Project Apollo: Milling technology enhanced by human milling skills

by Morton Sosland
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      By Morton I. Sosland, Editor-in-chief

   One of the largest flour mill build- ing and modernization programs in North America or Europe, if not the largest — the £100-million (U.S.$164 million) Project Apollo of Allied Mills Ltd., England — has not only realized its expectations in significantly reducing milling costs but also has affirmed how manufacturing gains from advances in milling technology are greatly enhanced by the application of human milling skills.

   These findings emerged from a wide-ranging interview with Ralph Richard, chairman and chief executive of Allied Mills, and Martin F. Connolly, managing director, at the group's newest plant, the Coronet Mill at Manchester.

   "We have built flour mills to be run by millers, not computer-driven factories as some might think," the two executives declared with considerable pride. "Everyone who works in these remodeled, modernized or new mills is aware that they are working in a flour mill requiring human input. It is definitely not a factory run by automatons." This is especially important because the new Coronet Mill and several remodeled plants are so-called "lights out" mills, in that they operate at nighttime without a need for operative millers to be on site. Millers are connected to their facilities by laptop computers and modems that give them the ability to make adjustments from home as easily as if they were at the plant.

   Mr. Connolly also pointed out that a plant like the mill in Manchester is never without personnel who serve the many functional operations around the clock, such as warehousing, deliveries and security.

   At the time the Apollo project was unveiled in 1995, it attracted attention not just for its size — a single group spending more than U.S.$150 million on flour milling modernization over a five-year period — but also for the commitment that Mr. Richard and Mr. Connolly made that the program would leave the total milling capacity of Allied Mills the same at the project's close as it was when the program started.

   Another special aspect of the program was the selection of Buhler Ltd., Uzwil, Switzerland, as the milling engineers and equipment suppliers for the entire project. With relatively few exceptions, every new piece of equipment that has gone into the various mills, including the totally new Coronet Mill at Manchester, was supplied by Buhler.

   Mr. Richard noted that the group kept to all of its original plans, with the budget unaltered from the start, the modernization and new mill building right on schedule, and old capacity being reduced or eliminated as new capacity has come on line.

   This required a careful balancing act, Mr. Connolly said. Modernization of several of the company's mills required large plants being shut down to allow for the removal of old equipment and the installation of new, putting a strain on the remaining capacity.

   This need for filling in capacity from other plants while modernization was under way led to the one major change from the original schedule — the priority assigned to building the Coronet Mill on a greenfield site in Manchester about a year earlier than was originally planned.

   Mr. Richard, a familiar figure in North American and European milling, acknowledged that the Allied Mills' modernization and mill building program differs in one important aspect from similar programs undertaken in other parts of the world. Most often, he said, when mills or milling companies launch any sort of a modernization project, adding capacity is essential to the overall plan as a way of lowering costs. Allied decided against this, he explained, because of the state of the flour market in Britain, which he said had shown little change over the years.

   Instead, the Allied Mills managers effectively made the case to their parent company, Associated British Foods P.L.C., that the cost of milling flour could be reduced to the advantage of the milling group without creating a battle for customers in a market that already was highly competitive and has been so for a number of years.

   "I know this is different from the purported efficiency gains by adding capacity that is cited in many other places," Mr. Richard explained. "But our chairman, Garry Weston, has a much greater vision than most when it comes to appreciating the long-term benefits of this sort of major investment program. He doesn't simply focus on an immediate return from investments like these, preferring instead to understand the cost and competitive advantages that may be gained. And then he holds us to realizing what we've targeted."

   Mr. Richard emphasized that even though the largest flour customer of Allied Mills is its A.B.F. sister group, Allied Bakeries, "the cost of the Apollo flour mill program is not being funded by improved profits (or lower flour prices) for our group's baking business. The funding is coming through savings in our milling operations and importantly from savings in flour mill overheads made possible by this program. Suffice it to say that the results of Allied Mills have more than met the criteria laid down by A.B.F. in approving such a large-scale capital spending program."

   These overhead savings, he explained, came about largely as a result of the rationalization of the location and the plant capacity of Allied Mills' plants in the United Kingdom. Prior to this program, Mr. Richard said, mill location and capacity had largely been the result of acquisitions of various companies in the initial structuring of the business as A.B.F. entered into flour milling.

      APOLLO'S OBJECTIVES.

   This structure out of acquisitions led to a milling system that included a number of poorly located or inefficiently sized plants, he said. That is being corrected by Project Apollo.

   Asked about concerns heard in other parts of the developed world that reductions in milling costs would only be passed along in the form of lower flour prices due to the industry's high degree of competition, Mr. Richard said he did not believe that was the case in the British market or in other European markets. He refrained from commenting on the United States, where Allied Mills does not operate in milling but where A.B.F. has several baking ingredient businesses.

   The cost of wheat, as the basic raw material, looms so significantly in flour prices that "it's wheat where our customers focus their attention," Mr. Richard said. "They tend to pay less attention to our costs of producing flour and more to our ability to supply the quality they require in their increasingly diverse baking operations." In reviewing the objectives of the five-year Apollo program, Mr. Richard listed the following:

   •To assure that Allied Mills continues to be the lowest cost producer of flour in the U.K.

   •To be certain the group's mills incorporate the newest in technology that allows the production of flour to the increasingly demanding specifications of flour customers, both within the group as well as to the growing share of baking customers outside A.B.F.

   •To assure the group's plants are able to utilize the latest technology available through expanding computerization.

   •To be positioned so that the group's skills in milling technology could add to the value of utilizing the newest in milling equipment and technology.

