Corporate Profile: Bogasari Flour Mills: Massive flour milling expansion in Indonesia

by Teresa Acklin
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Bogasari Flour Mills to increase capacity by 58%.

By Morton I. Sosland, Editor-In-Chief

   Bogasari Flour Mills, already known globally for operating the world's largest flour mill in Jakarta, the port capital city of Indonesia, is either constructing or has designed and contracted for an increase of more than 4,500 tonnes in the daily capacity of the three flour mills it manages. That is a 58% increase in daily capacity, by any measure representing the largest flour mill building program ever carried out anywhere in the world.

   When the current expansion program is completed in the next year or so, Bogasari will operate three mills with daily capacity of 17,800 tonnes of wheat. Bogasari's total would rank it among the largest in the world.

   Also in Indonesia, two new mills are being built on Java, at Semarang on the northern coast and at Cilacap on the southern coast of Indonesia's most populous island, that will add a total of 1,800 tonnes of daily capacity. Including these two plants, the nation's flour mill building program is within reach of 6,800 tonnes of new capacity. These two plants in Java are being built by companies unrelated to Bogasari.

   Not only is Bogasari carrying out a flour mill expansion program that is unprecedented in its size, but, at the same time, the company is expanding its grain storage capacity, grain unloading capacity, bulk flour and bag packing capacity and bulk millfeed storage and pelleting capacity on a dimension that boggles the minds of millers in lands where capital programs are carried out on a more modest scale.

   Piet Yap, the Indonesian milling executive at the helm of Bogasari, is known around the world for his leadership in developing that company into a flour milling powerhouse. He is recognized as one of the real pioneers of modern flour milling in southeastern Asia.

   In a recent interview at his office in Jakarta, he resisted putting a monetary figure to the giant program. Yet, anyone familiar with milling construction costs, and even after taking into account what might be relatively lower building and engineering costs in an emerging country, knows that Bogasari's current program represents an investment of several hundred million U.S. dollars.

   Mr. Yap, while being cautious in his assessment of the future growth of the Indonesian flour market, leaves little doubt that the expansion program has been undertaken to be certain that Bogasari has sufficient capacity to supply the needs of its rapidly expanding customer base. The expansion is also to assure the government of Indonesia of the adequacy of the flour supply, currently and into the foreseeable future.

   Indonesia, with a population of 200 million in 1994, is the fourth-largest nation in the world, surpassed only by China, India and the United States. As the market has matured, in contrast to the explosive growth experienced in the earliest years of operations, Mr. Yap observed, it also is becoming more sophisticated. This means demands for flour quality and grade are becoming increasingly important. Modern bakers and noodle manufacturers are asking for special grades for higher quality bread and noodles, he said.

   Mr. Yap estimated that the Indonesian flour market would grow through the balance of this decade at a rate of about 5% per year, using the current crop year as the base. He said this year's wheat grind would be right at 3.5 million tonnes. If he is correct in that forecast, wheat grind in Indonesia in the year 2000 will be near 4.5 million tonnes, representing a 29% increase during the last half of this decade.

   The 5% annual increase rate is made up of a 2% annual rise in population, which is near the highest of national gains around the world, and a 3% increase attributed to shifting dietary preferences in favor of flour-based foods. But that 5% annual rise, Mr. Yap noted, is less than half the annual rate of growth in the heady years of the previous decade. In the early milling years, when Bogasari started up the country's first mill in 1971, flour demand at one time was rising at a rate that often exceeded 20% per year, Mr. Yap recalled.

   In counseling caution on the outlook for consumption of flour-based foods in Indonesia, while at the same time engaging in such a massive capacity expansion, Mr. Yap particularly stressed the dominance of rice in the national diet. Indonesia grows no wheat, meaning that its entire grind must be imported, while the country is one of the world's leading producers of rice, growing about 47 million tonnes on a rough basis in recent years.

   In the past two years, Indonesia had to import rice because of drought. The country had been self-sufficient in rice since 1985. Indonesia this year is projected to import 1.5 million tonnes of rice, down from 2.2 million in the prior year.

   The country also ranks in the top tier of wheat importers, with wheat takings in 1995-96 estimated at 3.7 million tonnes. This is well below the leaders in wheat imports, such as China at 11 million tonnes and Japan and Egypt each at 6 million.

