Ask people what they think of in a high-performance race car and the answer is likely to be Formula 1.
Now, ask pork-industry personnel what they think of in terms of a high-performance pork system. Would your operation come to mind?
Regardless of whether the industry is facing a record profit run or struggling with a period of losses, managing today’s pork operation successfully is a lot like keeping a Formula 1 race car running smoothly.
Managing people and pigs well, controlling costs and making the right investments depend on a consistently successful set of practices—something more and more producers are learning. Reflecting on and listing the characteristics that high-profit farms have in common is not easy. That’s because the owner’s unique personality or the company’s culture often comes through each set of processes. Still, there are some points that seem to surface among high-performing farms.
First, those farms have owners/-managers who realize they will make mistakes, however, they never allow mistakes to continue long. It seems so basic, but during a career of consulting on hundreds of farms— large and small— this is the fact that seems to define those that succeed and those that languish. It’s okay to make a mistake, but correct it fast and don’t consider a problem intractable.
Problems are to be solved. Rarely is the first solution the best solution, but it at least sets you on the path to devise a better one. A surprising number of producers and organizations just can’t seem to make a change. That only works if you’re always able to make the best decision the first time. Honestly, how likely is that?
Second, at the base of high-quality, consistent performance is establishing standard operating procedures—SOPs— and an accountability system for those standards. Record systems perform a vital role in establishing and refining SOPs because they represent a consistent and standardized recording and diagnostic function for the farm. State and federal laws, high-quality veterinary care, the proper swine-care and feeding practices all come into play when developing SOPs. When they’re done well, SOPs build in cost savings for the operation. What’s more, they are critical in terms of educating managers and others who work directly with animal production.
Establishing SOPs requires you to dissect many factors that affect performance; organizing them into a succinct set of crucial factors, which when carefully and consistently executed, lead to success.
The first and possibily the most valuable outcome of seriously committing to SOPs is the education process that comes from creating them. There’s no substitute for having your staff debate procedures, reach agreements and commit the steps to writing.
Often managers and employees find they were initially hired and trained under systems with very different management philosophies and procedures than is needed today. Initial training creates belief patterns and biases that are difficult to overcome. The process of creating SOPs can help get everyone not only on the same page, but the right page.
Effective SOPs related to costs include those involving the control and centralization of purchase decisions. High-performing farms establish strict accountability for purchases, centralize input distribution and monitor input use without appearing to be penny pinchers. High-performance farms audit those steps frequently in order to spot problems that people simply have “gotten used to.” It is amazing to see the amount of waste that operations eventually consider normal. It’s often a case of simply losing focus.
Third, well-managed farms refuse to solve management problems simply with more technology. Increasingly, new inputs are being designed to remove some of the labor variability. While that’s a good thing, technology is only a tool in the hands of an operator. Producers running high-performance farms believe in, sponsor and create educational opportunities for managers and workers alike. Building skills and sharing cost-reducing strategies and solutions often create more savings than spending money on mechanized solutions. There’s nothing wrong with technology, but underutilizing existing resources is the hallmark of an average-performing farm.
Fourth, people with purchasing responsibilities on high-performing farms are constantly looking for ways to limit costs, find savings and reduce waste. For them it is both a challenge and a game. They shop various vendors, unbundle input packages to get just what they need, consolidate orders to cut shipping costs and negotiate price from knowing the vendor’s cost or the competition’s price. They invest in the storage and distribution capacity that allows them to buy in volume. They monitor shrink and find ways to reduce it. They invest in certain inputs such as a boar stud or feed mill and trucking functions, as is feasible.
Fifth, high-performance farms grow as individuals grow. They re-organize management structures to create increased communication and efficiency. This is tough for many managers and owners since long-standing roles and responsibilities are familiar and comfortable. People who excel in their role often are nervous about turning responsibilities over to others so that they can take on new ones themselves. This is a challenging process for sure. However, it often brings new perspectives, new accountability and even solutions for long-standing inadequacies that never made it to the surface. It’s a chance for people to get excited again about what they’re doing.
Sixth, these farms shape their recordkeeping system to handle a variety of reporting needs and objectives, as well as to facilitate management decisions. For example, when I visit a farm and ask for a specific subset of records that aren’t normally produced, and the personnel are able to retrieve them in less than 24 hours, I know that the underlying recordkeeping system has been designed for management use not simply for reporting to outsiders and for taxes. Effectively using a management-oriented certified public accountant early in a farm’s growth phase is a characteristic of a high-performing entity.
Lastly, an owner of a high-performance farm anticipates problems and issues, and tries to solve or prevent them early. I describe this as vulnerability analysis. It’s a way to pro-actively think about the farm and its unique and ever-present challenges. Rather than watching the week go by, and reacting to problems as they surface, high-performing managers plan the day, week and month with a focus on expected and unexpected issues.
For instance, if we know we’ll be moving a group of pigs to a finisher early at light weights, persons involved in trucking those pigs and receiving them at the finisher can’t take for granted that everything will work smoothly. They will need to double check key areas for success. They’ll call the building owner or manager to see that temperatures are set at the proper levels, that the building is dry, that the right feed is in the bins and waterers are properly adjusted.
The focus on preventing problems is the hallmark of farms where people guide events to successful outcomes rather than manage chaos back to a certain orderliness.
The characteristics described here are employed by successful farms year round, regardless if the producer is facing a profitable period or losses. It is a set of strategies and attitudes that form a core of successful outcomes regardless of the business.
By Dennis DiPietre, economist, Columbia, Mo.
Producers Costs Still Dominate
“Cost of production is still producers’ central focus,” says Dennis DiPietre, economist, Columbia, Mo. “Systems reach a stable process which determines the probability of production costs.”
Naturally, several factors influence any one producer’s production costs. However, a universal truth remains—that feed ingredients represent the largest production cost, as well as a large variation between producers. Other factors that affect costs include genetics; season; quality, type and cost of facilities; disease outbreaks and chronic disease; changes in production strategy; quality of management/labor; and compliance costs.
According to DiPietre, a typical per pig production cost is:
$25 to $29 per weaned pig
$13.50 to $15.50 per pig for nursery costs
$55 to $65 per pig for finishing costs
Which ads up to: $93.50 to $109.50 total cost per pig
The accompanying graph outlines the typical production cost (per hundredweight) for U.S. pork producers, as well as the percentage of producers estimated to fall into each category.