Fact #1: the world’s population is growing.
Fact #2: the Earth is not.
There are estimates that it will be necessary for the world to increase its food production by 2050 to be able to feed the growing population (ACIAR 2014 report). How do we, collectively, increase our food production to match the needs of the growing population? Lean Six Sigma could provide at least a part of the answer.
The answer is particularly important to businesses in the agricultural sector—not only to meet the increasing demands of a growing global population but also to stay competitive within the industry. This can be achieved by embarking on a journey of continuous improvement to enhance internal efficiency and productivity. Otherwise, the chance that these agribusinesses will be left behind increases exponentially.
For example, the Dole Food Company, a global producer of fresh fruits and vegetables, implemented Lean Six Sigma to enhance its farming and distribution processes. This provided them with the tools to reduce waste in their operations, improve production efficiency, and deliver fresher produce to customers.
What is Lean?
The Lean methodology was developed with the ultimate goal of reducing costs and increasing efficiency by identifying and eliminating activities in a given process (service or manufacturing) that fail to add value and yet consume resources. In the Lean terminology, value is defined as ‘what the customer is willing to pay’. As a result, Lean is heavily oriented not only to efficiency and cost reduction but also to creating value to ensure customer satisfaction.
On the other hand, Six Sigma is a system developed with the goal of controlling variation and making processes more consistent and reliable to ensure the quality of deliverables. The combination of Lean with Six Sigma results in a faster creation of value at the lowest possible cost.
Lean / Continuous Improvement within the Agribusiness Sector
The agricultural industry faces a range of operational challenges that vary depending on factors such as location, scale of operations, technology adoption, and market conditions:
- Pest and Disease Management: Crop pests and diseases can cause substantial losses in agricultural production, and monitoring and managing these issues while minimizing the use of pesticides is a constant challenge.
- Land Degradation and Soil Health: Maintaining soil health when faced with soil erosion and nutrient depletion is essential for sustainable agricultural practices that can lead to enhanced yields and overall productivity.
- Technological Adoption: The potential of modern agricultural technologies such as precision farming or drones to improve efficiency and yield is often held back by a lack of accessibility.
- Supply Chain Disruptions: Issues in the supply chain can impact planting schedules and overall production.
- Water Management: Efficient water use is critical for agriculture, especially in regions facing water scarcity. Balancing water needs for irrigation while conserving water resources is an ongoing challenge.
- Post-Harvest Losses: Improper storage and transportation can lead to significant post-harvest losses of crops.
These challenges highlight the complexity of the agricultural industry and the need for innovative solutions and sustainable practices, as well as monitoring methods to better quantify and understand the limitations posed by the challenges. Key Performance Indicators (KPIs) are important metrics that help agricultural businesses and farmers measure their performance and track their progress toward specific goals:
- Yield per Area: This fundamental indicator of productivity measures the quantity of crops or products produced per unit of land area.
- Crop Quality: Quality metrics include factors such as size, colour, flavour, and nutritional content—all important factors for ensuring customer satisfaction.
- Cost of Production: Tracking the total cost involved in producing crops or raising livestock helps farmers understand their expenses and profitability.
- Labour Efficiency: This measures the amount of labour required to produce a certain amount of output, helping to identify areas for improvement.
- Inventory Turnover: For agribusinesses that handle inventory (e.g., seeds, fertilizers, livestock), this measures how quickly inventory is sold or used up, which can help manage inventory levels and avoid overstocking.
- Water Use Efficiency: Being able to measure the amount of water used per unit of output is crucial for sustainable water management in agriculture.
- Energy Consumption: Tracking energy consumption helps farmers and agribusinesses identify energy-efficient practices and reduce operational costs.
- Disease and Pest Incidence: Monitoring the prevalence of diseases and pests helps farmers protect their crops and minimize losses.
- Carbon Footprint: As sustainability becomes more important, measuring carbon emissions associated with agricultural operations helps identify areas where emissions can be reduced.
Lean methodologies can address challenges by better understanding and improving upon these KPIs to improve process efficiency and quality by identifying and eliminating waste and defects. While Lean is commonly associated with manufacturing and service industries, the principles and tools can also be applied to the agribusiness sector to enhance process efficiency.
Value Stream Mapping (VSM) is a tool that helps visualize the entire process flow, from raw materials to end customers. It identifies areas of waste, bottlenecks, and inefficiencies, allowing agribusinesses to streamline their processes and improve overall efficiency. The Kaizen tool involves continuous improvement through small incremental changes. In agribusiness, this could mean making incremental adjustments to planting, harvesting, or processing techniques to optimize resource utilization and reduce waste. The 5S principles (Sort, Set in order, Shine, Standardize, Sustain) can be applied to improve workspace organization, cleanliness, and safety in agricultural operations such as storage, packaging, and distribution.
Other methodologies include Root Cause Analysis, a technique that identifies underlying causes of problems or defects; Kanban, a visual tool used to manage and optimize inventory to prevent overstocking of agricultural needs such as fertilizers or seeds; or the Voice of the Customer (VOC) analysis that helps to understand customer needs and preferences.
Customizing and adapting Lean Six Sigma tools to the unique aspects of agriculture can lead to significant improvements in efficiency, quality, and sustainability.
There are numerous examples of success stories in the agribusiness industry. Cargill, one of the world’s largest agricultural companies, implemented Lean Six Sigma principles to improve the efficiency of their supply chain processes, reducing lead times and minimizing waste. Monsanto, a multinational agrochemical and agricultural biotechnology corporation that is now part of Bayer, applied Lean to improve its research and development processes to accelerate the development of new products and technologies by identifying and eliminating bottlenecks and reducing variation. John Deere, a renowned manufacturer of agricultural machinery and equipment, integrated Lean practices, thereby allowing them to reduce defects and enhance overall equipment quality while increasing production capacity.
In addition to this, setting up a statistical process control system (SPC) is of paramount importance to determine process capability, and indicators such as Cp and Cpk or Pp and Ppk. This powerful tool will be extremely instrumental for determining further process improvements, the Sigma Score of your process, the defects to be expected and, as a consequence of this, the financial benefits that you can expect to achieve when improving that process. Undoubtedly, this type of improvement in your process will also deliver higher rates of customer satisfaction. During our consulting practice we have observed a wide range of examples of critical to quality (CTQ) variables within the agricultural industry that need to be monitored in a process capability analysis. These can be monitored with statistical tools that have successfully delivered significant benefits to operations, such as correlation analysis, regression, statistical predictions, hypothesis testing, and many more.
Lean Six Sigma Implementation & Training
At AMSaxum we help our clients with the implementation of process improvement projects and provide onsite corporate training on lean six sigma/continuous improvement methodologies. There are Government grants available in Canada and the USA to cover the cost of corporate training.
Government Funding & Assistance Options
In addition to the tangible benefits possible through lean, the research and development efforts (labor, materials and subcontracts) required in the agricultural sector could be eligible to be recovered through government funding, such as through the Scientific Research & Experimental Development (SR&ED) program in Canada.
For companies in North America, specifically, there could be applicable grants to aid in upfront costs such as capital investment and employee training. AMSaxum experts in government funding help with the application of these grants and with the preparation of SR&ED claims.
For more information on continuous improvement and Government funding within the agricultural sector call AMSaxum at 1-(888)-772-2809 or contact us here.