But Springdale, Ark.-based Tyson Foods doesn’t appear to have put much stock in the phrase, “Desperate times call for desperate measures.”
Quite the opposite, actually, has been embraced throughout the hallways of the nation’s top protein processor, which adopted a straightforward stabilization plan just as the economy went south.
The success of that plan has allowed Tyson to grow its business in spite of the economic headwinds, and has given it a head start, of sorts, as the economy begins to bounce back. Total company, year-over-year revenue growth from 2010 Q2 to 2011 Q2 (the latest results available at presstime) was a whopping 15.7%, and that follows a 9.7% increase from 2009 Q2 to 2010 Q2. Compare that with flat revenue results for the two 12-month periods prior. Based on these results, The National Provisioner honors Tyson Foods with the 2011 Processor of the Year award.
Making the moves that matter
Based on numbers alone, volatility had begun to take hold of the food industry — fluctuating (and often skyrocketing) prices for commodities such as oil/fuel and grains/feed had become the norm in the run-up to the 2009 recession. Tyson felt the pain, particularly on a quarter-to-quarter basis (see “Tyson’s Turnaround” on page 38). Facing this instability, Tyson took a new approach to its own production.
In the chicken segment, Tyson opted to discontinue the practice of scaling back broiler production — as Donnie Smith, president and CEO, says it had done repetitively in the past — and address the underutilized capacity it had created in previous cuts.
“In our business, you often don’t cut the [general and administrative] expense and a lot of the fixed expenses when you cut production back, so you end up with a pretty severe cost problem,” Smith explains. “That was our issue, and so [labor and line] efficiency issues were absolutely a result of having cut back production.”
Smith believes this decision was a turning point for the chicken business.
“So we just said, we’re going to take care of our customers and run this business as efficiently as it should be, and get these plants filled back up,” he says, adding that demand (including seasonal adjustments) will, of course, still dictate Tyson’s supply strategies at the end of the day.
In Tyson’s prepared-foods segment, Smith says the company began a project to “right-size” the production footprint to what it forecast three to four years down the road. Today, with the project completed, Smith says, “we are reaping the benefits of having a more efficient footprint spread over fewer facilities.”
The beef and pork segments had already gone through a beneficial adjustment of capacity and redistribution of assets in the 2006-2008 time period. And Smith says that over the last couple years, the group has taken the next step in giving the business a shot in the arm.
“Noel [White, senior group vice president, Tyson Fresh Meats,] and his team have done a phenomenal job in the plants driving yield, labor and line efficiencies, and those have made a tremendous difference in our business,” Smith says. “Their teams have been able to accomplish all this while improving our food safety, our quality and our service to our customers.”
Developing the playbook
Certainly, the modified approach to doing business has brought a bountiful harvest to Tyson, but Smith and his executive management understand the real engine behind Tyson’s turnaround, and that’s its own team members — the people who interact with the customers on a day-to-day basis.
“Last year, all four of our major segments operated in or above their normalized operating ranges, which has been consistency that we’d not seen in a while,” Smith admits. “But it is a direct reflection of this team’s focus on our customers and this team’s focus on operational efficiency.”
Because of that, Tyson has returned to some of what Smith calls the “grassroots” corporate culture that was espoused by former chairman and CEO Don Tyson (who passed away in January 2011; see “Remembering Don Tyson” on page 36).
“The key to any successful business is focusing on adding value to your customer — that’s our No. 1 goal as we come to work every day,” Smith says. “We’re going to take care of our people, our people will take care of our customers and that will take care of our shareholders. That’s the simple underlying principle.”
It all starts with communicating clearly down the organization chart, something Tyson Foods has mastered to this point, explains Hal Carper, group vice president, Research & Development, Logistics and Technical Services.
“With the leadership that Donnie [Smith] and Jim [Lochner, COO,] have brought to the business, there’s no doubt among the people walking the hallways what is important to the company, and it gets cascaded down through the organization,” he affirms. “Everybody is really pulling in the same direction on the same things consistently without worrying about, ‘Well, what will [our leadership] be interested in tomorrow?’”
The clear corporate messaging motivates the workforce to stay the course, regardless of the situation.
“We’ve been able to focus and concentrate our efforts on the things that mattered and [pursue them] with tenacity,” Carper continues. “At times in the past, we might have had an initiative or something we’d focus on, but then we’d get distracted from that in the heat of the moment.”
Donnie King, senior group vice president, Poultry and Prepared Foods, says Tyson was dissatisfied with its performance, but never its workforce, which it viewed to be hard-working and solid. But he agrees that focus was often an issue that concerned the leadership.
