18 December 2010 [c.1,600 word body text]
New year resolutions
Hot off the Wikileaks website, here are some extracts from the 2011 business plan from Bill’s Superior Animal Feeds Inc, for your eyes only, of course.
[1] Measure the company’s carbon footprint. Amid December’s second white-out in as many weeks, climate change remains plausible though global warming less so. However, ignoring this local blip, one of Bill’s rules that actually can apply to many aspects of life is “if you’re not sure about something that could be important, assume and plan for the worst. Then if it does happen, we’ve done our best; and if it doesn’t, bonus.”
So with global warming in mind, Bill gives it the benefit of the doubt and assumes it is taking place, though whether you take this view or not, I’m told that reducing your personal and business carbon-footprints alike makes good financial sense. None other than Peter Willes, one of the Nocton partners, said just that at Reaseheath College’s sustainable dairying conference last month. Incidentally, he and one other speaker were beacons of excellence in an otherwise sea of mediocrity and self-interest on the platform.
According to Willes, reducing one’s carbon footprint requires and indeed drives the elimination of waste. In whatever form we buy it, carbon is expensive. So by reducing carbon leakage, you need to buy less and therefore save money…simples. It may even be the case that this feature’s sponsor offers a service in this arena, though of course neither they nor your correspondent would be so crass as to promote it overtly here.
[2] Get out more. Luck = preparation x opportunity. See Screenings, November 2010.
[3] Measure the company’s true business potential. In less than five minutes, the UK populations of dairy and beef cows by county can be found on t’interweb. Indications of other farm livestock numbers by county are also available. So there’s no excuse here at BSAF Inc for not knowing how much potential business is out there. We think we know our market share and we think we know who’s who among our rivals. But are we right, assumption being the mother of many **ck ups? This is the year to commit £10-15k to an independent analysis of our market potential, our current standing relative to competitors, and our current standing as seen by customers and prospects. Be prepared, dear colleagues, to face some home truths.
[4] Buy a farm. If Bill’s Superior Animal Feeds Inc’s balance sheet isn’t strong enough to finance this, what have we been doing the past 10 years? By putting our money where our mouth is, or walking the walk as well as talking the talk, we demonstrate unique commitment to customers, indeed we become one of them. Land is a finite resource and they’re not making any more; on the contrary, it’s being consumed by urban sprawl. And driven by population growth, economic development, limited water availability and climate change, there’s a seismic global shake up coming in the economics, politics and distribution of food, out of which farmers can become masters of the universe where food is valued, rightly so, more highly than possessions.
At the Reaseheath conference, Peter Willes also voiced his faith in the strategy of buying land. No matter how you managed them, he suggested that dairy cows would always need about an acre of land each. And even in most difficult trading years, he said land-owning farmers still did ok through growth in the capital value of agricultural land.
Of course, managing a farm presents many challenge, but so does running a Superior Animal Feed company. Clearly, we will need to invest in the right people and management systems (including Lean Management…see point 5) as well as land and livestock. How different is that to what we’re already doing? Exactly.
[5] Make friends with Mr Tim Wood and, in parallel, approach independent agricultural economist Dr Kay Carson about (i) how the principles of Lean Management could be used to improve BSAF Inc profitability; and (ii) how its farm application on which she is working could be made available to our customers as a benefit of placing their feed business with us.
Dr Kay was beacon number two at the Reaseheath event. Shortly after an audience member had claimed, in posing a question to a previous speaker, that the average cost of producing milk was 28p/litre, she said a net margin of 10p/litre was the realistic target on the Lean Management’s monitor farm in Cheshire. By the way, her co-beacon Mr Willes also stated that his current three-herd, 1,000 cow set up in Devon was making money at the current milk price.
