How can an industry use business excellence to build a better profile in the face of public adversity? By Matthew Hancock.
Global poultry production is having a bit of a rough time. The US Foreign Agricultural Service predicts European Union chicken meat production in 2006 will decrease by four percent compared to 2005. In the United States, growth in consumption per capita has dropped and is forecast to reverse in 2007. In the United Kingdom, domestic usage of poultry meat in June 2006 was one per cent lower than in the same period in 2005.
Australia’s poultry industry has experienced consistent growth in the last few decades, increasing six-fold over 40 years to its current value of 2.5 billion Australian dollars. But in recent years this growth has begun to slow. Geoff Frost, CEO of the country’s second largest poultry processor, Bartter Enterprises, has a right to be concerned.
Bartter Enterprises moves more than two and a half million chickens every week to customers including supermarket giants Woolworths and Coles, and restaurants such as KFC, Nando’s and Red Rooster, under its own name and that of leading brand Steggles. But with inflation and those 4,500 employees expecting pay rises every year, costs are building up – by 15 million Australian dollars per year. But what happened to the growth? Geoff has his own theories.
“Growth has run at three to five per cent for decades,” he says, “now it’s running at one or two per cent. And that’s a big change. There are a lot of urban myths out there about poultry – about bird flu most recently, but also the use of hormones, antibiotics, cages… and as a result, what has been a long- term growing industry has faltered a bit.” Geoff remains adamant that it’s all just scare-mongering. The challenge lies in convincing the public.
Bartter has led the way on an industry response program aiming to combat ignorance, supply the facts about chicken meat, and clear the name of this humble fowl. “A lot of it is about educating the media,” says Geoff. “It’s about putting information out there that’s correct and defending our industry.” The campaign is being run by the Australian Chicken Meat Federation, the representative body of the chicken meat industry and involves participation from Inghams Enterprises and Baiada Poultry, the large integrated companies that, alongside Bartter, provide more than 80 per cent of Australia’s chicken.
The campaign aims to communicate positive messages about chicken as a healthy and safe food choice, proactively debunk the “myths” surrounding the industry and to dissipate fear about chicken meat. The campaign is also trying to address concerns about avian flu. Its message: that it does not exist in Australia; that the risk of outbreak is minimal in chickens and even more so in humans, and that proven contingency plans make any threat negligible.
The education initiative seeks to provide honest information on issues of public concern, and even offers a “Chook Infoline” to answer public questions about chicken meat. Geoff is passionate about correctly educating the public, but acknowledges it’s a slow process: it may be some time before the positive effects are felt, and growth begins to pick up. For the moment, returns from this project will be small. In the meantime, rather than sit back and wait, Bartter has sought to address its rising cost levels in other ways.
> Business Excellence
According to Geoff, “when you haven’t got any significant growth, you need a strategy to take costs out of your business and make yourself more efficient. We’re now trying to take an old-style family business and turn it into a modern business with modern processes; to turn it around and make it the best in our industry – best in breed.”
To do this, Bartter have implemented an extensive improvement process, calling in experts from consulting firm Planpower, Lean Services provider Bevington Group, ELICA, and leading business improvement provider SAI Global. The allstar team was set the task of creating a functional strategy for improving operational efficiency.
As Geoff says, “in this century you need to be fleet of foot, but around that you need to have good processes to make sure decision making, problem solving and recourse analysis work for you. You need to be able to make considered decisions based on data, but you need to be able to do it quickly.”
The first step down the road to efficient business was the establishment of a strategy map: a mission for change laid down in black and white. Working from the premise that “the way we work today is not good enough for tomorrow,” Bartter’s framework detailed the key initiatives, projects and targets for each department to improve behaviour, processes, and systems, and to achieve “Bartter Business Excellence”.
But getting the company to accept such a sweeping transformation was no mean feat. According to Bartter’s National Business Excellence Manager, Greg Searson, “the framework gave a clear message that the business needed to change. The type of strategy we had before was very much evolving - it was a major cultural change in the business to set aggressive targets. The business had never been used to that.”
The greatest challenge in implementing a program for business excellence was getting employee support, and persuading them that a drive to improve was no fad, but a long term commitment. To this end, the executive went on what CEO Geoff describes as a “roadshow”: circulating to each of Bartter’s processing, packing and distribution plants, giving presentations to each and every employee about what was going on and why.
At a more recent management conference with the 100 most senior employees from across the country, Greg Searson recalls, “Geoff went through and answered about 80 anonymous questions, and I think people walked away probably for the first time knowing what the strategy is for both the medium and long term, and most importantly, what it was we needed to do now. The feedback has certainly been very positive.” “We wanted everyone across the business to understand”, says Geoff, “we want a high activity, decision-making culture amongst all our employees. This means if you’re not going to get on the bus, let us know and we’ll give you the ticket home.”