“One of the things Donnie [Smith] used during that period of time was a clip from the movie ‘Seabiscuit,’ and said we were fast in every direction essentially, and we were,” King explains. “We wanted to be everything to everybody, and so we lacked focus.”
Tyson’s executive team believes bringing that focus back was nothing particularly innovative or magical — it was simply getting back to basics and empowering employees to do their jobs with those basics in mind.
“We really looked for every opportunity to simplify what we were doing, the fundamentals of the business — labor management, yield, customer service, quality, taking care of our people and customer,” King says. “But there was no magic wand, and I think that confuses a lot of people.”
White adds that, no matter where a team member works in the organization, these fundamentals are front and center.
“There is tremendous clarity in what each of our goals and responsibilities are — it’s very visible,” he says. “We all understand [them], and it’s a matter of the team working together to assist in accomplishing each of those goals and responsibilities.”
One revelation that helped team members get aligned under the same goals, Carper says, was the idea that the company could not run away from the realities of the core business and expect to maintain stability.
“A big part of what has led to our improvement is a recognition that there is not a new product or new thing that can outrun sub-optimized execution of your business model,” he explains. “We need to chase new products and do it strategically, but we’ve got to have the strong foundation for the business for the long term. There’s been a really solid reinforcement of that concept here.”
Setting the objectives
Once Tyson believed it had its workforce pointed in the same direction, the time began to narrow the primary objectives of the entire company — four goals that dictate where Tyson wants to go and how it plans to get there.
The first two stated objectives — being the customers’ go-to supplier and being the best-in-class protein supplier by optimizing commodity businesses and driving out inefficiencies — are highly intertwined, particularly during times of inflationary wholesale prices.
As a go-to supplier, Lochner says, Tyson can communicate with its customers the effects of grain and feed prices and what that does for demand and costs. Tyson can then advise them to adapt their product lines to be more efficient, and as a result, more cost-effective. Finally, Tyson can work with them within the scope of its own ability to drive inefficiencies out of the process, bringing the cost-savings to the customer.
The third objective Tyson has is to continue to build out its multinational enterprise, with poultry operations in Mexico, Brazil, China and India. Each is at a different stage of development, but Lochner says the company has been pleased with the job the teams in those countries have done so far.
Finally, Tyson continues to pursue the use of animal products as raw material for renewable fuels and other processed products. Lochner advises that the technology has been very promising but has also been full of learning curves, as it is very new. The company’s Geismar, La., joint-venture with Syntroleum remains in startup mode, but Lochner says some of the challenges have been resolved and the plant should soon be converting fats to diesel or jet fuel, or even carbon for some plastics production.
Keeping it simple
Regardless of the objectives Tyson pursues, its ability to maintain its focus throughout the entire organization — and keep the culture of teamwork a priority — will dictate how well the company operates moving forward. Smith believes Tyson has emerged from the worst of the recession with good momentum, and it’s hard to argue with the results Tyson posted through the recession.
Despite the success, Smith doesn’t expect anyone at the company will be satisfied.
“I don’t ever anticipate a customer walking up to me and saying, ‘That’s good enough,’” Smith says. “So we’ll never be satisfied either. Our job is to add value to their business. That means as they go more places, they’re going to want a consistent supply of high-quality food that meets whatever the demand is in that new region, country, segment, etc., and we need to be there for them.”
Furthermore, Tyson will not limit itself in terms of growth — any angle, any idea is on the table, as far as the company is concerned.
“That may mean we need to retool some facilities and maybe change from one type of processing equipment to another type of equipment to meet a customer’s changing needs,” Smith adds. “I can’t ever see a day when we’re not focused on innovation, being our customer’s go-to supplier, keeping our plants running full by growing our business, by meeting our customers’ needs, by being more efficient — adding value to whatever we touch.”
That type of clear overall objective and its trickle-down effect throughout Tyson Foods are what unites the company’s thousands of team members and has them pulling the company in the same direction — far from the volatility that plagued it years ago.
|Remembering Don Tyson|
"Don [Tyson] meant a lot to so many of us, and we’ve learned so much about what to do from him. Maybe in a lot of our hearts, out of respect for him, there is a desire to carry on the legacy of taking care of our customers. Don taught us that this business is a people business, and our job as a leadership team is to take care of our team members and trust them with the awesome responsibility of taking care of our customers. And you know what, they do a great job at doing just that. I think [his passing] brought back pride and heritage in what Don built, and then a desire to really follow through his legacy and that heartfelt desire to keep up the good work, doing what we’re doing and really making a difference for folks. He taught us well, and we’re still getting it done.”
Tyson Foods president and CEO, on the impact
Chip off the old block
Tyson Foods’ Sherman, Texas, case-ready facility feeds its own growth via its versatility, innovation and reflection of the corporate strategies and culture.
