A new look at productivity gains in flour
January 1, 2009
by Morton I. Sosland Editor-in-chief
Even in an industry as long lived as flour milling, where boosting productivity has been an important goal for a very long time, indeed for centuries, no single measurement exists of what constitutes efficiency. Recent features in World Grain about new flour mills built in Asia and in Europe emphasize how varied are the approaches used in countries where technology is well advanced. In Japan, the leading flour milling company measures its productivity in output per employee. It is likely that a similar gauge is used by milling companies in both Europe and North America. But it also is generally accepted that this measure has the greatest applicability in tracing advances made over time in individual flour mills or in measuring relative performance among mills owned by a single company and operated with a common strategy. As a test of relative efficiency among milling companies, or even between plants owned by different companies, output per employee rapidly loses it relevance because so many other factors affect both the number of employees as well as a mill’s production in a given year.
In the recent European example, energy consumption is front and center as the measure of the plant’s productivity and the benefits anticipated from making the investment in a modern facility. The mounting importance of energy savings and overall conservation lend credibility to treating these energy savings as a measure of productivity. This is so even though energy outlays typically rank a distant third below labor and management administration costs as the principal operating expenses of a flour mill.
While flour milling is the first modern industry to have developed in the 18th century a continuous flow system, milling has hardly deviated from its hot pursuit of new equipment and technology that improve productivity. For centuries, these advances were almost solely measured in terms of yield — how much flour is produced from a given quantity of wheat. Great advances have been made with modern milling machinery that make the historical 72% extraction standard an understatement. New roller mill systems make 80% extraction the expectation for a mill producing to the highest quality.
Of course, it is the range of different sorts of flour being produced that mainly account for difficulties in coming up with a single measure of milling productivity. The new European mill makes 20 different flour products and grades, while the newly expanded complex in Japan produces an astounding 200 different types of flour from 30 specific wheat blends. How very different that range of possibilities is from another sector of the food business, the production of milling’s basic raw material on farms. At one time, agricultural productivity, like milling’s, was measured in rather simplistic terms — as changes in output per acre or in production per farm worker.
Recognizing the way that these measures neglect the effect of technology and capital costs as well as the wide range of other inputs, besides land and labor, going into farming, the Economic Research Service of the U.S. Department of Agriculture has developed “total factor productivity” as the ultimate determinant of agricultural productivity. This is defined as the difference between growth in output and growth in input use, recognizing that agriculture has a fixed amount of cropland and thus depends on “inputs” to increase output. As the result of productivity gains, U.S. agricultural output nearly tripled between 1948 and 2004, while cropland in production dropped 25% and labor employed fell 75%. That phenomenal showing is accentuated by commodity prices in the same period rising by less than half the rate of the overall economy.
In many ways, flour milling, not just in the U.S. but around the world, has benefited from the fantastic productivity gains achieved by farmers. Aiming to match these field crop advances with similar progress in milling productivity is a worthy goal that first and foremost requires an equally effective measure of total flour milling productivity.