Lean on the Hoof

by BILL WADDELL

Those of us who are in the business of teaching lean are engaged in the endless pursuit of the perfect example, the best analogy, the ideal teaching tool.  John Stossel and Dr. Jude Capper, an assistant professor of dairy sciences at Washington State University may have finally provided it.  In a piece on what he terms "another food myth" Stossel and the good professor debunk the idea that grass fed 'naturally raised' cows are better for the environment than grain fed ones bulked up in feed lots.

What does the feeding of cattle have to do with lean, you might ask?  Cycle time.  According to the doctor, a grain fed cow goes from birth to burgers in 15 months, while a corn fed one takes an 8 month slower path to McDonald's.  That 50% longer cycle time causes the cow to incur "extra eight extra months of feed, of water, land use, obviously, and also an awful lot of waste. If we have a grass-fed animal, compared to a corn-fed animal, that's like adding almost one car to the road for every single animal. That's a huge increase in carbon footprints."

The environmental cost per month per cow may well be lower for the grass fed cattle, but the gain is more than eaten up (pathetic pun untended) by the longer life cycle.  "By stuffing the feed-lot animals with corn, farmers get them to grow faster. Therefore they can slaughter them sooner, which is better for the earth than letting them live longer and do all the environmentally damaging things natural cows do while they are alive," Stossel says.

There is a direct parallel to the core lean objective of manufacturing cycle time compression.  Stossel's statement can be rephrased: 'By reducing lot sizes and moving toward one piece flow, manufacturers get products finished sooner. Therefore they can sell them sooner, which is better for the business than sitting in work in process inventory longer and do all the indirect cost damaging things unfinished products do while they are in process.'

Whether it is with herefords or widgets, cycle time drives the consumption of resources.  Stossel is worried about the environmental impact of resource consumption; manufacturers are worried about the cost of resource consumption; but the logic is the same.

Actually the excess cycle time penalty is worse than Stossel and the bovine thinkologist make it out to be. 

Farmer Brown is a grain feeder and he needs to sell 100 cows a month to make ends meet.  With a fifteen month life cycle, that means he has to have 1,500 cows in the feed lot - 100 one month old cows, 100 two month old cows, etcetera, so that every month he has 100 of 'em turning 15 months old to sell.  Farmer Jones raises cows au naturel, so his cows take 23 months.  To sell the same 100 per month, he has to have 2,300 cows in process to assure 100 are celebrating their fateful 23rd monthly birthday each month.  With so many more cows doing so much more eating and requiring so much more cowboying and so forth Farmer Jones' monthly cost of coing business is a lot higher than Farmer Brown's.  To make the same profit as Brown, Jones has to sell more than 100 cows a month ... say 110 per month to make as much money.  So his inventory is not 100 cows X 23 months, it is 110 X 23, which, of course, raises his costs even more, which requires even more cows, which raises his costs, which ... well, you get the picture.

So what have Stossel, Professor Capper, and all of these cattle taught us about lean?

1.    Any schmuck with a #2 pencil can figure out that it costs more to feed a cow on grain for a month than it does to feed it grass, and the environmental impact of a month in a feedlot is greater than the impact of a month in a field.  Likewise, anyone with an accounting degree can figure out that an American factory worker costs more per hour than a Chinese worker.  There is a lot more too it than that, however, and the environmenatl impact of holsteins and the 400-800% overhead rates in factories are driven by something a bit less obvious - time.

2.    Cycle time and inventory are two ways of saying the same thing - it is a direct, logical, mathematical relationship.  If it takes you 23 months to raise a cow to full weight, you need exactly 53.333% more cows in inventory than it does if you can take a cow to full weight in 15 months.  Same is true in manufacturing:  if your factory cycle time is 23 days, you will have exactly 53.333% more inventory than your competitor who has a 15 day cycle time.  The costs involved in having so much more inventory - handling, floor space, quality controls, etc... - mean that if you and the competitor have exactly the same direct labor efficiency, same direct labor hourly rates, same purchased prices, then he makes a lot more money than you do. 

