Shrinkage - Increase Profits by Controlling Product Losses
Controlling product losses, commonly referred to as “shrinkage,” is essential to profitability, regardless of the type plant (fluid milk, ice cream, cheese or butter and powder).
Controlling product losses, commonly referred to as “shrinkage,” is essential to profitability, regardless of the type plant (fluid milk, ice cream, cheese or butter and powder). Reducing or controlling “shrinkage” is one of the most practical means of improving profits.
Plant shrinkage (product and butterfat losses) can be segmented into five major areas of the operation:
• Raw receiving and storage
• Processing
• Bottling/packaging
• Refrigerated/frozen storage
• Distribution
Although controlling shrinkage is important in all dairy operations, it receives more attention in Grade A fluid plants. This is due to the monthly accounting required by the Federal Milk Market Administration (FMMA). The FMMA requires an accurate accounting of all milk received, processed and sold. Consequently, the FMMA report is the first document to review when investigating possible causes of product losses.
Product losses in plant operations are classified as either accountable or unaccountable losses.
Accountable losses are those that can generally be measured and causes are assigned. These losses may or may not be accounted for on the FMMA report. Examples are variations from standards, route returns, documented spills and market order-approved “dumps.”
Unaccountable losses are those that are not readily identified and causes are generally unknown. Unaccountable losses appear on the FMMA report as pounds of shrink (product and butterfat pounds). Generally, unaccountable losses occur in areas where there are no controls or inaccurate measurements are being performed. Keep in mind, if you don’t measure it, you cannot control it.
Reducing Losses: A good way to start is to establish “plant loss control goals.” An acceptable starting point is ≤ 0.25% for each of the five areas listed above. Therefore, an efficiently operated fluid milk plant would expect to have a total shrink of fluid product and butterfat pounds of ≤ 1.25%.
In order to achieve this shrinkage “target,” a system of collecting accurate process data must be established. More importantly, plant employees must be trained to identify and correct procedures and practices that contribute to shrinkage. People control shrinkage.
Once it is determined that product losses exceed “target” goals, it is time to investigate. Suggested questions and areas of concern follow:
• Is there a repeatable pattern in shrinkage values on a daily basis?
• Are raw milk receipts accurate/verified?
• Are samples for butterfat testing representative? Are butterfat testing methods accurate?
• Are there any product leaks throughout the plant?
• Is product being left in lines and tanks? What about foam?
• Are daily production counts and month-end inventories accurate?
• Are high-temperature, short-time water-to-product and product-to-water changeovers monitored to determine product losses?
• Are containers being overfilled?
The above is just a partial listing of questions to ask and areas to check.
Controlling plant “shrinkage” is a significant project with substantial financial benefits. Every plant should include “shrinkage” control on its list of continuous improvement programs. It is never too early to get started, but it is a never-ending challenge.
Remember, people, not process equipment or software programs, control shrinkage. Always keep in mind, if you don’t measure it, you cannot control it.
Join Randolph Associates, Inc. for the following basic training courses: Advanced Sanitation Workshop, Oct 20-22; Pasteurization Workshop, Dec. 13-16; and HACCP/Implementing SQF Systems Workshops, Dec. 6-9. For registration and additional information, contact Kristy Clark at 205/595-6455 or email kristy.clark@raiconsult.com.
Plant shrinkage (product and butterfat losses) can be segmented into five major areas of the operation:
• Raw receiving and storage
• Processing
• Bottling/packaging
• Refrigerated/frozen storage
• Distribution
Although controlling shrinkage is important in all dairy operations, it receives more attention in Grade A fluid plants. This is due to the monthly accounting required by the Federal Milk Market Administration (FMMA). The FMMA requires an accurate accounting of all milk received, processed and sold. Consequently, the FMMA report is the first document to review when investigating possible causes of product losses.
Product losses in plant operations are classified as either accountable or unaccountable losses.
Accountable losses are those that can generally be measured and causes are assigned. These losses may or may not be accounted for on the FMMA report. Examples are variations from standards, route returns, documented spills and market order-approved “dumps.”
Unaccountable losses are those that are not readily identified and causes are generally unknown. Unaccountable losses appear on the FMMA report as pounds of shrink (product and butterfat pounds). Generally, unaccountable losses occur in areas where there are no controls or inaccurate measurements are being performed. Keep in mind, if you don’t measure it, you cannot control it.
Reducing Losses: A good way to start is to establish “plant loss control goals.” An acceptable starting point is ≤ 0.25% for each of the five areas listed above. Therefore, an efficiently operated fluid milk plant would expect to have a total shrink of fluid product and butterfat pounds of ≤ 1.25%.
In order to achieve this shrinkage “target,” a system of collecting accurate process data must be established. More importantly, plant employees must be trained to identify and correct procedures and practices that contribute to shrinkage. People control shrinkage.
Once it is determined that product losses exceed “target” goals, it is time to investigate. Suggested questions and areas of concern follow:
• Is there a repeatable pattern in shrinkage values on a daily basis?
• Are raw milk receipts accurate/verified?
• Are samples for butterfat testing representative? Are butterfat testing methods accurate?
• Are there any product leaks throughout the plant?
• Is product being left in lines and tanks? What about foam?
• Are daily production counts and month-end inventories accurate?
• Are high-temperature, short-time water-to-product and product-to-water changeovers monitored to determine product losses?
• Are containers being overfilled?
The above is just a partial listing of questions to ask and areas to check.
Controlling plant “shrinkage” is a significant project with substantial financial benefits. Every plant should include “shrinkage” control on its list of continuous improvement programs. It is never too early to get started, but it is a never-ending challenge.
Remember, people, not process equipment or software programs, control shrinkage. Always keep in mind, if you don’t measure it, you cannot control it.
Join Randolph Associates, Inc. for the following basic training courses: Advanced Sanitation Workshop, Oct 20-22; Pasteurization Workshop, Dec. 13-16; and HACCP/Implementing SQF Systems Workshops, Dec. 6-9. For registration and additional information, contact Kristy Clark at 205/595-6455 or email kristy.clark@raiconsult.com.
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