By Andy Hanacek, editor-in-chief | Photos by Jeff Peak, Tyson Foods
A company’s success occurs not because of the strate-gies of the board room
When looking for a microcosm of Tyson Foods’ overall efforts, turnaround and strategies, one needs look no further than its five-year-old Sherman, Texas, case-ready plant.
Sherman epitomizes Tyson’s ability to adapt and pounce quickly on trends driving the industry, and it also displays team members’ abilities to be innovative and take responsibility for driving out inefficiency. When asked specifically about the Sherman facility, Donnie King, senior group vice president, Poultry and Prepared Foods, calls it a great asset for the company.
“We have great people there, a great management and leadership team there, and they’re producing great products for some outstanding customers,” he says. “We operate that facility and two more like it that perform at the very top of the industry in every measure you would want to put before them.”
King adds that the case-ready team as a whole has done an excellent job of making quality and customer service the top priority, led by Gary Sheneman, senior vice president of Case Ready Beef & Pork.
“It’s interesting to watch, because every quarter they come in and find new and creative ways to absolutely wring out any waste in their system,” King adds. “They do a great job anticipating customer needs, and it runs very smoothly; we’d like to have a lot more like it.”
The facts speak for themselves, with Sherman surpassing the six-million-pound production level (per week; beef, pork and ground beef production) in five years of operation. The facility employs nearly 1,500 people, and has been at that level consistently, says Mike Gerleman, complex manager.
“We’re more efficient,” he explains. “Our pounds-per-man hour is at a higher level, and we’re getting more poundage with fewer folks.”
Furthermore, as the industry has evolved (particularly case-ready preferences and technology), so has the Sherman plant, adding equipment as overwrap packaging grew in popularity to handle customer demand.
While the plant is five years old in its current state, the building actually opened in 1974 as an Oscar Mayer bacon, hot dog and sausage facility. It was shut down in 1998 and purchased by IBP inc. in 2000.
Four years after gaining control of the plant in the 2001 IBP acquisition, Tyson Foods announced in January 2005 that it planned to convert the plant into its third case-ready meats facility, building on the success of similar plants in Council Bluffs, Iowa, and Goodlettsville, Tenn. (both of which were also acquired in the IBP deal).
Dustin Kratochvil, plant engineer, explains that work ramped up quickly, with the facility being an empty shell, for all intents and purposes.
“The demolition had been pretty much complete, and there wasn’t much equipment left, so it was a wide-open space with no utilities for the most part,” he says. “The shell was one of the reasons we came here rather than build from the ground up. To build a shell this size would cost a lot more money and take a lot more time.”
With a crew of more than 600 people working to get the plant going, and despite sometimes uncooperative weather conditions, Kratochvil says Tyson was able to go from its announcement to a total conversion of the facility quickly, at a cost of more than $100 million.
Sherman is no miniscule facility, either, featuring 561,000 square feet of workspace, 10 production lines producing a wide variety of fresh beef and pork products, and six lines producing ground beef items.
Because Tyson was able to design the facility within an empty shell, it was able to lay out production lines with efficiency in mind, and Gerleman believes the plant’s ground beef section is highly streamlined as a result.
Technology breeds efficiency
During The National Provisioner’s visit, production versatility was on display, with items such as bone-in pork chops, boneless pork chops, cube steaks, petit sirloins, and a variety of ground beef patties, among others, moving through the processing rooms in a steady stream. Gerleman says efficiency is affected positively by the fact that the facility has the room to run a variety of products at the same time.
“Whenever you can run isolated products down an individual line, most of your efficiency is affected by changing from one product line to another,” he explains. “So the more we can do consistent runs of product, the more efficient the plant will be.”
Once products are packed into modified-atmosphere mother bags and placed into boxes, they head to a combined sorting and palletizing room, where bar-coding and labeling technology has allowed the facility to streamline operations.
Furthermore, the plant’s own engineering team and its ingenuity have given it an efficiency and cost-savings boost. The team was looking for a way to improve the process of applying the pad to the inside and nutrition label to the outside of the trays it was using for its products.
Sherman’s team members devised what the company calls the “concept room,” in which specialized equipment, designed in-house, applies the soaker pad to the inside of the tray and the label to the bottom of the tray quickly and efficiently. Kratochvil says the company has taken the design and incorporated it into all three case-ready plants.
“That is a very specialized room that we have in the plant,” he says, “and it took a year of development in-house to get the speed and consistency to fit together.”
