06 October 2011

Arla Foods: Highly Commended, 2011 Judges' Special Award

Many companies claim they put their customers first – few have been challenged like Arla Foods' Lockerbie plant, or won through against such odds

Arla's Lockerbie dairy is the result of an £18m investment, initially to supply Asda's Scottish stores. One of the most modern dairies in Scotland, it serves the whole Scottish market and employs 96 people within the plant.
Capable of handling 200 million litres of milk a year, it provides computerised traceability from milk intake to the fillers. The majority of its milk comes through a partnership of dairy farms which meet Arla's quality and animal welfare standards.

Production started in December 2005. Since then, it has added two more supermarket chains. This is where life gets complicated. Lockerbie delivers directly to 121 stores, as well as shipping three times a day to its Dundee distribution centre.

Some customers only want milk from a declared geographical location; others take a small percentage of milk from farms in other areas. There are sound marketing reasons – regional loyalty is important to some brands – but it undoubtedly makes extra production demands. Three main regional product identities comprise four types of milk differentiated by fat content, packaged in five sizes of polybottle tested for safety and quality at virtually every stage of production.

It adds up to over 50 SKUs and every product runs every day. It has huge peaks in its demand pattern – notably Christmas – and there is no way of padding a fresh product with increased inventory. So it runs two lines 24/7 and flexes the third.

Only months after the plant started, Lockerbie spotted lean opportunities. Initially it focused on kaizen blitzes but the short-term gains weren't sustainable. It needed more awareness and education across the plant, creating an organisational structure to support long-term lean management.

Working on its own initiative, it became the first unit in Arla to change to a flexible cell structure. Since then other plants have followed suit and lean initiatives are being deployed across the group.

In Lockerbie, cell teams include engineering, laboratory and despatch, as well as production – all reporting to the cell team leader. People stay in one team to encourage bonding and foster improvement. The support of a dedicated co-ordinator and trainer has been vital in raising performance across the site.

Lockerbie was the first to introduce formal succession planning for the shopfloor. As a result, the number of trained fillers has increased from eight to 20 and several operators can now handle laboratory work, too.

Lockerbie saw that its determined pursuit of lean necessitated coaching as well as technical skills.

So it has established programmes for its first line leaders – who are working towards ILM Level 3 – and its middle managers. It has also made a firm commitment to the Eden educational project, aimed at growing the next generation of world-class dairy technologists.

Lockerbie's hunger for change and improvement is evident throughout the plant. It shows. On a micro level, by changing a default setting, run rate on one machine has climbed from 80 to 110 bottles a minute. On a macro level, Lockerbie – which was once near the bottom of Arla performers – is now near the top.

It has trebled its volume. It is top for quality and, despite being a smaller dairy, produces with less wastage, below the sector average and at a price per litre beaten by only one other site.

But there's more. Its customer service is in a class of its own. No one living in Scotland will forget the winter of 2010. Normal life ground to a halt as temperatures fell to -17 degrees. In the pre-Christmas rush, food supplier after supplier failed to get through – except Lockerbie.

It made every single one of its deliveries. It took a superhuman team effort between production and drivers. Production manager Jason Cairns vividly recalls standing outside at 3am pouring hot water over pipework to keep the milk flowing.

The retail industry isn't known for its effusiveness but, on this occasion, gratitude flowed like – well – milk. Here's just one sample: "Arla is being highlighted and talked about daily internally as an outstanding example of a supplier who is doing a stunning job for us." This alone would be enough to justify the Judges' Special Award.

Annie Gregory

Supporting Information

Arla Foods UK plc

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