A REPORT ON APPLICATION OF KAIZEN

IN POULTRY FARM

Submitted To:

Prof. Bijoyen Das

Submitted By:

Maulik Padh

BK School of business,

Gujarat University,

Ahmedabad

INTRODUCTION

Kaizen is a system of continuous improvement in quality, technology, processes, company culture, productivity, safety and leadership.

Kaizen was created in Japan following World War II. The word Kaizen means "continuous improvement". It comes from the Japanese words 改 ("kai") which

means "change" or "to correct" and 善 ("zen") which means "good".

Kaizen is a system that involves every employee - from upper management to the cleaning crew. Everyone is encouraged to come up with small improvement suggestions on a regular basis. This is not a once a month or once a year activity. It is continuous. Japanese companies, such as Toyota and Canon, a total of 60 to 70 suggestions per employee per year are written down, shared and implemented.

In most cases these are not ideas for major changes. Kaizen is based on making little changes on a regular basis: always improving productivity, safety and effectiveness while reducing waste.

Suggestions are not limited to a specific area such as production or marketing. Kaizen is based on making changes anywhere that improvements can be made. Western philosophy may be summarized as, "if it ain't broke, don't fix it." The Kaizen philosophy is to "do it better, make it better, improve it even if it isn't broken, because if we don't, we can't compete with those who do."

In business Kaizen encompasses many of the components of Japanese businesses that have been seen as a part of their success. Quality circles, automation, suggestion systems, just-in-time delivery, Kanban and 5S are all included within the Kaizen system of running a business.

Kaizen involves setting standards and then continually improving those standards. To support the higher standards Kaizen also involves providing the training, materials and supervision that is needed for employees to achieve the higher standards and maintain their ability to meet those standards on an on-going basis.

OVERVIEW OF INDIAN POULTRY INDUSTRY

Indian Poultry Industry is one of the fastest growing segments of the agricultural sector today in India. As the production of agricultural crops has been rising at a rate of 1.5 to 2% per annum while the production of eggs and broilers has been rising at a rate of 8 to 10% per annum. Today India is world's fifth largest egg producer and the eighteenth largest producer of broilers. Driving this kind of expansion the contributing factors are - growth in per capita income, a growing urban population and falling poultry prices.

The Indian Poultry Industry has undergone a paradigm shift in structure and operation. A very significant feature of India's poultry industry is its transformation from a mere backyard activity into a major commercial activity in just about four decades which seems to be really fast. The kind of transformation has involved sizeable investments in breeding, hatching, rearing and processing. Indian farmers have moved from rearing non-descript birds to today's rearing hybrids such as Hyaline, Shaver, and Babcock which ensure faster growth, good livability, excellent feed conversion and high profits to the rearers.

The Indian Poultry Industry has grown largely due to the initiative of private enterprises, minimal government intervention, and very considerable indigenous poultry genetics capabilities, and support from the complementary veterinary health, poultry feed, poultry equipment, and poultry processing sectors. India is one of the few countries in the world that has put into place a sustained Specific Pathogen Free (SPF) egg production project.

Indian Poultry developments another aspect is that it has significant variation in the industry across regions. As for the egg production in India by the states during 1998-99: the four southern states Andhra Pradesh, Karnataka, Kerala and Tamil Nadu - account for about 45 % of the India's egg production, with a per capita consumption of 57 eggs and 0.5 kg of broiler meat. The eastern and central regions of India account for about 20% of egg production, with a per capita consumption of 18 eggs and 0.13 kg of broiler meat. While the northern and western regions of India record much higher figures than the eastern and central regions with respect to per capita availability of eggs and broiler meat.

APPLYING KAIZEN IN POULTRY INDUSTRY

Poultry is one of the fastest growing segments of the agricultural sector in India

today. While the production of agricultural crops has been rising at a rate of 1.5 to

2 percent per annum, that of eggs and broilers has been rising at a rate of 8 to 10

percent per annum. As a result, India    is now the world’s fifth largest egg

producer and the eighteenth largest producer of broilers. Driving this expansion are

a combination of  factors – growth in per capita income, a growing urban

population and falling real poultry prices.

In the context of this emerging scenario, questions are being raised about the

impact of the scaling up of production-through structural factors, externalities and

policies-on small-scale producers.

Do the transaction costs, policy distortion and environment externalities place the small-scale producer at a disadvantage?

Why do some poultry farms have higher income than others?

Do large farms earn more profit per unit of output than small ones?

What explains the differentials in profitability?

OPPORTUNITY

Improving operational efficiency from “Farm to Fork” is the main challenge faced

by the industry. There are issues in:

Farms (Grand Parents, Parents, Broilers, Breeders)

Hatchery

Processing plant

Support system (Fleet Management, Supply chain management, Stores, Lab, HR, Accounts)

BENEFITS

Hatchery –

Reduction in egg damages, Improvement in Hatchability, Maximize equipment’s

reliability, Improvement in cleaning & hygiene (Bio Security), Optimization of

raw material and other inventories,  Improvement in on time error free deliveries of

Day Old Chicks, Improvement in capabilities and discipline of employee

(Performance Management System)

Farm –

Effective Bio Security System, Reduction in Mortality, Improved FCR (Feed

Consumption Ratio), Effective management of feed and water, Maximize

equipment’s reliability, Improvement in Houses maintainability, Improvement in

Cropping process, Improvement in capabilities and discipline of employee

(Performance Management System)

Processing Plant –

Improvement in On Time In Full Error Free deliveries, Improvement in End to

End Flow (Birds receiving to Dispatch), Maximize equipment’s reliability,

Inventories (Raw material and Finished Goods) Optimization, Improvement in

capabilities and discipline of employee (Performance Management System)