In the end, Gerleman says, the room adds tremendous value in that it costs less than purchasing pre-padded trays, it takes only nine team members to operate (in comparison to the several dozen team members who used to apply those items manually), and gives the plant approximately 2.5 days of tray inventory with which to work.
The bottom line
Gerleman believes Sherman holds its own in terms of producing results and following the corporate strategies set forth by the corporate leadership in Springdale, Ark.
“From an earnings standpoint, we’ve done very well,” he says. “From a community-relations standpoint, and fitting in to the Tyson model, we’ve done very well.”
Yet, Gerleman makes it clear that Sherman has not peaked in its capability, citing the fact that there are several areas in the building that could be renovated to house additional production lines as needed.
He says the Sherman team looks forward to future expansion and adds that Sherman proudly shares in the responsibility of improving the company from top to bottom — for much of that, he passes the credit to his team.
“I’m very proud of the management staff we have here,” he says. “We’ve developed managers here who have also gone on to be successful in other plants, so we’re also feeding that pipeline.”
|Training Sherman’s ‘army’|
By Andy Hanacek, editor-in-chief | Photos by Jeff Peak, Tyson Foods
Tyson Foods’ commitment to its team members shines through in the training, educational and philanthropic
opportunities available at its Sherman, Texas, plant.
Companies bandy about the idea of “continuous improvement” quite a bit in today’s catchphrase-oriented world, and while many of those businesses may practice just that on the operations side, not all of them go the extra mile to encourage continuous improvement in their own employees.
Tyson Foods is not one of those “pretenders” when it comes to their employees — visit any Tyson facility, as we have, and it becomes quickly apparent that the Springdale, Ark., processor truly invests in its team members and their abilities to advance and succeed.
Tyson’s Sherman, Texas, facility — which won an HREVOLUTION Award from The National Provisioner in 2006 for its training efforts — supports its team members in their efforts to expand their education and skillsets, as well as its community through charitable initiatives. What follows is a discussion about these programs with the senior management team at Sherman, during The National Provisioner’s visit to the plant in the spring.
NP: From the maintenance training rooms with the hands-on training stations to the variety of educational programs here at Sherman, it’s obvious training is a big part of what you do for your team members. Talk about the plant’s culture and perspective of management as to how training fits into daily life here.
Mike Gerleman, complex manager: Training is extremely important to us, because team members don’t come in with the skills needed in most cases. So we have to develop those skills within our facility. It doesn’t make a difference if they’re a person on a knife line, an MET, or a maintenance mechanic, we develop those skills in those people to make us better, make them better and reward them as well.
NP: What about production floor workers? How involved is their training program?
Rita Huske, complex H.R. manager: On the production lines, we use our Alchemy system, and we have line meetings that consist of 40-60 people at a time who go through the training. The system does test for understanding, and if there is, by chance, someone who doesn’t understand the material, we’ll come back and re-train them. The more they know, the better they can do their job. We also have hourly trainers on the floor and our orientation trainer who also helps with annual training.
NP: Do you offer anything to team members in the realm of educational assistance, and if so, how much participation do you see?
Huske: We’ve had six team members go through our tuition reimbursement program, and we have two going through it right now as we speak. If it pertains to something that would help our business grow, from business to quality control to safety to maintenance, it pretty much encompasses anything you can imagine. We will reimburse employees up to $3,000 per semester, and they do have to maintain a certain grade point average.
NP: How do you promote and encourage ongoing training for team members in order to improve the capabilities of the overall workforce?
Dustin Kratochvil, plant engineer: Each mechanic gets roughly three hours of training per week, paid. That’s on our time, but it makes them better and makes the plant better as well.
Huske: We are one of the few plants that has its own computer lab, and we do offer free training to our team members — anyone who wants to learn how to use the computer a little better. We also offer English as a second language — we use Rosetta Stone for the second-language classes, and we have our training coordinator and a couple managers who are certified to train Microsoft.
NP: How does Tyson expand its culture outward from the plant to the community? Do team members get involved in those initiatives?
Huske: We do a lot in our community. Our major charities that we contribute to are United Way, the American Cancer Society via the Relay for Life, and Big Brothers Big Sisters. We help out with Earth Day, planting trees at schools, and Hunger Relief here. This year, to date, we have donated approximately $116,000 in our community alone. And that’s not just Tyson donations, but also Tyson team-member donations as well.
Gerleman: There are roughly 60,000 people in the Sherman area, and the town was very happy to see this facility open. … They were starving for an industry like us to move in. And I’m not kidding you, when we went out to eat during construction, people would come up and say, ‘Golly, we’re glad you guys are here.’ So, you know, they’ve been very good to us, and we believe we’ve been good for the town. We’re good community citizens, and we’ve been recognized as a good community leader.