Anytime a business isn’t seeing a return on resources it can cause problems. But in the dairy industry, the loss of resources is a daily occurrence. From losing feed to birds or during harsh weather, to the mixing process and inefficient labor, Shrink is a major industry wide problem.
What is Shrink?
Shrink, or the loss of return on various resources, can be obvious. Many dairymen literally watch feed blow away in the wind or constantly fight off birds. But in many instances it is invisible, such as evaporation of moisture in corn silage.
Why Should I Manage Shrink?
On average, dairies that aren’t practicing efficient shrink management experience between 7-8% shrink. 7-8% doesn’t initially sound like much, so let’s put this number into perspective:
If a farmer missed the bottom of the market on an ingredient and instead of buying it for $550/ton he bought it for $570/ton he would experience an annual loss of about $10,950 (on 1,000 cows). If that same farmer had 7% shrink he would experience an annual loss of about $21,845 on the same ingredient. That’s more than double the loss that he is already taking by missing the bottom of the market. And that’s just on one ingredient.
So, needless to say, shrink can be a source of major profit loss. Fortunately there are ways to manage shrink. And even though implementing management practices won’t allow you to capture everything, it will help you capture a big portion.
When beginning shrink management it’s important to know a few things. Here are some questions to ask yourself:
- What am I already doing to manage shrink?
- What are my ultimate goals for shrink? (Usually having a specific number will help bring about the best results.)
- Where am I having the most problem with shrink? (Weather, other animals, mixing?)
Three Ways to Manage Shrink
After you’ve answered these questions, you’ll want to do some of your own research to determine the best ways to manage loss on your dairy, but in the meantime we’ve come up with three really good steps to begin implementing shrink management:
- Commitment from Everyone
- Feeding Software Program
- Platform Scales + Commodity Tracking Software program
Commitment From/Training Everyone
Managing feed efforts is a team effort. So it’s important to get everyone involved in your shrink management practices.
From our experience a common source of shrink comes from labor inefficiencies. For example, some ingredients are bulky and hard to handle. Maybe a feeder is loading hay which is hard to load because it comes off in big flakes. And because of that, doesn't get quite enough in the mix. Then he loads the next ingredient (maybe it's alfalfa) and uses that to finish off the amount of hay that should have gone into the mix. Then he continues to load the alfalfa. Well, if you are tracking your inventory and the amount that goes into the mix isn't adjusted, the hay inventory and alfalfa inventory are now off.
Make sure that you build a team environment where everyone understands the importance of stopping shrink. Set goals and expectations and make sure that your workers have the means and training to meet those expectations. Implement operating procedures that work best with your dairy and, most importantly, regularly report and evaluate results. Keeping your team involved can make a huge difference in your ability to capture and lower your percentage of shrink.
Feeding Software Program
On the average U.S dairy farm, feed costs represent between 40-60% of total milk production costs. This is a huge percentage, regardless of the size of the dairy. To ensure that you are capturing as much of that feed as possible you have to keep track of exact actual usage and disappearance numbers. These numbers need to be accurately measured and chronicled, not just estimated and written down.
In today’s dairy industry the best way to get, maintain and change these very important numbers is through a powerful and intuitive software program. Make sure to do your research. Talk with other dairymen about what has worked for them, take your time in talking with sales reps and watch plenty of demos in order to find the software program that will work best with your farm and your daily operations.
One thing is for certain. A good feed management program should help you not only track ingredients, but also hold feeders accountable for what they do. By tracking what a feeder is actually doing, the office manager and the feeders fill the communication gaps.
Commodity Tracking
Weighing dry ingredients at purchase is absolutely necessary and is a pretty well known practice. However, don’t forget that all ingredients should be weighed. This allows them to be reconciled with the billed weight. And, in order to accurately calculate shrink the initial weight has to be known and recorded.
You should also have a system in place to take invoiced weights and reconcile them with fed weights. Farmers have been doing all of this on their own for years, but using a platform scale and an associated software program will not only make this tedious job easier, it will guarantee that numbers are consistent and measurements are accurate. Which is incredibly important when trying to effectively manage shrink.
Shrink can be devastating to a dairy but it doesn’t have to be. When properly measured and managed, it can be greatly limited and have very little impact on your overall profits. But it does need to be taken seriously.
If you’re interested in learning more about shrink management and how other dairymen have dealt with it, check out Herd and Feed TV highlighting TLK dairy with their fully-enclosed, shrink optimized feed center.