   •To be fully compliant with new food safety regulations and growing public awareness of the importance of food safety.

   •To create a milling production system that has maximum flexibility in its ability to respond to the wide and frequent changes in the quality of European wheat crops.

   "Milling flexibility is central to what we've planned," Mr. Connolly stressed. "The ability of Buhler to understand and to respond to this need was one of the major reasons we selected them as the engineers and equipment suppliers for this large program. The eventual success of this project depends on the skills of our millers, and we wanted to be sure that the system we created recognized this. Our culture is based on finding the right balance between process controls and the latest technology and the knowledge and skills of our millers themselves."

   Emerging from the discussion with the two executives was their belief in the uniqueness of how Allied Mills conducts its business and how it believes that the skills of the miller, in being able to select wheat blends and in blending flour, is even more important than the millions of pounds sterling invested in new plants, new equipment and the latest computer-driven technology. "We want people who come to work to use their brains as well as their hands," Mr. Connolly declared, emphasizing that Allied Mills has a "very flat" management structure, with "the majority of people managing themselves."

   He underscored this point by declaring that "anyone can buy milling equipment," but "we focus on creating the environment and the culture." He noted, "Our millers are well-rounded and thoroughly grounded not just in milling but also in wheat selection as well as in baking. They are encouraged in every possible way to share their ideas within the individual plants as well as throughout the group."

   With the adoption of "best practices" throughout the Allied Mills group, Project Apollo was designed to focus on the development of multi-skilled employees. "Our millers are more than just millers, and that is true of every member of our staff," Mr. Connolly added. "We are very focused on maximizing flexibility among what our people can do, and this requires the conduct of ongoing training programs designed to improve the skills each individual within the group."

   Allied Mills also is very conscious of the importance of favorable staff attitudes, he added, and periodically surveys employees to learn what each thinks, not just of associates and supervisors but also of company policies and practices.

      CHANGING BRITISH MARKET.

   In emphasizing Allied Mills' commitment not to increase its capacity, Mr. Richard cited the flat level of total British flour consumption and significant changes in the makeup of the market, from the viewpoint of customers and from milling itself.

   Long the largest flour miller in the U.K., Allied Mills appeared to be on the verge of becoming a distant second when Tomkins P.L.C., through its Rank Hovis milling unit, acquired the six Spillers flour mills that had been bought by the Kerry Group. Then the Monopolies and Mergers Commission directed Tomkins to sell four of the six newly acquired mills. Tomkins sold the mills in Avonmouth, Tilbury, Liverpool and Newcastle, to the largest U.S. miller, Archer Daniels Midland Co. (see World Grain, April 1999, Page 54). With the two Spillers mills it has been allowed to retain, Tomkins' Rank Hovis probably has capacity very close to being on par with that of Allied Mills, Mr. Richard estimated.

   So far as overall industry capacity is concerned, Mr. Richard and Mr. Connolly said they believed independent mills were actually adding to their capacity in a small way during this period. These developments, they said, served to intensify competition at a time of great industry uncertainty.

   It can be noted that Rank Hovis is adding to its baking capacity, thus creating uncertainty about possible shifts in flour suppliers to the newly acquired baking businesses.

   While some small milling companies are increasing capacity, Mr. Richard and Mr. Connolly pointed out that milling companies that have "underinvested" in modernizing their milling capacity face an extremely difficult competitive situation in the face of a program like Project Apollo. Some mills have gone out of business in recent years because of their inability to stay abreast of technology changes, the two men said, and they indicated that additional closings could occur. In the alternative, U.K. milling could witness a major surge in remodeling and modernization projects.

   In the period since 1977 when Mr. Richard came to the business as sales director, he has devoted considerable attention to expanding the marketing of flour beyond Allied Bakeries. When Mr. Richard came to this position, the group's own baking business utilized close to 80% of flour production. This internal share has been reduced currently to 55%, he said, voicing the hope that it will continue to decrease as the company's ability to serve the fast-changing U.K. flour market increases with Project Apollo fully in place.

   Not only was reduced reliance on Allied Bakeries part of an effort to build non-A.B.F. flour business, but it also reflected how U.K. flour consumption has shifted from the wholesale bread business to an expanding number of specialized bakers with flour requirements that are different from the traditional large wholesale plants. These changes were reflected in the group's decision to concentrate at a single site, Corby, its production of specialist products — mainly mixes for use by in-store and commercial bakers. Allied Mills even created a division for specialist products, called Kingsgate Food Ingredients.

   And while the mix business has grown not just in the U.K. but also in the development of export markets on the European Continent and in Asia, especially Japan, Mr. Richard pointed out that the U.K. has witnessed a recent surge in demand for bagged flour from major grocery chains operating in-store bakeries in their supermarkets and hypermarkets.

   "A large number of grocers have shifted to scratch bread and rolls," he said. "This most frequently has occurred after the grocer may have experimented with so-called ‘revolutionary' bread production systems that didn't work at all." He cited instances where grocers were eagerly trying to rehire bakers who had been made redundant because of the promise of systems that could not produce the quality of product wanted by consumers. "It is near to being a 100% reversal in how in-store baking is done," he said.

   Even with the fast-changing flour market, Mr. Richard and Mr. Connolly voiced great satisfaction, even elation, with the results thus far of Project Apollo. "We started out to achieve a balance between where our flour mills are located and where our market opportunities exist, and this has been done," they said. "Indeed, it's no exaggeration to say that Project Apollo has realized all we had hoped for and more."

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