How the Just-in-Time inventory model may benefit animal feed manufacturers
The animal nutrition and feed industry is worth an annual £4.4bn to the UK economy. The UK has approximately 200,000 animal feed businesses involved in importing, producing, handling, storing and distributing animal feed.
Animal food production is not only important to the welfare of our pets and livestock, but also critical to the human food chain, it has implications for the composition and quality of livestock products such as milk, meat and eggs that people consume.
Traditionally manufacturers have forecasted demand for their products into the future and then have attempted to smooth out production to meet that forecasted demand. At the same time, they have also attempted to keep everyone as busy as possible producing output so as to maximise “efficiency” and reduce costs. This type of production involves holding high inventories, often tying up space and cash flow.
Storing raw materials and finished goods for any length of time in any business can lead to high storage costs, an increased head count to manage the storage and the implementation and management of storing processes. Storage can also create losses such as accidental damage, handling damage, obsolete stock and issues due to poor rotation.
It is not just a matter of acquiring space and implementing procedures to store the goods, it is a far more complex issue and may contribute to rising costs in terms of inspection, prevention and control further down the supply chain and accounts for some of the biggest losses to animal feed production.
In the case of animal feed, losses fall under the main categories of: weight loss; quality loss – which can lead to health risks such as contamination, and economic loss.
Standards of animal feed production in the UK are extremely high and manufacturers have to adhere to strict guidelines, polices and regulations, so if product is stored, economical losses occur in the management, inspection, prevention and control of the feed to maintain the required standards.
In order to minimise these losses during storage, strict control must be taken of climate, hygiene, humidity, oxidisation, chemical changes in the atmosphere, turnover and rotation, traceability and the physical stacking of goods; all of these controls contributing to increasing costs.
Producing goods to order can reduce inventory investment and waste. Producing goods to forecast may result in production runs being very long, with manufacturers believing that they are maximising efficiency. The problem with long production runs is that issues are often identified late in the process, whether that be an ingredients error or a potential cross-contamination risk, many tonnes of product might have to be scrapped. Worse case scenario is that product has already been shipped, meaning a costly re-call, potential public relations disaster or legal cases arising from unhealthy or deceased animals.
Just-in-time manufacturing (JIT), also known as just-in-time production or the Toyota Production System (TPS), is a production and inventory strategy that companies employ to increase efficiency and decrease waste by receiving goods only as they are needed in the production process, thereby reducing inventory costs from the storage of raw materials and work-in-progress. Just-in-Time means producing what is needed, when it is needed, and in the amount needed.
The shorter production runs associated with JIT manufacturing enables quicker response times to specific customer orders and seasonal changes, whilst minimising inventory costs, reducing waste and mitigating many of the issues associated with storage.
This method does require manufacturers to accurately forecast demand, respond to the market quickly and develop strong relationships with suppliers, creating sustainable supply chains through collaboration. The just-in-time inventory model, by design, enables manufacturers be more efficient with their supply chains, lowering costs throughout the production process.
With this in mind, if animal feed manufacturers were considering the JIT model, they would need a reliable production platform, minimising the risk of production disruption, otherwise they may fail to deliver. With JIT there needs to be contingency built in with production schedules and order delivery dates.