   Bogasari's current expansion program is best described on an individual mill basis, as follows:


   • Daily capacity, in terms of wheat grind, is being increased from 6,500 tonnes to 9,500 tonnes.

   • A second deep water jetty is being built to handle Panamax-size ships; it will have two pneumatic ship unloaders with capacity of 2,000 tonnes per hour. The current jetty at the mill has three pneumatic unloaders with a combined unloading capacity of 1,800 tonnes per hour. Larger-size ships must be partially unloaded before docking at this jetty.

   • New wheat storage capacity is being added to provide 224,000 tonnes of capacity in steel bins in addition to the existing vertical concrete silos that hold 180,000 tonnes.

   • Wheat millfeed storage capacity is being increased by 22,000 tonnes to bring the total feed storage capacity to 67,000 tonnes, with additional pelleting capacity also being installed to expedite exports of pelleted feed.

   • The one-year-old centralized bulk flour storage bins hold 9,000 tonnes of flour, making it not only the largest bulk flour installation but also the largest to move flour into packing lines that load 22.5-kilogram bags into which all flour is packed. Provision has been made in the new flour bulk silos for possible loading out in bulk.

   • The milling complex has total flour storage capacity, mainly in warehouses, for 50,000 tonnes of flour.


   • Daily milling capacity in Indonesia's second-most populous metropolitan area is being increased to 5,000 tonnes from 3,000 tonnes.

   • New vertical concrete wheat storage capacity for 100,000 tonnes is under contract that nearly doubles the current storage elevator for 110,000 tonnes of wheat, bringing the total to 210,000 tonnes.

   • New bulk millfeed storage of 22,000 tonnes is being added to the present silo of 36,000 tonnes, along with additional pelletizing capacity.

   • A 50% increase in bulk ship unloading capacity is planned at the current facility. The jetty, which now has two ship unloaders with unloading capacity of 1,200 tonnes per hour, is being expanded by the addition of a new unloader of 600 tonnes per hour.

Ujung Pandang

   (This mill, located in Sulawesi in eastern Indonesia, is owned by Berdikari Flour Mills, in which Bogasari is a partner and also has operating responsibility).

   • Daily wheat milling capacity will be increased from 1,300 tonnes at present by the addition of 1,500 tonnes of new capacity, raising the total to 2,800 tonnes. Construction has begun on this expansion.

   • Wheat storage capacity for 50,000 tonnes, in vertical concrete silos, is being doubled by the construction of new elevators.

   • The mill's jetty, which currently has two small ship unloaders with capacity of 300 tonnes per hour, will be doubled by the installation of a new unloader with the same capacity as the existing two units.

   In describing the market for flour-based foods in Indonesia, Mr. Yap stressed the importance of an adequate food supply to the nation and the emphasis of President Su-harto's administration on this factor. Through Bulog (National Logistical Agency), the government maintains a tight grip on the price of wheat and flour.

   Bulog, the nation's only wheat importer, delivers wheat to the mills and receives the flour from the mills, which it then sells through an approved distribution network at prices it sets. Millers receive a fee for the service they perform, and the mills also market the millfeed, which is partly pelleted and sold for export. The current millfeed price is near U.S.$100 per tonne, f.o.b.

   Thus, Bulog, not the mills, controls the price of flour to bakers, noodle manufacturers and other processors. While this system apparently removes flour users from the effects of fluctuations in global wheat prices, which fulfills one of Bulog's main goals to achieve a degree of price stability for basic foods (the same applies to rice, sugar and cooking oils), Mr. Yap noted the negative impact on the agency's operations of recent sharp advances in global wheat prices.

   When Bulog sells flour milled by Bogasari, it is purchased by a network of more than 500 distributors that either operate or lease truck fleets and other systems for moving flour to bakers and other users. The metropolitan areas of Jakarta and Surabaya account for a combined population of about 20 million, or 10% of the country's total, and include major food industries located in and around those cities.

   Food industries in smaller cities supply the smaller towns and villages in rural Indonesia, which account for 80% of the country's population. Per capita consumption of flour nationwide on a wheat flour basis is near 13 kg.

   The stress on supply and price assurance, which is a key part of the Suharto government's policy, provides in part the basis for not just the unprecedented mill expansion, but also the decision that, in effect, will more than double the group's wheat storage capacity. Noting that Bogasari grinds about 250,000 tonnes of wheat per month, Mr. Yap said he believed that, at a minimum, the group needed to have a two-month wheat stock on hand at all times, particularly in view of the varied sources of Indonesia's imports and the need to avoid being dependent on the whims of shippers and unpredictable conditions at source ports.

