What are Irish dairy processors doing to drive efficiencies?

Market sentiment in the global dairy industry is extremely pessimistic right now in the wake of the last two GDT auctions, which saw the average product price fall by 5.9% in the first week of July and a further 10.7% at the mid-July auction.

The GDT has now fallen for nine consecutive auctions since mid-March and it leaves the southern hemisphere index at its lowest level in 10 years.

In response to the difficult market situation, some of the world’s largest dairy processors have been implementing cost-cutting procedures in a bid to improve efficiencies.

Closer to home, the IFA has raised concerns in recent weeks that Irish dairy co-ops were not doing enough to drive internal efficiencies, that would ultimately help support producer milk prices.

The Irish Farmers Journal has contacted a number of dairy processors to see what cost saving measures each has undertaken and how it has helped performance.

Arrabawn

“Arrabawn embarked on a €15.7m investment programme five years ago, in anticipation of the challenges that would be presented in the post-quota era. This delivered vastly improved efficiencies, by significantly growing capacity and enabling us to return one of the most competitive milk prices to suppliers in the country.

“We have also worked closely with neighbouring co-ops to get through the peak production period, which this year heralded unprecedented volumes from suppliers.

“From an efficiencies perspective, we are looking forward to the installation of natural gas, which is currently being commissioned and will significantly lower our fuel costs and enable us to pass on this saving to our suppliers.”

Aurivo

“Aurivo has a continuous focus on all costs. This has led to major efficiency improvements in the business, including consolidation of liquid milk processing to one site, displacement of heavy fuel oil with a biomass wood energy system and an increase in volume capacity through a comprehensive lean programme instead of capital expenditure.”

Carbery

“Since 2012, Carbery Group has been implementing a lean manufacturing programme across its supply chain, from milk production to delivery to market. This programme has enabled the business to optimise the efficiency of its operations and is allowing Carbery to handle extra post-quota milk volumes without increasing overhead costs.”

Dairygold

“Dairygold maintains an ongoing focus on continuous improvement across all areas of its business activity. This is delivered through Advance 2020 – a continuous improvement programme which is based on the principles of lean manufacturing.

“The programme drives efficiency and process improvement, which underpins the delivery of a leading milk price and a strong operating performance.

“In addition, Dairygold’s investment and expansion programme has been building additional, high-efficiency processing capability and technology to further reduce processing costs.”

Glanbia

“Regardless of the market environment, cost control and business efficiency is a key focus for management at Glanbia Ingredients Ireland (GII).

“We use the Glanbia Performance System (GPS), which focuses on elimination of costs and creating value and forms a core component of GII’s strategy to ensure efficiency.

“This year, GII has stepped up the GPS approach, in order to redouble the effort to identify any potential cost saving opportunities. All employees at GII are charged with eliminating costs under the GPS approach.

“In this regard, we are satisfied that all efforts to ensure the most efficient operating process are deployed within the business.”

Kerry

“Kerry has been supporting consolidation in the dairy industry and driving efficiencies for many years since we acquired Golden Vale and Newmarket.

“We have invested heavily in capital expenditure and new product development at our facilities in Charleville, Listowel and indeed Newmarket once it was acquired.

“Kerry is constantly improving efficiencies regarding our milk assembly service.

“We have also co-ordinated with neighbouring co-operatives in relation to milk assembly, processing, etc.

“We have been implementing lean efficiency programmes here at Kerry even before Enterprise Ireland introduced them to Irish businesses because they have long been international best practice.”

Lakeland

“Lakeland Dairies has a constant efficiency and cost reduction programme in place across all of its operations. Investments and rationalisations that have been put in place over previous years have delivered valuable efficiencies and economies of scale to date.

“The co-operative flexibly diverts milk into the highest potential value dairy product categories in order to maximise returns and to pay the highest possible milk price in line with market conditions.”