One of the major successes in the company’s blossoming improvement plan was a dramatic streamlining of regional operations. Before this, four separate regional managers sat on the executive board contributing to decision-making, then returned to four separate areas, filtering and personalizing these decisions into their own four separate strategies. Any changes that needed to be made had to be sold to four separate teams in four separate places. This meant little sense of unity or co-operation; in fact, teams almost competed against each other. The removal of this regional structure allowed for the implementation of functional, centralized processes. As a result, Bartter now enjoys flexibility of operations and ease of communication.
> Adapting the Lean Six Sigma the GE Way
In its relentless drive toward operational efficiency, Bartter has been enthusiastic in adopting Six Sigma, the highly developed business philosophy favoured by the likes of Motorola and Bank of America. A properly implemented Six Sigma system becomes an integral part of a company. Its aim: to reduce defect levels to below 3.4 per million opportunities. The suggestion that Bartter might take up the philosophy came from Steve Sargent, CEO of GE in Australia and New Zealand. In Geoff’s view, “GE are the Six Sigma kings of the world. They have a really transparent company, so they have a really great process. I guess we looked at how they use all this business excellence stuff and thought ‘yeah, there’s some really good parts of that we can use in this business.’”
Some months later, the process is already well under way. One of the cornerstones of Bartter’s Lean Six Sigma operation has been the project office. According to Greg Searson, “it’s the glue that’s pulled everything together. It provides governance for all projects across the business, so whether we’re doing a project in finance or sales or anywhere, it all comes under the project office, and it’s working extremely well.” The office provides a monthly review of everything the business does, which is reviewed by the executive. They compare the progress of each project to the aims it set out to achieve, and if it’s not in line with their strategic direction, plugs are pulled. It’s tough, but the benefits to efficiency are substantial.
The nuts and bolts of Lean Six Sigma are projects like Bartter’s value stream mapping – employee level schemes that deal with waste reduction. Gathering information from employees, the project maps out their activities in detail for further analysis. Greg explains; “at Beresfield we collected data on 33 teams with more than 8000 activities, and analysed the data to find out that 32 per cent of what the employees were doing was waste. So, it gave a very clear indication that we had some room to improve.”
Distinctly democratic in flavour, the project then opened up the floor to suggestions from employees. “At Beresfield they came up with 1500 ideas, of which we implemented 400 and set up five projects. The benefit on that particular project is five million
dollars a year.”
> A Path to Triumph
So has Bartter’s plan for business excellence been a success? In Greg Searson’s view: absolutely. “I look straight to bottom line results – we had a four million dollar budget to take seven million dollars of cost out of the business in the first 12 months. We ended up taking out almost ten million in costs.”
Greg will bring his business improvement expertise to the 11th World Congress for Total Quality Management, held in Wellington, New Zealand this December. He will join a number of keynote speakers under the theme of “developing management and organizational capability to improve business performance” to impart his wisdom on the benefits of Lean Six Sigma.
The last word falls to CEO Geoff Frost: “We’d never really sat down and decided what our values were until about a year or so ago. It was an 800 million dollar business that was run like a much smaller business because that’s the way it had grown up. Are we comfortable that we’ve done well in the first year and a bit? Yes. We’re not silly enough to think it’s all been done, there’s still a lot of hard work in front of us. But we’ve started the process.”
For Bartter, every cloud has a silver lining. Lacklustre growth levels have led them not only to participate in a major public education campaign, but also to implement a business improvement scheme the benefits of which will be felt for years to come.
> Dispelling the Myths
- All chicken sold in Australia is grown in Australia. At the moment, importing raw meat is banned.
- Australian chickens have been developed over generations through traditional selective breeding to put on meat quickly and efficiently, resist disease and develop a robust constitution.
- Chicken meat comes from purpose-bred chickens, bred differently to egg chickens.
- The use of hormones or steroids in chickens was banned more than 40 years ago.
- Meat chickens are not caged but are raised in large sheds with room to roam. Freerange chickens also have an outdoor space.
- The composition of meat from chicken reared on genetically modified feed is the same as that reared on normal feed. Australia’s major producers endeavour to source GM free feed whenever practically possible.
> Poultry in Motion
Lean Six Sigma problem solving involves determining the “root cause”, and implementing solutions that last.
the background: Chickens being processed pass along a main line, which splits into three secondary lines. If all three lines are at capacity, the chickens are distributed into overflow bins, and are reworked at a later stage.
the investigation: The main line could run faster than the secondary processing lines. Often there were more birds of a particular size than the lines could cope with. Most of the overflow was caused by fluctuations in flow rate.
the solution: Better control of the inflow of birds, better allocation of bird sizes to machines and marginally slowing the main line down.
the results: Annual project savings of $600,000 through the reduction in rework – from 20 tonnes to seven tonnes per week.