his unique expertise working for major Australian agribusinesses and large food producers in senior strategic, commercial and operational roles.
Simon has been applying Lean principles to a diverse range of large and sophisticated manufacturing and packing operations for more than a decade. His practical approach towards solving problems in agribusiness has seen him develop a range of insightful diagnostics that help clients identify the factors to improve performance.
Try it for yourself! Complete our Category Management or Supply Partner diagnostics and take the first step towards improving the profitability of your agribusiness.
For more information, contact simon@psvcadvisory.com.au or 0407 567 250Cate
‘‘Having worked extensively with Simon in my capacity as Buying Director for ALDI, I recommend Simon and PSVC to those businesses in the agriculture sector looking to execute their category plans and supply chain strategy. Simon delivers an excellent level of sophistication required to deal with major retailers and complex supply chains.’’
PSVC ADVISORY