Productivity rises as Cargill modernizes U.S.milling capacity

by Morton Sosland
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While Cargill sees its pioneeringwork in developing new varieties of wheat as an important key to building its North American Flour Milling business, great attention also is being paid to modernizing its U.S. milling capacity — particularly when it comes to raising miller productivity. Unlike many companies where productivity emphasis reflects a focus solely on reducing costs, the Cargill initiatives are largely in response to increasing sophistication of the milling process and the expectation that further refinements are on the horizon.

Guy Shoemaker, president of U.S. Flour Milling at Cargill, related in a recent interview the great progress that has been made in recent years in boosting productivity. In the past five years, he said, Cargill's U.S. milling capacity has been raised by 40,000 cwts to the current daily total of 250,000 cwts, while the unit's workforce has been reduced by 200.

This is dramatic change by any measure, and primarily reflects advances in new milling equipment and new technology related mainly to electronics and computer-driven systems. As milling has gained sophistication, the overall level of training and skills required of workers has increased exponentially, Mr. Shoemaker noted.

He pointed out that in the current job situation in America it is increasingly difficult to recruit shift millers. The coming together of these two seemingly opposing trends has made the focus on boosting miller productivity of the utmost importance.

"Milling has not become any less dependent on people," Mr. Shoemaker said. "Instead it has become very dependent on a staff with a rising skill level."

Automation has made mill work a more pleasant task, he said, recalling the declaration of one of his Cargill peers, Jack Burkhalter, retired vice-president of worldwide dry milling, to the effect that "we are in the business of eliminating crummy jobs." In many instances, modernizing a mill has resulted in a halving of the plant staff.

He cited the example of the San Bernardino, California, mill, where a doubling in capacity, from 10,000 to 20,000 cwts, resulted in the addition of only two more people to a staff that now numbers 22.

He described the extensive internal training program that Cargill operates, often on a mill-by-mill basis. The company has hired graduates of the Department of Grain Science and Industry at Kansas State University and has utilized short courses and similar industry offerings to assure that its mills are staffed with people with the appropriate proficiency.

In addition to the continuing training program, the cross-pollination of its employees among countries and divisions that has been a Cargill hallmark for many years is evident in global flour milling. The mill superintendent at the Ogden, Utah, mill is a Venezuelan, while one of the superintendents in Venezuela in an American. Further, the superintendent at the group's sole mill in India is a Brazilian.

Cargill's modernization program is largely designed by the U.S. Flour Milling's own team of engineers, Mr. Shoemaker said.

"This is a small, focused group that takes advantage of the very good equipment made by the milling engineering firms," he said. "At the same time, Cargill's ability to construct new plants and install equipment at lower cost and greater efficiency is one of our core competencies. In preserving that rank, we do everything possible to assure attention to strict environmental standards and food safety requirements."

He said that Cargill seeks to benchmark its capital expenditures against other companies, and he expressed confidence that his milling modernization and expansion costs are lower than other companies for which data are publicly available.

Even though Mr. Shoemaker and his operative millers express great satisfaction with current milling machinery and processes, the interview revealed the expectation that flour milling might be on the verge of revolutionary change in the not too distant future. This stemmed from a belief that, even with the great changes of recent years, the basic, or fundamental, milling technology had been unchanged for more than the past century.

"The constant search for better ways of milling wheat into flour cannot help at some point to produce a change in milling fundamentals," Mr. Shoemaker noted. "We wouldn't know how to predict where or how that will occur. Perhaps it will come in a new way of producing flour from wheat. Perhaps it will be effected by further changes due to electronics and automation, which already have had tremendous influence in improving wheat milling in the past five years. It might even come through changes in the structure of the wheat kernel accounted for by genetic modification."

Mr. Shoemaker said he believes flour milling capacity consolidation through mergers and acquisitions in the United States has about run its course — for now.

"There will be a time in the not-too-distant future when mergers will be needed to fix inefficiencies in the supply chain," he said. "Our customers will not pay for inefficiency. This will lead to some more consolidation."

The 40,000-cwt increase in the company's daily U.S. flour milling capacity in the past five years includes the lease of the Italgrani plant in Ayer, Massachusetts, with capacity of 14,000 cwts; the addition of the 10,000-cwt unit at San Bernardino; expansion of the Albany, New York, mill by 6,000 cwts, and smaller increases at other mills in the course of modernization.

Besides these plants, Cargill mills at Stockton, California; Ogden, Utah; Wichita, Kansas; and Lake City, Minnesota, have been totally modernized, with a focus on automation. A similar project was scheduled to get under way shortly at the Los Angeles mill.

