Increasing Intended Production

It's time to get intensive. By that I mean we need to focus on existing but overlooked means to extract more value from our production. One way to do that is to focus on our revenue stream and the process which generates it so we become just as celebrated in our knowledge of this as we are for knowing our cost of production. Once that happens, we will have the components which make up profits (revenue and cost) and some really big changes will start to happen. But since almost no production workers have full access to the revenue numbers of the farm, they are continually focused only on cost of production and production metrics. Because of that, we still operate in a fifteen year old notion/and the "irrational exuberance" that believes if production rises and/or costs fall, we will automatically make more profits. The key error in this thinking is that pounds and pigs are not measures of value, they are measures of physical output and weight. Not a dollar sign in sight when you look at PSY, FE, W-F mortality, or my all time favorite, pigs/crate/year (the metric which cost the industry over a billion dollars by my estimate). While they may be correlated with profits over a range, there is certainly NOT a one to one correspondence.

We practice a kind of reductionism in this metrics area which is handy and necessary to an extent, so too, on the revenue side if I ask you, for instance, what the price of hogs is today, you are likely to give me one number, the average base price. All you have to do is take out one of your packing plant kill sheets (I refer to them as receipts, useless for revenue management) and what you will notice is that there are dozens of prices today and in some packer matrices you literally have hundreds of prices each day, though please don't read them all to me the next time I ask you for your current price! Those "pounds out the door" that we love to increase face one of those dozens of prices depending on the carcass it is hanging on. When you use the average price times the average weight times the number marketed you are on the road to mediocrity in revenue and production process management. In a story in the Wall Street Journal several years ago, it was reported that Atlanta, Georgia reported to the International Olympic Committee its average summertime temperature when making application to be the venue for the summer games and as we know, won the bid. During the games, when the Scandanavians (I think it was) began to complain to the IOC about the oppressive heat and humidity of summertime marathon running in Atlanta, the benefit of hiding the variance in the average was revealed. Not that Atlanta was trying to pull anything but we tend to use averages freely when communicating summary details about a lot of things when the variance may really be where the rubber meets the road.

Adding to this, we normally only fill in the blanks that our record systems ask for so we only have the metrics and output values that those record systems produce. That's really a big constraint to progress and getting intensive. For instance, if you rely on your Pigs Weaned/Breeding Female, your total mortality and total lbs sold etc., etc. you have some good sub-system metrics for tuning up some facets of production but you really know nothing about what percentage of the pounds you marketed were undiscounted for weight or quality, much less what percentage were within a targeted range around profit maximization. Getting intensive means that we come to understand just how good we are at achieving the intention we had when we started producing pork. When I ask producers what their intention was (is) they usually say something like "Make Money!" or "Produce pigs!". That's an OK starting position but not much clarity of the kind which leads to actionable improvements so I would call it kind of an "average" answer.

I maintain that our intention is to sell every pig that comes into our care, at or very near its profit maximizing weight with an outstanding premium for non-weight quality measures at the least possible cost. That mouthful actually creates a basis for judging how well your actual production process meets your intentions. Unfortunately no record system that I know of actually helps you get very close to measuring this comprehensively, or even partially. When you use partial data like for instance measures of sort loss, as your proxy for profit, you will be led down the primrose path to big mistakes. For example, if you constantly track your sort loss on sequential kill sheets and try to minimize it, you will normally find you reduce average weight of loads as the mechanism to drive sort loss down. The packer you sell to will help you track just how well you do that on the next kill sheet. The problem you have is no one sends you a report about all the very profitable pounds you failed to produce on the pigs which were not in sort loss and which now go to market at even more reduced weights. Since we sell distributions of weights in the pigs on every truck, when you lower the average weight (almost regardless of how you do it) you drop the weight on the pigs that are too heavy as you drop the weight on the ones that are 10-30lbs lighter than the discouted ones as you back down the sort penalty. Ideally you would back down the average weight of loads until the additional loss from the underproduced (but profitable) pounds present in lighter pigs on the load was just equal to the sort loss reduction savings from reducing the heavy end pigs. I can tell you for sure, that this will lead you to accept some positive sortloss. But since we only track sortloss, we only focus on that.

If your range of weights is typical (over a three to six month period to avoid a biased sample) you will find that only a very small percentage of all your pigs actually wind up meeting your intentions (at least as I described it above). Getting intensive means we find a way to track variance from intention and develop action plans to reduce it. I will begin focusing on some very simple tools you can employ to do that in the near future. Come by at WPX and we will chew the fat on this topic. Look for the Swinecast entry in the BarBQlossal area and I will share more of these mysteries with you in person.