Dairy’s ‘triple bottom line’ includes economic, environmental and social aspects. In the drive to reduce costs and the industry’s ‘carbon footprint,’ improved efficiencies in on-farm milk storage and delivery to the processing plant can address all three.
In the dairy industry, if one person or entity owned all the farms, trucks and plants, there would be a number of ways to save costs in moving milk from the farm to the processor. But because one person or entity doesn’t own all the farms, trucks and processing plants, milk pickup and delivery efficiencies and cost elimination must be achieved within each part of the system, leading to savings for each individual component – producers, haulers and processors – adding up to savings within the system as a whole.
As in most hauling industries, milk hauling charges are often two-fold:
1) stop charge. Conceptually, the stop charge represents the fixed cost for pulling into a farm driveway. Every time a hauler pulls in the driveway, the farm is charged a fee.
2) transport fee. The transport fee, or “pump rate” as it’s called in the dairy industry, represents the cost to get the milk from the farm to the processing facility. Generally a standard rate per hundredweight for a hauler to transport raw milk, it will usually vary with distance between the farm and the plant.
Reducing producer costs
While a producer can’t cut the distance between his farm and the plant, he may be able to reduce stop charges.
Since the stop charge is based on the number of times a hauler stops to pick up milk, matching the farm’s milk storage capacity to tanker capacity maximizes the efficiency of each stop.
Many farms are picked up on a daily basis, even though they are not filling a trailer load of milk. Investing in more storage capacity could mean haulers could stop on an every-other-day basis, saving costs to the hauler and stop charges for the producer (see Example 1). Additional savings may be realized in reducing use of cleaning supplies, as well as heating and disposing of wash water.
Cooperatives and marketing organizations may provide “incentives” to get producers to increase storage capacity. One method is increasing the stop charge, a “disincentive” to stay at their current storage capacity.
Or, co-ops or marketing agencies may offer producers opportunities to participate in a “tank swap.” Haulers and field representatives who are on farms on a day-to-day basis can collaborate on the needs and opportunities within a region, working with producers to initiate a tank swap between farms to “right size” storage capacity to create efficient hauling schedules, improving efficiencies and reducing costs.
Efficiencies at the farm
At the farm level, there are a number of other factors affecting milk hauling efficiency:
• Timing. In most cases, producers determine when their milk can be picked up by their milking schedule. Haulers cannot pick up milk mid-milking. Additionally, farms milking 3X a day may not have storage capacity for all three milkings, so the hauler must plan accordingly.
As the pickup time window narrows, the cost to the hauler generally increases, because haulers may must alter schedules to meet the individual requests. This may mean bypassing the farm at a time when it would be most efficient for the hauler, coming back later in a route. Flexibility and sufficient on-farm storage capacity are crucial to making hauler routes the most cost effective as possible.
• Farm accessibility. Not all farms can accommodate a tractor trailer, forcing a hauler to pick up milk with a straight truck, which is two-thirds the size. Smaller trucks mean more fuel, more drivers and more resources.
Investing in appropriately designed areas for tractor trailers will allow fewer trucks to pick up the same amount of milk in a shorter amount of time, eliminating costs in the system. Additionally, federal and state regulations, safety and time come into play when truck drivers cannot turn around in the farm driveway and must back onto the property.
On the hauler side, efficiencies are driven by equipment utilization. Equipment is a fixed cost. Ideally, the equipment would be used 24 hours a day, seven days a week and 365 days a year to use the least amount of equipment to pick up milk. Haulers, however, are limited to farm pick-up hours and accessibility, processing facility receiving hours, and driver availability to working the third shift.
With these limitations, there are other areas to save costs and drive efficiencies. Investments can be made in larger hoses. However, bigger hoses are heavier, making pickups harder on drivers. Farms also may not have adequate access points to accommodate a larger hose.
Technology has given haulers ways to drive costs down. One area is the development of tools to reduce fuel costs. There are now global positioning system (GPS) tracking and truck engine diagnostic systems available to monitor truck speed, braking habits and idle time, with the goal to increase miles traveled per gallon of fuel. Haulers can use monetary incentives to reduce driver speeds and minimize hard braking and idle time, saving fuel and fuel emissions, as well as maintenance costs.
Technology has also given the industry means to minimize the number of miles traveled through optimization programs for both farm load assembly and processing plant destination selection. These programs are designed to come up with the best assembly decisions and routes based on a number of parameters, including plant receiving schedules, farm pick-up times, types of milk, weight restrictions on roads and highways, differential zones, etc. Analysis has shown these programs can save up to 5¢/cwt.
Another technological advancement does away with manual, paper-based hauler tickets. Handheld units allow producer information and load weights to be transferred immediately to marketing organizations and processing plants. This instantaneous information decreases time spent keying data on an administrative level, and increases accuracy. Plants can receive advance ship notices to anticipate hauler arrival time, load weights, and producer certifications for things such as recombinant bovine somatotropin-free (rbST-free) verification. All this decreases hauler wait times.
A final area to drive milk transportation system efficiencies is at the plant. As a general rule, it should take a processing facility two hours or less to unload a trailer load of milk. Upon arriving at a plant, a truck has to be weighed in, sampled and approved, unloaded, cleaned and weighed out. In the case of rbST-free milk, certifications must be checked and approved. The more things that can be done at the same time, the more time effective the plant will be at unloading. Some dairy processing plants in countries, such as New Zealand, automatically draw milk samples and run antibiotic snap tests as milk is being unloaded into silos. In other ag industries, such as corn delivered to an ethanol plant, corn is sampled as a truck is being weighed in. If the truck’s contents do not meet specific standards, it does not make it to the receiving area.
Receiving room efficiency at the plant plays a huge role in meeting or exceeding the two-hour unloading benchmark. More receiving bays increase truck capacity. Receiving bay design is also very important. Drive-through bays vs. back-in/back-out bays play a role in the time haulers spend at plants.
Another factor in processing plant efficiency is silo capacity. Although a plant may have a specified throughput per day, this does not always mean they have the capacity to hold that milk to be processed. Sufficient silo capacity means less time haulers spend waiting in the plant’s parking lot to be unloaded.
Plant locations can also add costs, due to the distance from milk supplies, as well as Department of Transportation rules governing driver working hours (14 hours per trip with 11 hours of actual driving time). Other issues at milk processing facilities include first-come, first-serve testing, bumping trucks out of appointment times, and plant receiving hours.
Driving cost efficiencies in milk transportation makes sense, especially as the dairy industry strives to reduce energy use and its “carbon footprint.” Between picking up milk at the farm and delivering it to the plant, there are number of areas that can be capitalized on to reduce costs, save time and energy and decrease the impact on the environment. If collaboration occurs, each unit of the system – and the system as a whole – will reap the benefits.
• Contact your cooperative or marketing agency to see if ‘tank swap’ opportunities are available.
• Visit the Innovation Center for U.S. Dairy website, www.usdairy.com.