Cargill's North American Flour Milling operates with a geographic cluster system of mills, Mr. Shoemaker explained. This involves selecting mills that are equipped to make a broad range of flour, numbering around 25 or 30, around which are clustered other plants designed to be highly specialized and making only two or three types of flour.

The complex mills include Albany, New York; Saginaw, Texas; Los Angeles, California; Ogden, Utah; and Wichita, Kansas, he explained. The specialized mills are meant to concentrate on consistency of flour quality to meet the needs of major customers in their areas, and he noted that as baking plants are also increasingly automated, the task of assuring consistency becomes itself much more important.

When it comes to outright mill location, Mr. Shoemaker said that he was satisfied with how his plants are located across the country.

"The pendulum tends to move between mills located in wheat-growing areas and those meant to serve major destination markets," he noted. "It would appear that current rail rates might favor mills located nearer wheat-growing areas, in contrast to the advantages destination mills enjoyed earlier."

Company plants are configured differently. In some mills, staffing is along traditional lines, with a hierarchy of superintendent and other managers. In others, Cargill has only a single superintendent who works with teams to operate the mill.

Mill operators, Mr. Shoemaker observed, have a single task — of producing and delivering a consistent quality of flour. When it comes to milling wheat, these purchases and positions are handled by two teams of wheat traders with North American Flour Milling, with offices in Minneapolis and Kansas City. Millfeed sales and positions are also managed by a dedicated team in Wichita.

Flour sales are managed from headquarters of North American Flour Milling in Minneapolis, facilitated by sales offices at mills in Los Angeles, Wichita, Chattanooga and Albany.

Quality control, from the point of view of both the incoming wheat and the outgoing flour, is managed from the headquarters, which has a 10,000-square-foot research and development, ingredient testing bakery plant and laboratory located nearby. All wheat is assessed for quality prior to reaching the mill, a system facilitated by the increasing share of the group's wheat that is delivered by unit trainload.

In the case of wheat delivered by truck, samples are sent to the Minneapolis laboratory for testing before it is milled. All wheat samples are examined and subjected to test bakes within 24 hours of being received by the laboratory in a system that at the peak of harvest involves testing of well over 100 samples every day.

Flour produced at each mill is subject to a thorough testing process by the same central laboratory. A specific testing schedule is instituted at each mill to assure that a week's output is subject to thorough examination.

Mr. Shoemaker explained that North American Flour Milling in effect enters into a "contract" with Cargill to produce a given return based on its use of capital, both in fixed assets and in working capital. A formula is used to determine the expected return based on invested capital.

"We are judged on our total results, not on bits and pieces," he said. "We are held to a very high standard, and I'm pleased that within Cargill, with its broad array of businesses, that North American Flour Milling is considered favorably for the return we produce on the capital employed."

He described flour milling as "a labor of love," noting that success in the industry requires hard work, as well as "a passion for the business." He said, "Milling is a business where profits are counted in pennies and losses can be counted in dollars."

When asked what sort of losses would be so counted, he said that it would mainly apply to "wrong" positions in wheat, with milling totally responsible for its wheat book even in a business where others also are involved in grain.

So far as the prospects for flour milling are concerned, Mr. Shoemaker said that he was of the opinion that the recent decline in consumption in America will continue for another 12 to 18 months. He blamed the present doldrums primarily on the popularity of fad diets that suggest the elimination of carbohydrates such as bread in favor of increased protein intake. While evidence of this is largely anecdotal, he noted that in the past year when per capita consumption of flour fell 3.5 lbs, per capita use of meat rose 4.1 lbs.

So far as Cargill helping to reverse this trend is concerned, he said U.S. Flour Milling is "very capable of helping our customers improve their products to attract consumers." Reformulating is one area that perhaps should be pursued, and this should not always be aimed at cost reduction, but also should look for quality improvements.

He also said he was encouraged by the growth of artisan baking and by consumer willingness to pay a premium for specialty loaves of bread. He reviewed the "Progressive Baker" program developed by Cargill to serve the ingredient needs of specialty bakers focusing on quality, freshness and wholesomeness. While sacked flour business is on the decline, as is family flour where the company is a major private label producer, Mr. Shoemaker expressed great optimism about the long-term future of milling and baking.

"We are important to making healthy and delicious foods, and there's nothing more positive than that," he said. "Yes, we're being impacted by dietary fads, but we'll weather that. Once consumers again appreciate the message of the Food Guide Pyramid, of which the products we make are the base, I have every confidence upward consumption trends will resume."

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