This is why Toyota manufacturing wizard Taichi Ohno said, "All we are doing is looking at the time line, from the moment the customer gives us an order to the point when we collect the cash.  And we are reducing that time line by eliminating the non-value added wastes."  It is why Motorola preached that the "shortest cycle time producer is always the best cost producer" back when Six Sigma was in its origins.  It is why Shingo described the Toyota Production System as "the simultaneous compression of time and space".  Who'da guessed the cattle folks knew it all along?

Comments

[Dino Morson]

Here is a question: Isn't there a discernible taste difference between grain fed, corn fed and grass fed beef? Throw that into the cost equation.

[Bill Waddell]

Dino,

According to Wikipedia it sounds like there is not that much difference, a fair amount of variation in taste, and it depends a lot on the preferences of the people eating the beef. There is apparently no universal preference for grass over grain - or vice versa.

http://en.wikipedia.org/wiki/Cattle_feeding

[Eh]

"Bovine thinkologist," that's a great one.

Cows fed in feed lots have to have lots of bicarbonate of soda because they do not naturally digest grain as efficiently as grass. This was left out of the Stossel article. This may skew your analogy a little.

Cows will eat all that is available. Argentina became a major beef producer simply because of the vast areas of excellent grass that allowed them to raise herds to sell weight more quickly. Better grass equaled shorter lead times.

There is no such thing as the perfect analogy.

[Andy Wagner]

My wife points out that grass-fed have various health benefits over grain-fed because they aren't in cramped quarters, don't need the same heavy doses of anti-biotics, etc.. This suggests that some customers may place a value on health that they'd be willing to pay a premium on. Lean is, after all, about what the customer values.

[Mark Welch]

Dino & Andy, you beat me to the punch. Dead on. As a native Iowan, pork and beef are big industries here and we consume a lot of both. I've got to disagree with Wikipedia on this. One of the key points of lean is facts vs. data. Wikipedia may say there is no universal preference, but I'd challenge us all to a taste test and judge for yourselves to see if you really have no preference (What a nice gemba experience - go to a restaraunt and see for yourselves!)I've had grass fed beef only once, in a restaurant in Wyoming in 1983 (yes, it was that bad that I recall the year and state), and that was all it took for me to make up my mind.

A little anecdote to reinforce my point... A few months ago I was having breakfast in a motel and the milk had started to turn. I brought it to the attendant's attention. He showed me the gallon it came from, which had a date indicating it should have still been good. He had the data, I had the facts. I went with the facts.

[Jim Fernandez]

I don't know about the cow issue, but your lesson in lean manufacturing was great.

P.S I always thought that lean beef was better and better for you too.

[Steve Harper]

As a Lean advocate and purchaser of grass fed beef, I take issue with the basic analogy. With grass fed beef, there is a difference in taste (you can essentially taste what they eat, so yes, corn/grain fed does taste "better" by American standards), the number of and quality of nutrients (grass fed cows have Omega 3 fatty acids whereas the others don't naturally), and the level of "foreign" substances (like antibiotics or other things that have to be fed to cattle that aren't eating a natural diet). What Stossel and you seem to be leaving out of the equation is that cows aren't cars. Beef is a natural product; like a fine wine, time has an effect on certain quality aspects. I will continue to pay for real beef from a cow that lived like a cow rather than a factory-produced beef product because it's better for my health, quality of life and longevity. Sure, corn fed beef is cheaper and tastes a little better, but if it's taking years off my life, I'll make a small sacrifice and eat the as-nature-intended version.

As far as the environmental argument goes, all ruminants (cows included) are bad for the environment (methane is far worse than C02), so if your goal is to fix the environment, stop eating beef. I could also argue that making cows grow more quickly drives down prices, increases demand and drives up the need for more cows, so systemically, over time, quick and cheap cows results in more cows and a worse environment (not to mention an obesity and public health epidemic - oh wait, we already have that).

[Eric Wade]

Great article. Rush Limbaugh has made this argument in the past regarding the environmental impact of eating organic, etc.

Interesting to me is the fact that beef (and, in some sense, cars) is overproduced for consumers who overpurchase and then waste.

