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New breed of dairy processor is a ‘virtual’ success’

April 11, 2003
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Supply-driven supply chain solution helps vertically integrated processor meet customer demand.

Vertically integrated dairy processor Horizon Organic is responsible for the entire supply chain but owns very few of the assets. This “virtual” manufacturer uses iProcess.sct from SCT to address its supply-driven supply chain challenges.

Horizon Organic produces and markets a leading brand of certified organic milk and a full line of refrigerated, certified organic dairy products. The company also produces certified organic eggs and juices. Horizon Organic brands enjoy a 70 percent market share and can be found in conventional supermarkets and natural foods stores in all 50 states plus the U.K. The unique difference about this vertically integrated dairy processor is that is it responsible for the entire supply chain but owns very few of the assets. This new breed of processor could be deemed a “virtual” vertically integrated processor.

Horizon Organic owns two farms that produce less than 30% of its certified organic raw milk needs and buys from 200 independent farms for the remainder. The company owns no processing facilities and relies on 25 independent plants nationwide. Horizon Organic owns no distribution facilities, but uses two US Cold Storage distribution centers. For transportation, the company uses third party companies. This approach to production, distribution and transportation plus some issues inherent in organic dairy products represents challenges in managing the supply chain.

According to Steve Jacobson, vice president of operations for Horizon Organic, the difficulty is that the company’s supply chain is supply driven. “We contract to buy 100% of the production from our producing partners. That means that our organic milk supply is fixed in all but the long term. Our challenge is to match demand to supply.”

Other challenges include the fact that Horizon is a national brand, making the physical supply chain longer than most dairy operations. “Of course, much of our product has a relatively short shelf life,” said Jacobson. “Our cost is higher than non-organic product due to demands of gaining and maintaining organic certification for farms and process facilities.”

A supply chain management tool is key to matching demand and processing capacity to supply in planning and coordinating deliveries to plants, plant production, outbound logistics, and warehousing. Horizon Organic chose iProcess.sct from SCT as a solution. “We evaluated a number of supply chain management tools and found that iProcess.sct was one of the few that addressed the supply-driven supply chain,” Jacobson said.

Horizon Organic uses 25 process facilities, most of which specialize in specific dairy products (for example, cheese, cultured product, butter, fluid milk, etc.) Typically, the processing facilities run Horizon Organic product from one to three or more days per week first thing in the morning to ensure segregation from non-organic product as required by both Horizon and the USDA’s NOP (National Organic Program).

Horizon Organic coordinates with the processing facilities in a number of ways. This includes sharing an 8-quarter rolling forecast plus shorter term planning. In the short term, Horizon must match plant capacity to demand. This plan is provided to the plants on a weekly basis with daily plans adjusted for those days when they run Horizon product. Horizon Organic must allocate 100% of its anticipated raw milk supply to individual plants based upon expected sales, processing capabilities, shelf life and product profitability. From these decisions, Horizon Organics coordinates inbound and outbound plant logistics.

“We see SCT as a key partner in managing our supply-driven supply chain,” Jacobson said. “It gives us the ability to maximize the utilization of our raw milk supply while meeting the demands of the consumer.”

For more information:
Dawn Deal, SCT, 610-647-5930; ddeal@sct.com; www.sct.com

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At Washington Quality Foods small quantities of specific ingredients are added by hand. Operators monitor and verify these hand additions on InBatch workstation screens. Source: Wonderware.

Sidebar:
Batch system a match for mix maker

Software allows operators to move quickly from one batch to the next, enhancing productivity and product consistency.

Washington Quality Foods’ line of muffin, waffle, cake and other dry mixes is one of the leading retail brands in the eastern U.S. The company also supplies custom cake, breading and flavoring mixes and marinades to food processors in the baking, seafood, and meat and poultry industries.

A significant factor in increasing productivity at the company’s Halethorp, Maryland, plant is Wonderware FactorySuite automation software, which incorporates the InTouch human-machine interface (HMI) system and the InBatch batch management system that automates the processing of custom-ordered product batches and maintains genealogy records on every batch produced. In addition, the company uses an enterprise resource planning (ERP) system from Baan to handle customer orders and create production schedules.

“We use six different mill grades of flour in this plant to achieve different qualities such as texture, protein content, and so forth,” said Tony Murray, director of information technologies. “We also use a lot of sugar, salt, dextrose and about 330 other ingredients.”

“In designing this facility, our production and research people went through about two years’ worth of production history to see what we used and how we used it,” he explained. “We came up with about 18 ingredients other than flour and we built a tank farm to house those ingredients so they can be conveyed to the mixers automatically.”

“The other 330 ingredients are done in a hand-add process and we’re also making use of InBatch with an InTouch HMI in that process to prompt the operator as to what he should be adding next, and then record that it was added,” Murray said. “Every day we produce or revise the production schedule for the week ahead.”

Typical batches are about 5,000 pounds in size. The pre-mixed formulation additions are stored in tubs, each labeled with precise content ID for the particular batch in which it will be used. The flour is transferred via air conveyor pipes into the mixing tank and the tub additions are poured in manually. Once the automatic mix cycle is completed, the batch is discharged into a tote bin for transfer to the appropriate packaging line. Quality control tests are run on every batch prior to packaging to check and verify its ingredient contents as well as levels of proteins, pH, leavening agents and other elements. In many cases, test batches are baked in ovens in the QC lab to verify the color and texture of finished product that will result from the mix.

Once a product tote has been approved for packaging, it is elevated to the plant mezzanine area where it can be gravity-fed to the packaging lines below. In addition to packaging of its own retail products, which have a bag inside a box, Washington Quality Foods bulk packages products in bags ranging from two to 50 pounds in size. Smaller bags are packed up to 24 bags in a case for shipment to the customer.

“We have to be flexible because we make concentrates and flavorings for producers like Tasty-Kake and Dolly Madison, plus we bulk package for food service producers that resell pancake, waffle and other mixes to restaurants and all sorts of institutional food preparers.”

The InBatch system validates each step taken in production of a batch. That’s especially critical for Washington Quality Foods because 100% of its products are kosher. Four different scale systems are used to isolate different classifications of ingredients to minimize contamination in blending operations. And all cleaning operations are managed as batches, too.

The plant has been designed to be in constant motion. “While one set of products is being mixed, another set is being formulated for the next batch,” Murray said. “Operators can quickly move from one batch to the next, which enhances productivity as well as consistency in product manufacture.”

For more information:
John Nichols, Wonderware, (949) 727-3200; E-mail: john.nichols@wonderware.com; www.wonderware.com

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