Angus Davidson Executive Chairman, TOP Pork Pty Ltd 3 September 2007 • TOP Pork is a privately owned company which oversees the production, QA and marketing of 23 family-owned and operated pork farming businesses throughout Victoria and South Australia • The group has 11,000 sows • Market approx 4,500 pigs per week • Combined turnover is over $40m • TOP Pork is the only ColestockTM certified Inner Circle supplier of pork to Coles • TOP Pork members exclusively use Myora Farm genetics • TOP Pork is governed by a board of eight directors – 7 elected directors – 1 independent • TOP Pork is funded by subscription • TOP Pork members must achieve ‘international’ competitiveness • Competitiveness Cornerstones – Single marketing brand – Superior genetic source – Cost-plus payment model – “Fleetfootedness” of family run farms – Ability to benchmark amongst members • Benchmarking developed by Xerox in the late 1970s • Numerous definitions – At least seven that are widely cited • Benchmarking is about how businesses can compare themselves and learn from the activities of their peers (and competitors) • Benchmarking: • Is an efficient way to make improvement • Helps businesses to make improvements faster • Has the potential to bring a sector’s collective performance up significantly – i.e. TOP Pork • There’s a common theme: • Benchmarking is a cornerstone in the continuous improvement process • It is the most cost effective way of introducing best practices into your business • Key data used in the pricing model • Three primary types 1.Productivity Benchmarking 2.Financial Benchmarking 3.Price Benchmarking • The process of comparing an operation against herds in a database – A commercial source – Regional – National reporting system • It helps you to establish exactly where you are relative to others in the database • • • • • • • • Pigs born alive per litter Pre-weaning mortality percentage Pigs weaned per sow per year Post-weaning mortality Pigs finished per sow per year Finisher herd liveweight feed conversion Herd dressweight feed conversion Conception rate • • • • • • • • Sow replacement rate Breeder deaths Still births Mummified piglets Pigs weaned per litter Average age at weaning Farrowing rate Kilograms of meat produced / sow / year $3,000,000.00 12.00% 11.00% 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -3.00% -4.00% -5.00% -6.00% -7.00% -8.00% -9.00% -10.00% -11.00% -12.00% -13.00% -14.00% -15.00% $2,750,000.00 $2,500,000.00 $2,250,000.00 $2,000,000.00 Dollars ROI (%) $1,750,000.00 $1,500,000.00 $1,250,000.00 $1,000,000.00 $750,000.00 $500,000.00 $250,000.00 $0.00 1 Total Cost 2 3 4 5 Total Revenue 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 ROI Pigs Sold / Sow / Year B reak Even B est P erfo rmer Wo rst P erfo rmer • In May 2007 and holding all other variables constant: – Breakeven point is 9.72 pigs sold / sow / year – Members’ performance ranges between 16.21 and 24.56 pigs sold / sow / year – The equates to a return on investment between 5.34% and 10.07% – The average is 8.37% $3,250,000.00 12.00% 11.00% 10.00% 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% -1.00% -2.00% -3.00% -4.00% -5.00% -6.00% -7.00% -8.00% -9.00% -10.00% -11.00% -12.00% -13.00% -14.00% -15.00% $3,000,000.00 $2,750,000.00 $2,500,000.00 $2,250,000.00 Dollars ROI (%) $2,000,000.00 $1,750,000.00 $1,500,000.00 $1,250,000.00 $1,000,000.00 $750,000.00 $500,000.00 $250,000.00 $0.00 1 Total Cost 2 3 4 5 Total Revenue 6 7 8 ROI 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Pigs Sold / Sow / Year B reak Even • By reducing the HFC to 3.56 & holding all other variables constant: – Breakeven point is 8.85 pigs sold / sow / year – Return on 16.21 pigs sold / sow / year is 6.68% – Return on 24.56 pigs sold / sow / year is 11.71% – The average is 9.90% $3,250,000.00 5.00% 4.00% $3,000,000.00 3.00% 2.00% $2,750,000.00 1.00% $2,500,000.00 0.00% -1.00% $2,250,000.00 -2.00% $2,000,000.00 Dollars -4.00% $1,750,000.00 -5.00% $1,500,000.00 -6.00% ROI (%) -3.00% -7.00% $1,250,000.00 -8.00% $1,000,000.00 -9.00% -10.00% $750,000.00 -11.00% $500,000.00 -12.00% -13.00% $250,000.00 -14.00% $0.00 -15.00% 1 Total Cost 2 3 4 5 Total Revenue 6 7 8 ROI 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 Pigs Sold / Sow / Year B reak Even • By increasing the HFC to 4.20 & holding all other variables constant: – Breakeven point is 16.01 pigs sold / sow / year – Return on 16.21 pigs sold / sow / year is 0.10% – Return on 24.56 pigs sold / sow / year is 3.51% – The average is 2.25% th • TOP Pork has been undertaking benchmarking for many years now – Some good results achieved • Data collection has been time consuming • Furthermore there was often erroneous or missing data • Only a limited number of KPIs captured and benchmarked • Single software program required – The inherent problems of manually benchmarking was a significant driver – Many members had outdated programs – Single point of slaughter – Animal ID technologies • Due diligence conducted on several proprietary herd recording programs st • EliteHerd® and EliteGrow® was chosen • TOP Pork’s benchmarking program took a significant step forward ® ® • This software allows the centralised collection of all data through the use of email • It also provides the ability to easily compare key performance targets (KPIs) across the entire group • It has also provided members with modern herd recording program ® ® • KPIs for the group can easily be set and readily changed as performance changes • If it can be recorded – it can be benchmarked • Individual herds can be added or removed from the dataset • Names can also be hidden • The data can also be easily charted for graphical comparison • Flexible system for hiding selected herd names • It is also possible to display a single herd name and hide the rest of the herd names • Benchmarking of financial parameters is essential if TOP Pork members wish to truly enhance their competitiveness • Automated uploading of kill sheet data – saving more time and providing an even greater opportunity for benchmarking slaughter generation performance • Electronic ID • Benchmarking is an important strategic business tool • The ability to benchmark within TOP Pork provides a comparative advantage • EliteHerd® and EliteGrow® will help to ensure the accuracy of data • Using a standard chart of accounts it can also benchmark financials - Essential • TOP Pork is still some way off being the best in the world at benchmarking! • However, with the clever use of the latest software – our members are well on the way to achieving world’s best benchmarking practices – more importantly reaping the rewards that flow from that