Opinion


The planning challenge for meat packers

3 Minutes

I am often being asked why I sell specialized software for the meat industry. I mean why specialized software for any industry? Truth to be told, you can probably use any accounting software to run a meat packing plant. Same goes for your Human Resource Package or perhaps even your CRM system. But when it comes to the heart of the animal harvesting, cutting and deboning, value-add and eventual sales and distribution of your goods, you need something more. 

 

You need a system that knows how to dispose a whole carcass, completely, without leaving any evidence in your inventory and at maximum market value. A vast majority of historians put the domestication of animals for food consumption at around 10,000 b.c. Since then we have grown animals for our nutrition like any other food source. We invest feed, medication, water, land among other things, and the animals turn this into muscle meat we eventually eat. This process has, depending on species, a perfect time from birth to harvest, the point at which the resources we add still create more value just before the feed costs more than the muscle it creates. Generally speaking, the smaller the animal, the faster it occurs and the narrower the window for optimal profit, for chicken about 42 Days from birth to harvest, for fed cattle about 18 months.

Perfect Harvest

Once we reached the time for the perfect harvest, we want to harvest the animal. Unlike a salad, where you can eat the outside leaves for dinner and keep the plant alive for even more salad, we need to unfortunately slaughter and process the entire animal. This also means that we now need to do something with everything that comes of the animal to get the most value and profit out of it. We got pressure from the live side to do something with the animals, or we lose money.

Customers of meat packers can be generally categorized into 3 groups: Retail, Food Service and Industrial. High end restaurants and retail customers take most of the premium meat cuts like steaks and some roasts. Industrial takes mostly trimming and lower value cuts and adds value by further processing them. A lot of the further processed items are than the deli meats on your Subway sandwiches or beef patties on your fast food burgers. I know, I simplify the world a tad here.

These three major groups create demand for different pieces of the animals we harvest. This can lead to swift changes in demand and a planning challenge. Right now a big challenge is, that a lot of the ultra-premium meat cuts, which usually are eaten in prime steakhouses are just not eaten there. These meat cuts do not get better by freezing and you find some of these actually in your retail store today either comparatively cheap or in a downgraded package (yes, some of the choice NY Strips you buy right now are actually prime, just look hard at your retail counter).

Balanced Production Process

How do I balance the production process, so that every part of the animal is processed and sold? This is a tall order. Animals are natural products and they come in a lot of different variations. We invest special food in them to make them ABF (anti-biotic-free) or Organic which makes the animal even more expensive, and not always can we market the entire animal for all its attributes in its entirety fresh. While it is actually not particularly hard to balance the incoming supply (push plan) with the sales demand (pull plan). It is though hard to decide what else to do with the rest of the animal. The typical options are:

1. Cut it further or a different way to create different meat cuts that have a higher current market value for the combing parts (cut out value)?
2. Pack it into the cooler based on anticipated future orders that are not in yet.?
3. Further process it into e.g. a fully cooked product thus extend the shelf-life?
4. Downgrade it into a product that has higher demand but still fits the necessary attributes and allows to sell the meat fresh.

Downgrading

Downgrading is a common option, one that needs close monitoring and reporting. You lose some cut-out value and you certainly need to know how much that is. It is the worst of the options during the planning cycle, but still better than any that come later:

Selling distressed at a discount, because the meat aged out.
Freezing it, incurring loss in value AND additional storage costs.

Now back to the original challenge: you need an industry specific solution to orchestrate all these things together: catch weight functionality to deal with random-weight items, cut-trees to accommodate all deboning options, further processing solutions for value add, shelf-life management to optimize inventory rotation and purchasing and sales systems that allow you to manage the incoming supply and understand the sales demand. Once you have all these instruments playing together like a philharmonic orchestra, you can maximize your profits.

I am not sure what you call it, we call it “perfectly balanced push and pull production”.