A McVitie’s digestive biscuit may seem like a straightforward thing but it is the product of a long and complicated chain. All the parties in that chain recently got together to identify where they could save waste and increase efficiency through value chain analysis Chris Lyddon reports.

One of the parties in that chain was John Whitelam, marketing manager of grain merchants Fengrain, who told a recent conference how Value Chain Analysis had worked “We knew it wasn’t revolutionary,” he said in a talk to grain buyers, traders and farmers at the Home Grown Cereals Authorities Outlook Conference in London. “It’s been around since the ‘90s,” he said. “It was first tested by Toyota and latterly by the red meat industry.” It is not a matter of sharing your innermost secrets. “The operation at no time compromised financially sensitive issues,” he said

The team was assembled by the cereals industry forum, a group tasked by government with the job of improving the efficiency and performance of the cereal supply chain.

The chain starts with the farmer, J S Means limited, which is based near King’s Lynn in the East of England, the UK’s most important grain-producing area. The grain is traded through Fengrain, which is a farmer owned grain-marketing business. The grain goes to the mill belonging to Heygates, Britain’s biggest independent miller. Finally it ends up at United Biscuits’ plant in Harlesden in North London.

“It involved walking the chain from farm to mill to bakery to supermarket and then looking at the ideal chain to see how we could go forward,” Whitelam said. “We followed wheat from the farm to the central store to the bakery. At each stage the team analysed the time it took, looking at where there was wastage.”

The members of the team were taken from each business involved. They created a map of the product and information flows for each participant and then put them together to create a full picture of the process.

532 hours to make a biscuit

The total lead time from the farm to the end of the biscuit manufacturing process was 532 hours, a figure which did not include an average of six months spent in store. The product travelled an average of 150 miles in a process with 62 different steps. The team point out that the actual ‘seed to store’ distance is much greater as once the biscuit has left the part of the chain they were analysing it goes to UB’s central warehouse in the midlands, then to a retailer’s distribution store and then on to the actual retail store.

Of the 532 hours, only 62 minutes were actually spent adding value to the product, a relationship the team reckons is typical for the food industry and which demonstrates the scope for speeding things up.

One of the primary aims of the exercise was to make the use of transport more efficient. “We were able to identify where savings could be made,” Whitelam said. Fengrain currently uses 20 hauliers and makes 100 phone calls a day relating to transport. The problem is it’s all getting too complicated, with too little planning. “There’s too much reaction on a day-to-day basis with bulky lumps of product in particular places,” he said. He acknowledged that Fengrain needed to do more long term planning, rather than short term reaction.

More cooperation at the start of the chain would help. “Hauliers should work with the farmers,” he said, “and not give them short notice.”

Fengrain’s delivery performance was above average for the millers Heygates, but even so there were errors, including no-shows, wrong day deliveries, deliveries outside the time slot, rejections due to condition, or rejections due to the wheat being of the wrong specification.

For a start almost 50% of the grain delivered to Heygates mill did not meet the allocated delivery slot, or the quality specification. He quoted figures showing that 75% of difficulties with quality were manageable on the farm. “30% of difficulties in delivery to the mill were purely down to arriving at the wrong time for the slot allocated, and they weren’t particularly tight,” he said. Heygates’ time slots for deliveries are four hours long.

The biggest transport cost between the farm and the mill came from rejections. Rejected vehicles often missed a second delivery or a backhaul opportunity. “Where there has been a rejection, it probably costs up to GBP300 (US$513) for the load,” Whitelam said. “When you look at the value of the product it’s utterly unacceptable.”

When the miller sends flour to United Biscuits (UB) 1.5% of deliveries bounce because UB’s flour silos are full. A dial-up computer system to which Heygates has access means that they should know whether there is space, but there are problems when UB works into the weekend and the system is down. When it happens, Heygates contacts UB by telephone, but if that doesn’t work the flour tankers are sent out anyway.

One problem he identified was a surfeit of testing. “Grain is getting tested two or three times,” he said. “Flour is getting tested a time or two There’s a lot of repetition there.” There were inconsistent test results

The team established that the problems of unnecessary inventories, inefficient transport and quality rejections were all linked. Heygates overbooked deliveries by 25% to compensate for delivery problems. They were carrying unnecessary stock to hide the delivery and transport problems.

The answer

An approach called ‘lean thinking’ had been developed to improve the way the chain works. It requires everybody in the chain to be aware of the rate of consumer consumption, with as little stock in the chain as possible. Where there is inventory, it should be in the right form.

Information should be kept as simple as possible, with ‘pure signal’ on consumer demand, and none of the ‘noise’ which hinders that communication.

The vision drawn up by the team had something for everyone in the chain. Among a long list of proposals is that farmers should align their practices with the wheat quality needs of the end users. The merchants and millers should improve delivery performance, while the millers should cut stocks of the raw material. United Biscuits should improve the capacity utilisation of their intake bins and cut wastage in the production process.

“We can take this as a model which can improve the needs of all our stakeholders,” said John Whitelam. “We in our respective enterprises are starting to see the benefits.”