What I mean by that is that the scenario of minimizing waste and cost and inefficiencies is all well and good until you get to the American consumer (40% of whom are obese) who buys more than they should which puts huge pressure on the industry to push costs down rather than quality up.

Sometimes I laugh at the concept of a perfectly well run company serving a well designed and properly manufactured good to a customer who is far less than optimal or rational.

[Mike Wroblewski]

Nice example to ponder and I love a good steak. I agree with Eric on the notion that beef is overproduced for consumers who overpurchase and waste. And the waste is not only scrap in the trash waste but needless consumption waste. The USDA portion size for a serving of beef is 3 ounces. Try buying a 3 ounce steak in either the store or restaurant. I find that 6 ounce is the lowest on the menu, with normal 12-14 ounce offer and even the occasional 25 ounce. The fact is that portion sizes are out of control in America. Either we don't know what a good portion size is or we don't care.

Beyond this portion control problem which skews demand, any discussion on the best process should look at TOTAL cost. This is hard to do since many costs are hidden like impact to our environment.

[Jim Fernandez]

This conversation has degraded into telling the customer what they want is not good for them. And telling the customer what they should want.

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Amen Jim ..... Bill W

[Hank Roark]

I would suggest that you are leaving out a large amount of the supply chain when considering grain fed beef. When you look at grain fed beef, I would suggest looking

Grain fed beef, as the name implies, is largely fed by corn. In the case of the United States, that corn starts by being planted in some mid-western corn belt-state in the April/May timeframe. The corn is then harvested sometime in September-November. The inputs, such as seed, fertilizer, and chemicals, to this industrial cropping process are expensive and the associated capital is tied up the ground during this period (muda). It requires approximately 50 bushels of corn to finish grain fed beef (to USDA choice). That 50 bushels of corn at today's corn production rates means 1/4 to 1/3 of an acre of land and its associated capital expense (muda) is tied up to produce the corn needed per head of beef finished on corn.

Another consideration in the corn production value chain: it has reasonable size subsidies from the US government. This means your tax dollars are eventually going to support the cheap corn that then feeds the cattle contributing to grain fed costing less than grass fed.

The harvested grain is then stored (muda!) in grain elevators until it is needed by the feed lots. After storage, which could be for a while, the grain is shipped (typically via rail) to feed lots (more muda!) which are typically in drier climates than the feed; so imagine shipping from Iowa / Illinois to Colorado.

Reaching one step further back in the supply chain, the major fertilizer and chemical inputs into the grain production process are derived from natural gas or crude oil deratives. As such, imagine that the supply chain starts in the Gulf of Mexico (in the case of natural gas, the major input into nitrogen fertilizer, the main fertilizer to make corn grow) or Saudi Arabia (in the case of the crude oil that will be made into various herbicides, insecticides, or fungicides). (Muda, muda, muda.) The cost of fertilizer and chemicals fluxuates with with the cost of natural gas and oil; as these go up due to demand in other sectors, expect the inputs costs and cost of corn and the cost of beef to go up.

On top of all of this, a typical t-bone steak from grain fed beef has approximately four times the saturated fat in it as compared to the equivalent steak from grass fed beef. (!!!!).

Now ask yourself, which process is leaner...corn fed or grain fed beef. When you look at the complete supply chain the answer is not so obvious.

[Rick Bohan]

You've let ideology get in the way of good business sense this time. As someone above points out, you've effectively ignored the fact that the two products have very different supply chains. One goes like this: Sun, grass, cow. The other is more: Oil company, refinery, chemical plant, distributor (or two or three), corn, cow. And that's just for the food...doesn't count the supply chain for the tractor to put the chemicals in the ground.

Somebody else mentioned the discussion 'devolves" into telling people what they should like and buy. But that's exactly where the ideologues START the discussion. The fact that some farmers grow and sell grass-fed cows means that I have...choice! Maybe I just like grass-fed cow, right? It's funny how the ideologues use the choice argument to defend Hummers (which, ugly as they are, I wouldn't buy if the Sierra Club endorsed them) but ignore it when they want to dis good food. In other words, I buy local food and grass-fed beef because, yes, it tastes better. And I often pay more to get the added value. Ain't that the American way?