In most dairy evaporator/drying plants, margins are lower than in similar processing industries.
In many cases it takes running a plant at above 95% of its design capacity to cover the cost of raw materials, staff salaries, utilities and equipment depreciation to realize positive margins. Every dairy plant is different. The point at which a particular plant will enter the positive margin area will vary.
Some dairy plant managers try to save money by minimizing their spare parts inventory and overtime. In many cases this might be a good thing, but when it comes to responding to a down time situation, this concept could cost the plant a lot of very valuable run time.
Let’s look at a dairy plant that is running 75,000 lbs/hr. of skim milk to the evaporator and say the product is worth $.14 per lb. of feed into the plant. For this particular dairy plant, the breakeven point is 95% of feed design capacity for 20 hours per a 24-hour day. This means it has to run an average of 71,250 lbs per hour of skim milk for 20 hours or 1,425,000 lbs of skim milk per day to break even. Averaging a feed rate of less than this means the plant loses money.
Let’s say the dairy plant is able to average 100% of its design capacity. It is making about a 5% margin over its operational cost. Another way to look at this is to say the plant does not realize positive margins until the last 5% of it run. In the case of running product 20 hours a day, the positive margins happen during the last hour of operation each day. One hour of product is 75,000 lbs and that is worth about $10,500.00 in this situation.
As a negative example, it may take an additional 15 minutes to turn our dairy plant around on a particular day after CIP. That 15-minute delay just reduced the day’s profit margin by $2,625.
In another negative example, the dairy plant is only able to average 97% of design capacity because of various issues. As a result, it has lost the opportunity to make a potential $6,300 per day of positive dairy plant margin.
If management allowed the above situation to continue, these numbers would get big in a hurry. In a week, $44,100.00 is not being added to the Dairy Evaporator/Drying plant’s positive margins. In a month, $191,625. In a year, this missed margin potential could be $2,299,500.
Inversely, if we could improve capacity of the dairy plant beyond that of its initial design, say by doing a shorter product-to-product transition during CIP or by running higher feed rates, that additional capacity goes almost directly to the plant’s positive dairy plant margin.
A 1% increase in extra run time per day (12 minutes) achieved by shortening the CIP product-to-product time or by increasing the plant’s feed rate by 1% can add a lot of money to the positive margins. That’s an extra 15,000 lbs of milk run per day, which equals $2,100 per day, $14,700 a week, $63,875 per month and $766,500 per year.
In a final negative example, let’s say the dairy plant shuts down for 4 hours due to an unplanned maintenance problem. Simply put, our plant just lost 4 days of margins for that unplanned shut down. It will take 4 more days of running at design conditions to begin to get the plant in the positive margins again.
Let’s compare the dairy plant scenario to an oil refinery. Oil refineries plan their down time, called Turn Arounds (TAs), very carefully. A day of down time is essentially worth two million dollars. A typical TA might be 14 days long. That translates into 28 million dollars of product not being made.
Because of the critical nature of the TA, oil refineries will utilize full time TA managers and planners to strategize every detail for the next TA. These managers and planners will apply preventative maintenance lists, work orders, inspection reports, punch lists and engineering recommendations to determine what equipment needs to be rebuilt, overhauled, replaced, cleaned and/or recalibrated during the TA.
During the TA, the refinery will bring in teams of engineers, supervisors, boiler makers, pipe fitters, mill wrights, welders, insulators, instrumentation technicians, programmers, inspectors & operators to make sure all the necessary work is done and done on time. The TA team will have all the information, parts, supplies and equipment they need on hand to make sure the shut down goes smoothly. When that oil refinery starts back up, it needs to come on line as quickly as possible. Needless to say, there are severe consequences financially for the refinery and professionally for the managers if these TAs don’t go well.
Refineries also have unplanned down time. No matter how carefully the refineries plan, something occasionally fails and requires a premature shutdown. In these unplanned shutdowns, the TA managers look at their preventative maintenance lists, and other documentation and recommendations to determine how long the oil refinery will be down. Based on that down time determination, the refinery determines what work can be done. The refinery brings in the teams to do what work they can, while the unit is down. Extra help and overtime will be well utilized to make sure these units get back on line as quickly as possible.
The Turn Arounds that refineries manage are similar to the down time that dairy plants experience during CIP and maintenance stops. To be successful and to minimize down time, it’s all about plant management taking care of the details that sets up the dairy plants to make profitable margins.
Dairy plant managers need to plan for the activities that occur during these down times as carefully as the oil refinery TA managers do. The dairy plant manager should be constantly updating and utilizing preventative maintenance lists, work orders, inspection reports and punch lists to determine what needs to be worked on during the next shut down whether this shut down is planned or unplanned.
Dairy plant managers need to have the capital resources, the necessary parts on hand and the staff available to minimize these down times, yet take advantage of the down time to get as much work done as possible to insure smooth operations at design rates. When the plants resume operation, they need to start up on time, come up to design rates quickly and run at design rates for specified times.
If a dairy plant can run at 100% capacity when it is supposed to run, it realizes a positive dairy plant margin. Turning the plant around quickly and effectively during CIP and planned and unplanned maintenance stops is imperative to positive margins.
Having a clear plan in place, the teams in place, the parts in place and everybody and everything ready to go in case of planned or unplanned shut downs will actually add to positive margins by minimizing down time and increasing run time per year.
Caloris Engineering can do operational and CIP assessments in dairy evaporator/drying plants to discover opportunities to raise feed rates and shorten turn around times. We can work with the operational staff and show them by training and by example how to increase feed rates and turn the system around quicker while actually improving the CIP of the system. Caloris engineers can work with the maintenance staff and help them develop the preventative maintenance lists, the punch list and the parts list maintenance practices necessary to keep these systems running at design rates, for specified periods and minimize down time.
Ready to schedule an assessment with an eye toward improving your dairy plant margin? Contact Caloris today to arrange a discussion of your needs with one of our engineers. Call us at 410-822-6900 or send email to email@example.com.