Foster Dairy Farms

The business that never stops┬áMost factories close down at some stage, even if only for a few days, but as Alan T Swaby learns from Foster DairyÔÇÖs Jeff Fowler, the dairy industry doesnÔÇÖt get that luxury. Over the years, many famous, successful and viable brands have disappeared, usually following a merger or takeover when the victor relegates the vanquished to the dusty corners of our nostalgic memories. So it comes as a bit of a surprise when the victor chooses to relinquish his identity in favor of the vanquished.ThatÔÇÖs whatÔÇÖs happening with Foster Dairy Farms in California. ItÔÇÖs a half-billion-dollar company employing nearly a thousand people. Yet while the company name remains, supermarket shelves and freezers will soon be devoid of the Foster brand name.ÔÇ£When Max and Verda Foster began farming in Modesto,ÔÇØ explains Jeff Fowler, vice president of operations, ÔÇ£they had cows and chickens. Eventually it got to the size where Max took care of the dairy side and left his son to look after the poultry. Today they are two separate and highly successful businesses, both going under the Foster name and thereby creating a degree of confusion amongst consumersÔÇöespecially in the Central California region.ÔÇØFrom a few head of cows in 1939, the business grew at a phenomenal rate. Early on, Max introduced an all-Jersey herd, a breed renowned for the creaminess and quality of its milk. In the mid 1950s, a modern creamery was added, and a decade later a cultured products plant was opened to add cottage cheese, sour cream and yogurt to the ever-diversifying range of dairy products.Growth has continued unabated. Today itÔÇÖs the largest privately owned dairy operation in California and second in total only to a publicly listed business. Compared with the original 40 acres, there are now 4,000 in five different locations. As well as pastures, the farms grow wheat and alfalfa to supplement natural grazing for the 6,000 head of dairy and beef cattle. Foster Dairy is completely vertically integrated. Each week, 3 million gallons of milk are processed in its two main plants in Modesto and Fresno. ÔÇ£We run what are known as balancing plants,ÔÇØ explains Fowler. ÔÇ£There is a natural ebb and flow of milk supply and seasonal changes in demand at consumer level. Our job is to divert production into the most appropriate product categories. ItÔÇÖs the nature of the business that milk supplies canÔÇÖt be turned off. Milk will arrive at the factory 365 days a year, and something needs to be done with it.ÔÇØOf course, not all this milk comes from FosterÔÇÖs own herds. Around 85 percent of the 80 tankers a day are from contract farmers. Demand for fluid milk is fairly constant, but in summer ice cream production soars, while at holiday times the use of butter and cream goes up. When thereÔÇÖs excess supply, production can be switched to dried milk that will store until needed.Foster also controls the distribution side of the business, and in fact half the total workforce is engaged in moving finished goods to customers. ÔÇ£This is a very competitive business,ÔÇØ says Fowler, ÔÇ£and weÔÇÖre often working on the slimmest of margins. Even though there is a considerable amount of money tied up in the 250 refrigerated trailers and trucks we need, itÔÇÖs in our interests to ensure the product gets to the customer promptly and in perfect condition.ÔÇØIn fact, Fowler has been putting a lot of effort into improving on-time and unit-fill performance, despite historically running at a highly creditable 98 percent level in both categories. ÔÇ£In some ways you could argue that 98 percent is doing well,ÔÇØ says Fowler, ÔÇ£and we arenÔÇÖt penalized for not getting it completely right. But we see it as an insurance policy. WeÔÇÖre in a competitive business, and if we consistently do better than the competition, even if itÔÇÖs by the slightest margins, we should hold onto the business we have and even justify a price premium.ÔÇØThe first part of the process was to educate the entire workforce on the benefits of a lean approach. ÔÇ£Employees needed to understand that doing things more efficiently isnÔÇÖt about losing jobs or simply making more money,ÔÇØ says Fowler, ÔÇ£but itÔÇÖs about giving customers the quality and reliability they want. ItÔÇÖs also an opportunity for anyone to shape the way we do business. Ownership of how things are done is highly motivating.ÔÇØBy closely analyzing the entire process from receipt of order to delivery and then attacking the bottlenecks with kaizen campaigns, Foster has not only exceeded the 99 percent target he set but is consistently getting 99.8 percent of deliveries on time and 99.5 percent correct in terms of items and quantitiesÔÇöachievements made without spending a lot of money.FowlerÔÇÖs next target for the lean treatment is waste. The fact that only 1.5 percent of milk coming into the factory doesnÔÇÖt go out in some form of finished product is testament to the efficiency of the highly automated plant. Nevertheless, Fowler wants to identify which of the many stages that raw material passes through can be tweaked.In the meantime, following the acquisition of another longstanding Sacramento-based dairy company, Foster is gradually changing over its products to carry the Crystal name. ÔÇ£Despite fresh milk being essentially a commodity item,ÔÇØ says Fowler, ÔÇ£consumers have strong attachments to the milk they grew up with. WeÔÇÖve recognized that the Crystal name will give us a stronger foothold in a wider geographical area than we have at present, so while it will be sad to no longer see Foster milk on shelves or in schools, itÔÇÖs a move thatÔÇÖll pay dividends for the business.ÔÇØ ÔÇô Editorial research by Bobby Meehan┬á