   “Our goal in adding substantially to our wheat storage capacity is to give us more flexibility in both procurement and in the timing of arrivals,” he said.

   In addition to the flexibility provided by massive amounts of wheat storage space at each of the three mills, Bogasari owns three ocean-going bulk carriers that are used mainly in moving wheat from various origins around the world. The three-vessel fleet includes one ship of 36,900 tonnes used to move wheat from almost any origin and two ships of 30,600 tonnes each that are mainly used in a shuttle service on wheat movement from Australia.

   While Bulog, not Bogasari, procures and pays for all the wheat imported by Indonesia, the flour mills advise on the origins and qualities of the wheat. Mr. Yap was outspoken in his criticism of some wheat origins on both price and quality grounds.

   “We like U.S. wheat, but we don't like the way it's handled,” he said in reference to the practice of delivering wheat that measures strictly to the official grain standards.

   Mr. Yap said he wanted to be able to buy wheat without dockage. He also expressed disappointment over the failure of the U.S. government to make Indonesia eligible for Export Enhancement Program subsidies. He suggested that EEP be offered to Indonesia on certain types of wheat that are not available or insufficiently available from competing origins.

   To emphasize his negative attitudes toward U.S. wheat policies, Mr. Yap pointed out that Bulog bought no wheat from America from 1991 through 1994 and that this had changed in 1995 only because of tightness in world wheat supplies, particularly Australia's small crop last year and the cutback in Saudi Arabia production. At one time, Indonesia was the largest buyer of wheat from Saudi Arabia. That oil-rich nation for a time had a large export wheat surplus in response to domestic prices sharply above world market levels, which since have been sharply reduced.

   Almost as if to emphasize that he did not feel negative only about U.S. wheat policies, Mr. Yap noted that Bulog for some time had been asked to buy grain from India and that he had insisted that no Indian wheat be taken, primarily on quality grounds, the unavailability of automatic weighers and very slow loading.

   He said that Indonesian wheat imports were divided about equally between hard and soft wheat and that his preferred suppliers were the United States, Australia, Canada and Argentina. Normally, in buying hard wheat, Bulog seeks a minimum of 13% protein, which is essential to meet the rising quality standards of both bread bakers and noodle manufacturers.

   Bogasari mills three kinds of flour — all-purpose, which accounts for more than half of the output and is usually produced from a blend of hard and soft wheats; biscuit flour, an all-soft-wheat product that is used by biscuit and cake bakers; and “first class,” which is usually 100% spring wheat or a combination of spring and higher protein hard winter, used in bread baking and for special types of noodles.

   Indonesia is unique among the world's leading flour milling countries for packing all of its flour in cotton bags. These bags, which when filled weigh 22.5 kg, are very popular as a source of cotton fabric for home use. Bogasari maintains its own cotton textile plant to produce the bags, including printing with the company's principal brands — Segitiga Biru, Cakra Kembar and Kunci Biru. Annual bag output is near 100 million.

   Even though the new mill construction will allow the delivery of flour in bulk, Mr. Yap said he doubted whether this would be a significant trend for some time, in part because of the popularity of the cotton bags, but mainly because of the small size of most flour-using plants. The only exception would be in bulk deliveries to some of the larger noodle manufacturing plants. He contrasted the utility of cotton bags with sacks made of other material, such as multi-walls and propylene.

   When it comes to construction and engineering, as well as equipment suppliers, Mr. Yap emphasized Bogasari's reliance on a competitive bid process. In making this point, he acknowledged that Ocrim S.p.A. of Cremona, Italy, had been the dominant supplier of flour milling equipment to Bogasari over the years. That company's continuing leadership as the primary equipment supplier was plainly evident in the wooden crates of Ocrim equipment for the new expansion project stored at various sites around the sprawling Jakarta milling complex.

   Ocrim is supplying all of the flour milling equipment for the three-plant expansion program currently under way to supply an additional 6,500 tonnes of daily capacity. Indeed, all but 650 tonnes of the current Jakarta capacity of 7,000 tonnes of wheat per day was provided by Ocrim, the exception being an early 650-tonne unit supplied by Miag of Germany.

