Creamery of the crop
Martin Taylor, general manager, Dairy Farmers of Britain (DFB) creamery, Llandyrnog, Denbigh
Llandyrnog was part of Associated Co-operative Creameries until it was acquired by DFB in August 2004. Historically the site has seen some significant investment but as with any production business, further investments are always required to evolve, progress and increase efficiency.
When I arrived as general manager last April, we set things up differently to make it a standalone business unit within the group, so I have full profit and loss, cash flow and balance sheet responsibilities, which is great, because it gives me the freedom to take the business forward.
There has been an enormous amount of change since I got here. The site strategy we have put in place will return a better margin but also increases the complexity, which was why it was essential to implement a new ERP (enterprise resource planning) system, which is a major ongoing project. It took six months to find the right package and it will take 12 months to put it in. We are producing around 15% of the UK's cheddar at this site so it is essential to get things right first time.
We have implemented bench trials and testing to ensure the system is fit for purpose; but the biggest issue has been training. Basically, largely paper-based systems and procedures are being replaced with computers, wireless systems, hand-held scanners and touch screens. If you have not used this kind of system before, the thought of change can be quite daunting, so we have put in place a training and development scheme to give our people the skills they need to evolve with the business.
YELLOW BRICK ROAD
It's all part of a journey. We're not where we want to be yet, but change doesn't happen overnight, it happens a step at a time. Change can often be seen just as new equipment, but the key aspect and the biggest challenge is to deliver positive cultural change.
We have a lot of people that have worked 20-plus years at this site, so the knowledge, experience and passion they have is crucial to our success; however, it is important that they respond positively to the changes and understand why they are necessary.
A key issue in our business right now is rising costs without rising prices. Our energy bill has doubled in the last 18 months, so we have to sweat our assets hard.
The approach I have developed to achieve this is called 'square profiling'. The theory is: if we cannot run to full capacity all the time we can at least run to full capacity on the days we manufacture, and in the days we do not we should turn everything off. This is significantly more efficient, saving energy, chemicals and reducing effluent production. But you have to have the flexibility in your workforce to manage it.
Our production can vary between 24 hours, seven days a week in the spring, to two days production at 50% output in the winter. While our working practices have changed to accommodate this, our working patterns have yet to catch up, and we've been in negotiations to change them for more than nine months.
Seasonality is also a big issue in the business. Milk is the major raw ingredient in cheese, and as it is not available in the same amount across the whole year, we are working with our dairy farmers to try and flatten the supply profile.
Making money out of a commodity product is no mean feat. We are competing with factories in Eastern Europe that have a completely different cost base. The key for us is to keep our cost base as low as possible but also to keep the right product mix - that is, getting the right proportion of volume through lower value sales and higher margin branded lines to drive profit. But that's going to take time. In the meantime, we can drive efficiency through working practices and investment.
We spent about £1.2M last year and we're spending about £1.6M this year on large projects, one of which has been installing a state-of-the-art process control system that went live in February. We're one of the first dairies in the world to use it. It normally manages things like gas platforms in the North Sea, so it's pretty cutting-edge stuff.
REVERSE OSMOSIS
We've also invested in reverse osmosis membrane technology, which removes water from whey [a by-product of the cheese-making process] and then concentrates it so it can be used for things like sports drinks, chocolate and all kinds of other products. This has significantly reduced our energy bill.
We're also investing a lot of money in the retail packing area, where we are putting in new flooring, walls and equipment. This should be completed in October and will make a big difference: the old machines handled 55 packs a minute; the new ones will handle 140.
We receive about 70 tankers delivering up to 1M litres of raw milk per day. First we pasteurise it, and then to make it into cheese, we add ingredients including starter cultures. This causes acidification, which makes the milk solids separate into curds (solids) and whey (liquid). Currently, the market for whey is quite buoyant, which is lucky, as for every 1M litres of milk you process to make cheese, around 870,000 litres ends up as whey.
The curd then goes through a cheddar tower. This turns it from a fluffy substance into something more rubbery. Then we add salt, a natural preservative that stifles the bacterial growth. It's then formed into 20kg blocks, vacuum-packed into bags, thermally sealed, labelled and put through a blast chiller before being stored in the warehouse, where it stays for three to 18 months depending on whether we are making mild or extra mature cheese.
After that, we move to the more labour-intensive part of the operation - cutting and packing, which is where the complexity comes in. We currently have around 350 different SKUs (stock keeping units). Here, the 20kg blocks of cheese are cut using an automated wire cutter, which cuts the blocks into smaller portions. These are then sealed inside a barrier film, which is flushed with carbon dioxide to prevent the cheese going mouldy. Because the carbon dioxide is absorbed back into the cheese, you get that shrink wrap effect on packs of cheese. This is fine for portions, but no good for grated cheese, as the wrapping would suck into the product and create a blob of cheese. Each portion is then weighed and labelled, with the price marked according to the precise weight of each portion.
THE PERFECT FORECAST
Last year I introduced several things to make the business more commercially-led rather than manufacturing-led, so that we're producing what customers want, not what is easiest or most efficient for the factory to produce. Key to that is getting the planning and forecasting right, because one of the biggest costs in the business is stock.
Every month, the commercial team submits an 18-month rolling forecast, which tells us what we're going to make. This will feed into the ERP system and integrates with data from our cheese graders. This gives us greater visibility, which is essential if you want to be fit for the future - a key phrase in the business at the moment that underpins everything I do.
What we don't want to happen is that we get to the future and find we're not ready for it!
FACTORY FACTS
Location: Dairy Farmers of Britain, Llandyrnog Creamery, Llandyrnog, Denbighshire. Tel: 01824 790215
Employees: 180 with six different shift patterns covering a 24h, 365 days a year operation
Site: 15 acres
Output: 25,000t a year
Turnover: £60M
Customers: Retail, convenience, foodservice, some exports
Products: 350 stock keeping units. Double Gloucester, Red Leicester, white cheddar and coloured cheddar. Own-label and branded (Farmers Best and Cadog)
PERSONAL
Name: Martin Taylor
Age: 35
Career highlights: Graduated in engineering, but "quickly realised it was business that interested me more than technical aspects". Spent eight years in industry before taking MBA at Manchester business school. Joined DFB working in mergers and acquisitions team for 18 months before joining Llandyrnog as general manager in April 2005
Domestics: Lives with Veronica in Knutsford, Cheshire
Outside work: Enjoys ski-ing, white-water kayaking and climbing