Of course, the concept of lean manufacturing or lean production as pioneered by the Toyota motor company will already be familiar to many readers. Its goal is ensuring that all a company’s expenditure is on things that customers are willing to pay for; it seeks to eliminate expenditure that does not contribute value, as defined by customers’ willingness to pay for it, to the company’s output. It’s about creating more value that customers will buy, requiring less work and using fewer resources.
In Toyota’s hands, lean manufacturing is reported to be based upon eliminating the seven deadly sins of unnecessary Transportation (off site), Inventory, Movement (on site), Waiting, Over-processing, Over-production and Defects. Ladies and gentlemen, please welcome our new ally and guru for 2011, Mr Tim Wood.
Although here at Bill’s Superior Animal Feeds Inc we don’t manufacture monogastric feeds, we know that pig and poultry producers have been friends with Tim Wood for many years. Unsupported by UK or EU subsidies, harsh free-market realities have meant that staying in business depended on driving unnecessary costs and avoidable losses out of the business. Those realities are now just as applicable to our dairy and beef producing customers. So if we can help them adapt their businesses to be more sustainable long term, without spending any money on things they don’t value of course, then we can gain a competitive advantage over our rivals. Incidentally, Dr Kay also offered a good definition of sustainability in a farming context, which was “sufficient profitability with minimal environmental impact and high animal welfare”, sufficient presumably for re-investment and a satisfactory return on investment for shareholders.
With thanks to the Lean Enterprise Institute (http://www.lean.org/whatslean/principles.cfm) for the bullets points and graphic that follow, here is a process for the adoption of lean principles, which the website says is “easy to remember, but not always easy to achieve:
· Specify value from the standpoint of the end customer by product family.
· Identify all the steps in the value stream for each product family, eliminating whenever possible those steps that do not create value.
· Make the value-creating steps occur in tight sequence so the product will flow smoothly toward the customer.
· As flow is introduced, let customers pull value from the next upstream activity.
· As value is specified, value streams identified, wasted steps removed, and flow and pull introduced, begin the process again and continue until a state of perfection is reached in which perfect value is created with no waste.”
Simples (again). Thank you Tim Wood and Kay Carson.
[6] Not unconnected philosophically from number 5, teach everyone who works here at BSAF Inc, and anyone else who’ll listen, the principle of leaving everything slightly better than you found it. For example, pick up one piece of litter as you walk down the street; if everyone did this, we’d live in a tidy world, we’d not need as many street cleaners , and out council tax and business rates might be lower. Or even wash up your own cup and one or two others at the sink in the mill kitchen. Incidentally, it is Bill’s belief that all parents who aspire to make the world a better place for their children should begin by teaching them this rule and embedding it for life into their fertile subconscious psyches.
[7] Invest more in the company’s telesales team. The obvious purpose is to make sure all Bill’s Superior Animal Feeds Inc’s customers get a reminder call or text message when their next order is due, then further telephone calls from us to take the next order then confirm delivery and the customer’s satisfaction thereof. But the bigger picture is to make the telesales team an integral part of winning new customers. BSAF Inc’s move in this direction is based on the Five Meaningful Encounters model, as mentioned in this feature (attributed to Jim Williams of Precision Prospecting) in the June-July 2009 edition of this esteemed journal.
To recap, the essential components of this system include a database of customers and prospects, a capability to produce effective personal letters and advisory newsletters, an opening gambit, a defined step-by-step process, and close integration between the telesales and on-farm sales teams. The main principles are (i) a minimum of five worthwhile encounters need to take place between a potential customer and feed supplier before it’s worth asking for an order; (ii) that a well trained and suitably equipped telesales function is capable of contributing meaningful encounters, particularly in taking the relationship from cold call to warm, at much lower cost that the on-farm team; then (iii) the on-farm team is thereby accelerated towards the point at which they can ask for orders with a realistic prospect of getting yes as the response. The Lean Goal is minimising the cost of (a) getting the opening order with a new customer, and (b) generating repeat orders where little or no sales support is needed by customers.
Happy new year and best wishes for a successful 2011.
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