   The Jakarta mill, Indonesia's first, began operations in 1971, meaning that the expansion from the original 650 tonnes to the current and future total represents one of the miraculous growth stories of modern-day milling, in any part of the world.

   The Surabaya mill began operations in 1972, also with a beginning 650 tonnes of daily capacity. It reached the 3,000-tonne level in 1995, of which 1,600 tonnes are milled on equipment from Buhler Ltd., Uzwil, Switzerland, and the balance is from Ocrim.

   Ujung Pandang's current milling capacity of 1,300 tonnes is in Buhler equipment.

   Packaging equipment is mainly supplied by Chronos Richardson.

   When it comes to ship unloading equipment, Bogasari has placed that business mostly with Neuero Corp. while also using Hartmann equipment. The two small unloaders at Ujung Pandang were supplied by Buhler, while the new unit will be Neuero.

   Basic construction contracts for new mill buildings, jetties and concrete grain elevators have been awarded to Indonesian and Taiwanese civil contractors with whom the company has worked over the years. In the interest of speeding the building, the massive 224,000-tonne wheat storage expansion project at the Jakarta mill has been constructed with steel bins engineered and supplied by GSI Group.

   It is obvious that those companies that participate in supplying construction, engineering and equipment to Bogasari would look upon that company as a global customer without parallel.

   During a visit to the massive milling plant, located on 35 hectares of land on the Jakarta waterfront, Palmiro Baccinelli, factory manager and the senior operating executive of Bogasari Flour Mills, and Bambang Christianto, production manager, provided additional insights into the massiveness and complexity of the milling business.

   Mr. Baccinelli, a native of Italy and one of the few non-Indonesians permanently employed by the company, said that he had anticipated “something special” in the way of work experience when he joined the Jakarta mill staff in 1985, but that he didn't realize or appreciate the immensity of the operation.

   “Just think,” he said, “in less than two years, we are going to complete here in Jakarta the construction and installation of equipment for a new shipunloading jetty; a massive new wheat elevator as well as new storage for wheat bran pellets; a new pelletizing plant; and three flour milling units in the same new building with a daily wheat grinding capacity of 3,000 tonnes each.”

   A 9,500-tonne bulk flour silo was completed early this year.

   Mr. Baccinelli was particularly delighted that the completion time for the entire Jakarta expansion would be earlier than initially planned. As a result, a schedule that called for start-up by the end of 1996 or early in 1997 has now been moved forward by at least six months.

   “We started construction of the new mill building (it is the seventh building in the Jakarta complex to house flour milling equipment) in March of (1995), and we plan to be finished and up and running by the middle of next year,” he said. “That's only a little more than a year to complete this giant project.”

   Both Mr. Baccinelli and Mr. Christianto underscored the uniqueness of a single flour milling line having 1,000 tonnes of daily wheat grinding capacity. Prior to this installation, milling lines were typically in a range of 400 to 600 tonnes of daily capacity. They cited one other installation of a 1,000-tonne mill in Brazil, and then noted that Bogasari's advances in this phase of milling technology were moving even further in the Surabaya expansion, where a single line will be installed with 1,500 tonnes of capacity.

   They pointed out that the size of single milling lines is usually restrained by the potential cost of shutdowns in units of such large size on account of the breakdown of even a single piece of machinery. “We did a lot of work with Ocrim to obtain their participation in this effort to increase the size of what is considered a viable milling unit,” Mr. Baccinelli explained.

   “We believe that units of this size will allow us to reach 100% performance efficiency. We've been on this trend for several years, first raising our unit size to 800 tonnes. Now we're at 1,000 and even 1,500 tonnes,” he noted.

   The newest operating mill, a fully computerized line with 800 tonnes of capacity, uses 44 roller mills. The three new 1,000-tonne lines, which are expected to be running at the middle of 1996, will have 52 roller mills each. The rollstands are LAM units manufactured by Ocrim.

   Once the new milling capacity is in place, the expanded bulk flour storage and packing system will be able to run near its full capacity — another figure that also astounds. With operations at full tilt, Bogasari will be packing between 18,000 and 20,000 bags per hour, in a system that is designed to run 21 hours per day. That aggregates to the packing of 420,000 bags of flour each day. The reason the packing lines don't run 24 hours each day is that the men working the packing lines are given an extra hour of rest time on each shift.

   Along that line, the mill currently has 28 stations for the loading of trucks with sacked flour, at a rate of 15 minutes per load.

