Secret to cheaper food may be to copy Toyota - Dr Manoj Dora

You want to apply a concept known as lean, which was originally used in the car industry, to agriculture. Why?

‘We are still not on a par with American and Australian agriculture in terms of productivity and competitiveness. There are two ways you can improve the productivity (of farms). One is through technological advancement and the other is through managerial improvement. Managerial improvement such as lean management is more cost effective compared to technological advancement, especially in the context of small agricultural holdings. 

‘Lean means creating more value for customers with fewer resources. And how to do that is (to minimise) the different kinds of waste in the whole process. In that respect it will be quite impactful, bringing the waste and losses to a lower level and bringing up competitiveness through productivity increases by using management tools.’

What could the impact be on our food supply?

‘We could really reduce the cost of food by applying lean. There are two ways – producing more food (with the same resources), or producing the same amount but with less use of resources. That means reduced cost of production, improved quality and delivery.

'Studies have shown that a typical food product is handled an average of 33 times before it is ever touched by a consumer in a supermarket. Several of these activities are not adding any value from a consumer’s perspective, hence considered as waste. Lean tools can help simplify the production process in the food supply chain, eliminate waste and improve productivity.

‘The parallel benefit of that is that it can also be green. When you use fewer resources, so you use less energy, less water, those are the extra advantages of applying lean.’

Could you explain a bit about the lean approach?

‘Originally it was known as the Toyota Production System, because Toyota was the one which started this management system while it was struggling with resource constraints after World War II. They wanted to compete with the big automobile giants in the US, like Ford, Chrysler, GM.

‘They came up with the very interesting idea which was completely opposite to what Ford was doing. Ford was doing mass production, procuring all the materials involved, making a huge number of cars and keeping them in their warehouses and waiting for the customer to buy. What Toyota did was the complete opposite. They only made the car when there was a demand. They only procured the raw materials once they knew how much they would make. They connected all the suppliers and customers together and only made things that were required, and only procured things for the need.

‘So this is lean in manufacturing, or to be more specific, in automobiles. And then it went to other sectors. And then it moved to the service sector, like banking, insurance and others. And now, (we are looking at) lean agriculture.’

What kind of savings could the lean approach mean?

‘It is empirically proven that proper implementation of lean principles in manufacturing and the service sector could reduce defects up to 90 %, inventory up to 75 %, use of space up to 50 %, (and) variable costs up to 50 %, while at the same time increasing productivity up to 15 %, improving on-time delivery up to 90 % and (raising) overall employee satisfaction. The research on the impact of lean management in agriculture is at its infancy (but) we are currently investigating these issues through multiple case studies.’

The manufacturing industry is a very controlled environment, whereas farming is less predictable. How well does the lean approach translate from one sector into another?

‘That is one of the key areas where our research is. It’s a gradual process, it’s a bit new to this agricultural sector. We need to start with some basic principles of lean which can already give us a good start towards productivity and competitiveness.

‘First (we need to) identify different kinds of existing waste in the agricultural process. Classify them, identify them and then see how we can eliminate them. (For example), storage is the one area where this maximum waste happens. That also creates inefficiency. Lean principles can help us effectively plan, produce and control the process to minimise storage of food products.

‘The next step is we need more research (into) how we adjust (lean) to the particular agricultural sector, where we see variations in seasonality, the weather conditions, the soil factor, the moisture factor, the variations in seed. And then it needs more research – how do we adjust (for) all those contingency factors and the food safety factors. Those challenges are not there in cars. You can keep the cars for several years so that’s not a problem but you cannot keep milk for several days. We are now working on how do we deal with all those contingency factors and get the maximum benefit of lean from the agricultural sector.’

You’ve said that this approach to agriculture is very new – are any farms already using it?

‘Some people are using lean (principles), some others, they do but don’t call it lean. But we see a huge difference between small farms and the bigger farms. The bigger farms, farmers with some employees in the farms, they are more used to these types of management tools and methods than the smaller guys.

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‘When you use fewer resources, so you use less energy, less water, those are the extra advantages of applying lean.’

‘The one challenge for these farms is knowledge. First of all they have to know exactly what happens (in lean) and what benefit it can bring. And then the second aspect is how do we apply those things. They have no clue how to go about it because they have (such) a range of activities making it a bit difficult at this moment to start something new without external help or knowledge or training.’

What are you working on at the moment to drive this forward?

‘One key thing we are doing right now is (investigating) how ready the agriculture is for a new management tool like lean. We are creating a readiness index for farmers.

‘The second thing we are trying to do is apply lean with the farmers (to) see which are the techniques that are working well, which are the tools and techniques that are not working, which are the techniques that need adjustment, to make it tailor-made for their needs.’

You previously received funding from the EU for a project called IMSFood that looked at implementing lean techniques in the food processing sector. What did that show?

‘Together with Professor Xavier Gellynck in Ghent University, Belgium (who coordinated IMSFood) we did demonstrate that in the food processing industry you could substantially reduce the cost of production by applying simple lean techniques in small food processing SMEs (small- and medium-sized enterprises) in different European countries.

‘Now we are extending (lean) to the whole supply chain. The idea is to connect all three, the farmers, the processors and the retailers. The idea of lean is to bring them together and minimise the loss in the whole chain, not just in their own processes.’

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