Workshop –

Improvement in MTTR (Mean Time To Repair) & MTBF (Mean Time Between

Failure), Improvement in logistics system (Farm to Hatchery, Farm to Processing

plant, Hatchery to Customers, Processing plant to Customers, Suppliers to Farm,

Hatchery and processing plant), Optimize spares and other inventory levels,

Setting up various cost monitoring, analysis and action system, World class

workshop- 5S & Visual management, Improvement in capabilities and discipline

of employee (Performance Management System)

Other Areas –

Store, Lab, HR, Admin, Accounts, Marketing & Sales – Lean principles, Policy

Deployment

APPLICATION OF LEAN

Notwithstanding the many differences to other industries, the poultry industry has many similarities to other industries. Not the least of these is the fact that product is processed just like other forms of manufacturing. Health and safety considerations add to the complexity of processes, but do not alter the fact that they are still processes that can be improved. Also companies in this industry have the same cost, quality and delivery pressures as any other type of business.

The biggest obstacles remain the same therefore, as any other type of business and are generally as follows;

Lack of a clear vision of the future and of what is possible to be achieved.

Failure to link the processes in kaizen with normal work. It is often seen as a separate program and not part of everyone's formal work Lack of patience and follow through.

Failure to perceive that lean is a viable strategy to help achieve competitive advantage.

Failure to engage and involve employees at all levels in the process from an early stage.

Lack of constant visibility by management on the shop floor.

THE TOTAL PRODUCTIVE MAINTENANCE/LEAN FIT

Kaizen is the overriding philosophy that has driven the implementation of World Class Manufacturing strategies. These strategies, which include Just in Time (JIT), Total Quality (TQC), Total Productive Maintenance (TPM) and Total Employee Involvement, all result in improved cost, quality and delivery to the customer. The process of implementing kaizen, lean, or continuous improvement in the workplace, requires that these strategies be integrated. In the implementation of JIT, one result of extensive improvement activity is reduced inventories, but this requires extremely reliable production processes. Machine downtime cannot be tolerated as there are typically very low inventory levels between processes that can be used to keep other equipment running. TPM is an essential strategy to prevent equipment downtime, to improve the quality of the output and to ensure that JIT strategies actually work.

TOTAL EMPLOYEE INVOLVEMENT IN KAIZEN OR CONTINUOUS IMPROVEMENT

There are typically two levels of involvement in kaizen practices that lead to the involvement of employees. The first can involve every employee relatively quickly and easily. One of the most basic kaizen practices is called 5S or workplace organization. 5S stands for the five steps of improving workplace organization, namely, Separate and Scrap, Straighten, Scrub (Clean), Standardize (the practices), and Systemize and Spread the methods. A plant wide 5S campaign can be started very easily and can involve every employee. The second level is the focused improvement activity that is applied to work areas and would involve employees in those areas. This is typically called a kaizen event or blitz. The process involves doing a series of focused improvement sessions, usually three to five days, on a work process. Each time a session is held, a different improvement approach will

be adopted, depending on the constraint or need. The employees learn lean practices as they are implementing them.

MEMBERS OF A KAIZEN TEAM

A typical Kaizen team would consist of the employees involved in the process to be improved, the supervisor or shop floor leader of that process, appropriate staff resources such as people from maintenance, quality, logistics, finance and human resources, engineering, product development and so on. The team should be between eight and twelve in size.

TOTAL PRODUCTIVE MAINTENANCE

Improving maintenance practices usually results in more equipment reliability, affecting uptime, quality and capacity. Improvements in uptime range anywhere from 30 - 75% depending on the extent of the downtime problems on equipment. This results in reduced material waste and lower maintenance costs, both of which are evident in the income statement. Equipment life is extended preventing new equipment purchase and the resulting higher depreciation charges.

TOTAL QUALITY CONTROL

As the focus here is improved product quality, the result of this type of kaizen effort is reduced material waste and of course reduced costs. Improved practices in production reduce inspection costs as well. Poor quality is often the result of too much variation in the process. Variation has many causes, notable poor operating standards that come from no documented and implemented standards, poor operator skills, and old and run down equipment that cannot sustain operating tolerances. Improving standards by documenting them and training operators will reduce variation, however it is also appropriate to deploy sound measurement tracking processes and problem analysis and solving methods to reduce this variation. 6 Sigma improvement methods are part of this approach.

OVERALL EFFECT

Cost savings will occur from the implementation of kaizen strategies, but just what these are will depend very much on the nature of the improvement and the type of operation and company.

The improvements described will impact on the financial statements in a variety of ways. Much of it will be improved opportunity cost, in other words, future costs are prevented such as the building of new facilities to support manufacturing. Lean activity would save space and often avoid having to add new buildings and the depreciation charge that would be made that would affect costs. Better utilization of cash would also result.

Inventory reduction and higher inventory turnover will positively affect cash flow, and will allow for improved operating capital utilization. The effect will mainly be in the balance sheet and not in the income statement, although reduced inventories results in lower debt interest for debt used to fund inventory holdings.

Labor savings would directly affect the bottom line. Improved productivity would result in a better overhead or burden absorption, thus also reducing unit cost. Improved machine uptime as a result of TPM implementation usually results in improved capacity utilization, improving ROI/ROA calculations. Also additional capital expenditure can be avoided if capacity was a constraint, resulting in lower depreciation charges against margins. This also improves operating capital ratios.

Improvements in quality obviously result in less waste of material, and this directly affects material costs in the income statement.