   The bulk flour silo contains 56 steel bins, each with a capacity of 180 tonnes, providing, when fully operational, bulk space for more than 10,000 tonnes of flour. This bulk storage system feeds into 28 packing lines, each with a capacity of 750 bags per hour.

   Mr. Baccinelli said the addition of 3,000 tonnes of new capacity would result in a “highly sophisticated mill able to run with any sort of flour.” He added that the new plant would be totally computerized, from wheat blending to flour packing. Computerization has been a feature of the Bogasari expansions in recent years, but the company has not added electronic controls to the older units. In reality, it was estimated that the current 7,000-tonne unit represents 6,000 tonnes of efficient and fully operating capacity.

   Bogasari operates its mills 24 hours per day seven days per week, with closings only for seven or eight official holidays per year. Reflecting the broad ethnicity of the country, observed holidays include Muslim, Buddhist, Hindu and Christian holy days. No specific shutdowns are scheduled for maintenance, which is carried out on a continuing basis. The two officials estimated that the mills run anywhere from 320 to 325 days per year. Mill personnel mostly work in 8-hour shifts, 40 hours per week.

   Touring the Bogasari facility in Jakarta provided many varied impressions. Cleanliness at an extremely high level certainly was impressive. Plant floors of marble were spotless, with dust apparent only in the bag packing area. Exceptional building strength also was evident in the almost total absence of vibration.

   When asked about this, Mr. Christianto explained that Jakarta was in a seismic zone where earthquakes were enough of a threat to require special construction codes. This is the case even though the city has never experienced a quake. Only a few days after the plant visit, an earthquake did strike one of the neighboring islands.

   Mr. Baccinelli spoke with considerable authority regarding Ocrim's role in the engineering behind the Bogasari plant because he came from the Ocrim engineering staff to join Bogasari in 1985. A native of Cremona, Italy, where Ocrim has its headquarters, he joined the company as an engineer in 1968. Always assigned to jobs outside of Italy, he never worked as a milling engineer in his native country.

   Indeed, one of his first assignments was to Indonesia, where he assisted Bogasari in starting up the company's first mill. From 1974 to 1976, he worked for Seaboard Corp. of Merriam, Kansas, U.S., at several of that company's mills in west Africa, and returned to Ocrim later.

   Mr. Baccinelli reflected considerable pride in the training program Bogasari conducts to assure that Indonesians comprise practically all of the mill's staff. Mr. Christianto reviewed the operations of the company's extensive training activities, which are supplemented by programs offered by milling equipment companies as well as offerings by wheat exporting countries like Australia, Canada and the United States. Thus, 18 workers were currently taking a three-month course offered by Ocrim at Cremona, which was specially designed for the Jakarta work force.

   A pilot mill is in the process of being installed at the training center, which is part of the Jakarta complex, and it was scheduled to be ready for use early in 1996.

   Pointing to Mr. Christianto, Mr. Baccinelli said the production manager “was trained right here by us” to hold his position of high responsibility.

   Total Bogasari employment exceeds 3,000, including 1,500 at Jakarta, 1,200 at Surabaya and 400 at Ujung Pandang. Of the Jakarta workers, just about half are engaged in the packing and delivery of flour, another 25% actually work in the milling plant and the balance are in administrative assignments. The huge expansion under way currently will necessitate the addition of 50 to 70 new workers, Mr. Baccinelli estimated.

   Eating lunch in the supervisors' canteen at the Jakarta mill brought home an important point — the popularity of rice as compared with bread, even in a plant environment where the growing demand for flour has created so many jobs and such large-scale investment. Rice was the principal staple food served along with an assortment of traditionally spicy Indonesian food.

   Bread baked in the bakers' training school that is part of the same complex also was available, and it was very good. But a quick glance at the plates of the supervisors indicated that bread still has tough competition from rice, even in that amazing setting.

   (Above right) New deep water jetty under construction at Jakarta will have two pneumatic ship unloaders with capacity of 2,000 tonnes per hour.

   Three new 1,000-tonne lines each using 52 roller mills should be in operation by mid-1996.

   Expansion at Jakarta includes 224,000 tonnes of new wheat storage capacity.

   New bulk millfeed storage of 22,000 tonnes is being added at the Jakarta milling facilities.

   Examining project plans at Bogasari were Bambang Christianto, left, production manager, and Palmiro Baccinelli, factory manager.