www.usbuildersreview.comSpring 2010

USBuildersReview

Lean, Green Success MachineMilk Products LLC

T H E M A G A Z I N E F O R l e a d i n g C O N S T R U C T I O N E X E C U T I V E S

A mother’s milk sustains most young mammals early in their development. But when it can’t, Milk Products LLC steps in to supplement the needs of baby livestock through its production of milk replacer formula. Thus, “Cheesehead” territory, a.k.a. Wisconsin, is the ideal location for Milk Products, which will celebrate a century of operation in 2011. The company employs over 60 people and brings in around $60 million in annual revenue, all from one location in rural Chilton, Wisconsin.

The plant, which is one of the nation’s largest manufacturers of milk replacer, can be found on 10 acres, surrounded by land devoted to agriculture and various industries (including some of Milk Products competition, which is primarily located in the Midwest). Speaking to the variety in Wisconsin, it’s “not only the Green Bay Packers,” jokes Dave Kuehnel, president of Milk Products. Kuehnel is a reliable source regarding the company’s evolution throughout the 20th century; he is a good-natured,

knowledgeable source of information on the industry, having been involved with farming, agriculture, and livestock his entire life, growing up on a diversified farm as one of 16 children.

Under Kuehnel’s careful management of internal systems and external suppliers, Milk Products stays profitable by catering to a wide range of private labels and by managing its own brand, the Sav-A-Caf line, which includes a range of milk replacers, nutritional and health products for calves, piglets, kids, lambs, foals, puppies, kittens, and young animals of many other species.

Transitions

Milk Products hasn’t always served livestock needs; from 1911 to 1979 the company was a Carnation plant, serving the food industry. From 1911 to 1955 the company was in

Lean, Green Success MachineProduced by Hanim Samara & Written by Kelly Matlock

2 | USBuildersReview Spring 2010

liquid production, making cans of condensed milk for human consumption, and from 1955 to 1979 the plant operated as a dry processing plant, producing instant milk powder, packaged in the iconic red and white Carnation boxes.

The switch from human to animal food was a successful transition, however, with 40 years already behind the company in the animal milk replacement industry. The company serves primarily two groups: commercial livestock and “lifestyle” farmers, which refers to people who live in rural areas across the country and raise animals for their own use and enjoyment.

Within the last two decades, in both customer groups, interest has increased in smaller packaging, including single-dose packaging and two- to eight-pound bags, a change from the old standard of larger 40- and 50-pound bags. As well as changes in sizing, “Everyone wants their own unique twists,” explains Kuehnel. The company services over 700 private labels, all with slightly different profiles. However, while Milk Products caters uniquely to many different customers, one thing stays the same: quality.

Quality control is especially important, considering Milk Products’ milk replacer formulas are made from over 40 ingredients. It is a complex recipe of carbohydrates, fats, proteins, essential vitamins, supplements, antioxidants, amino acids, stabilizers, emulsifiers and minerals. In short, it’s everything a baby animal requires during an intensive and critical period of growth and development.

The inputs are carefully managed so that consistency is the result; and it begins for Milk Products with reliable suppliers from the food industry, who generate consistent quality ingredients. Milk Products must be doubly careful to abide by FDA compliance programs in traceability and cGMP’s.

Lean Manufacturing

The dairy market has been challenged by low prices in the recent economic downturn; to counter these challenges, Milk Products has applied the principles of “Lean manufacturing,” also known as “Next Generation” manufacturing. The increased efficiency from Lean methods has helped Milk Products weather the economic turmoil, which has had a substantial negative impact on the profitability of dairy farmers.

Learning the new system came first and it took time to invest in restructuring processes to add value and remove “all waste, anything that didn’t add value,” declares Kuehnel. “We applied ourselves to the study and the application.” Immersion in the philosophy resulted in a fairly seamless transition of all processes. “Marketing, manufacturing, lab, production, [across the board] we’ve applied the Lean methods; it’s lowered costs and helps us serve our customers better and faster,” Kuehnel explains of the tremendous benefits he has witnessed. “Everything is better, safer, more ergonomic… it’s smarter.”

The informed decision to invest in Lean methods has increased efficiency and supported profitability, as well; 2009 was another great year for Milk Products.

Smooth Sailing above the Rest of the Competition

Success comes down to what Milk Products creates and supplies to its customers. The key to the company’s smooth formula lies in what is referred to as “The Peebles System,” which the company credits for its ability to create a superior product in “wetability, mixability and economy.”

The secret to The Peebles System is described by Milk Products as lying in ”the heart” of its manufacturing equipment -- a hydrator tower that creates ”Magic Crystals,” as they are affectionately known. The tower adds a small amount of moisture to dry powder ingredients, slightly dampening the milk replacer particles, allowing them to fall down through the hydrator and form larger ”agglomerates.” Moisture is then removed in fluid bed dryers.

When the product is ready for the customer to use, the hydration and agglomeration technique shines; the larger particles ”drink” water that is added to the mix, using capillary action, allowing the powder to ”melt” into a solution quickly, easily and uniformly.

Milk Products is also the only ISO 9001:2000 certified manufacturer of baby animal nutrition products in North America. The certification was completed in mid-2005 with re-certification in 2008 (re-certification is required every three years). ISO stands for International Organization for Standardization, and it’s an independent organization that “helps companies and governments develop and adhere to internationally recognized standards for manufacturing and business. ISO certifies that these systems meet the standards set, and audits each company at regular intervals; it is an internationally recognized achievement in manufacturing.”

Milk-ing Success

Milk Products continues to evolve and meet market needs, even as the market changes.

Recently the company has focused on increased production of its colostrum-based health products. Colostrum is the “first milk” that a baby animal receives from its mother. The profile of the milk is nutrient-rich, ensuring that the baby receives all necessary immune system boosters. The first 48 hours of colostrum-nursing are critical in the baby animal’s health; Milk Products understands how essential it is that its product is well-made and abundant in immunoglobulin, fat and protein.

New packaging is another way to meet market demands, and changes. Milk Products has made its product easier to handle, more economical, less perishable and increasingly environmentally conscious. The company has largely gone away

3

from using a heavy plastic pail and toward re-sealable bags in various sizes; the bags use less packaging making them earth-friendly, and they cost less to manufacture, accounting for savings that can be passed on to customers.

Packaging needs also require reliable suppliers. Another area that Milk Products has streamlined is its management of corrugated cardboard suppliers, and particularly its inventory of these supplies. “Our suppliers are integrated with our purchasing department; they look at orders and the type of packaging needed three to five days out,” Kuehnel explains. This integration allows them to send supply as it is needed, meaning there is no extraneous, unnecessary or wasted inventory.

“The market varies, and this integration ensures that we don’t buy too much, or the wrong sizes, or have discontinued packaging on hand,” Kuehnel continues. It also results in a reduced number of suppliers, contributing to the company’s noted quality control.

Additionally, the company has made a conscious effort to green its facility, upgrading the lighting in the buildings to operate on auto sensors, ensuring no lights are left on to drain energy. On top of this upgrade, Kuehnel says Milk Products is looking into solar applications for hot water

4 | USBuildersReview Spring 2010

heating. These green efforts are woven into the holistic structure of Lean in avoiding waste and working smarter.

All these decisions have paid off for Milk Products. The company has found a system that works across all areas of quality control– suppliers, ingredients, processes, packaging and customer service – allowing them to celebrate a well-deserved 100 years in production in 2011, with another solid century to come.•

5

MiLk ProduCts LLC435 E. Main St.P.O. BOX 150

CHILTON, WI 53014United States

WWW.MiLKProductSinc.coM