Jim Lenz, GEAPS’ Director of Education and Training: 0:34
In today’s episode, we’re diving deep into a critical topic for anyone involved in grain handling and processing inventory management. Stay tuned for this highly informative discussion. Jim Lenz, your host and producer of the show, and director of global education and training at GEAPS, where the mission of the Grain Elevator and Processing Society is to champion, connect and serve the global grain industry and our members At GEAPS, we work to be the global community and thought leader for the grain industry which feeds and fuels the world. Thanks for listening today and for joining the network of thousands of other grain handling and processing professionals across the globe taking strategic steps to grow professionally. The Whole Grain Show will give you the competitive advantage to win at work so you can make more of an impact.
Jim Lenz, GEAPS’ Director of Education and Training: 1:23
Today we’re joined by Jim Voigt, a long-time veteran of the grain industry with extensive experience in inventory management. Jim will help us explore the essential components of inventory management, discussing why it’s crucial not only for operational efficiency, but also for overall profitability and sustainability in the grain industry. Throughout our conversation we’ll cover a range of topics, including the challenges faced in managing inventory in grain facilities, the impact of effective inventory control on operational success and the importance of understanding key terms and concepts. We’ll also examine different storage methods, the use of technology and data analytics in inventory tracking, and best practices to optimize inventory levels. Additionally, Jim will share real-life case studies and success stories, giving you practical insights into how effective inventory management strategies can lead to significant cost savings and enhanced operational performance. We’ll also look ahead to the future, discussing emerging trends that are revolutionizing the way we manage inventory in the green industry. This episode is packed with valuable information for professionals looking to improve their inventory management practices. Let’s get started.
Jim Lenz, GEAPS’ Director of Education and Training: 2:47
Today. We have the pleasure of welcoming Jim Voigt, a distinguished expert in the grain handling and processing industry. Jim’s impressive career spans several decades, during which he has significantly contributed to the growth and efficiency of major companies like ADM. He has sourced and trained over 5,000 employees to supervise and manage ADM grain facilities in North and South America, facilitated the expansion of ADM’s domestic grain operations and played a pivotal role in establishing ADM’s international grain operations in South America. He has also co-founded ADM’s continuous improvement support team, enhancing plant efficiencies and inventory management. As the president of JFV Solutions Incorporated, Jim provides top-tier consulting services, facility analysis and operations management training. Jim Voigt is also past international president and chairman of the board of GEAPS. Jim, thank you for spending time with the GEAPS. Whole Grain Podcast listeners.
Jim Voigt: 3:46
Thank you. I appreciate the opportunity to share my thoughts with your audience today, Jim.
Jim Lenz, GEAPS’ Director of Education and Training: 3:51
Jim, to allow our listeners to get to know you and to start the show with a bit of positive spirit, could you share with our listeners a mantra or success quote that you live by professionally?
Jim Voigt: 4:03
Sure, Jim, I think one of the ones I try and stay humble with this and keep my perspective is that you do not need to be the smartest person in the room to succeed. I always found it best to build a team and a network with individuals whose strength and knowledge offset my weaknesses and that allowed me to have the successes I have had.
Jim Lenz, GEAPS’ Director of Education and Training: 4:24
Oh, I like that. Thank you for sharing, Jim. You’ve had such a special and diverse set of roles and responsibilities in the grain industry. Could you highlight some of those roles in the industry?
Jim Voigt: 4:33
Well with the career I’ve had and the opportunities I had. That’s kind of a difficult question for me, jim, but I think looking at it is I had the opportunity to grow with ADM, where we went from about 50 locations to over 400 globally in about an eight or nine year period, turned it into the largest grain company in the world, and I got to be directly involved in making that happen. That was exciting. I would also say that the opportunity to work in 20 different countries around the world was a great experience. But I think the thing that probably gives me the most satisfaction is today I look around and I see the head of operations for a lot of these major grain companies, large grain companies in the US and these are people that I had found trained and developed in my career at ADN. That’s a lot of satisfaction there.
Jim Lenz, GEAPS’ Director of Education and Training: 5:19
That’s incredible. That’s why it’s so special, Jim, to have you on the show, just to have that wealth of experience, to see the fruits of your labor, meaning a lot to you that you’ve trained and worked with these individuals. What makes working in the grain industry so special to you?
Jim Voigt: 5:35
I started with Continental Grains Allied Mills Feed Division in East St Louis in 1974. But prior to that, in my youth, I grew up in Northern California in the rural part of the state. It was ranching, farming, the lumber industry, and I was involved in 4-H starting at age 10 through 18. I got into a sheep project and I had about 150 head of sheep rented to my own ground with Shearing Sheep commercially and I just found an interest in agriculture. So I chose a career in agricultural business management when I went to college. As far as my study, I just enjoyed that environment and the agricultural lifestyle and working with people who just have very common good values and that transferred over into the grain industry. The thing about that is I traveled a lot, as I mentioned the number of facilities. I had global responsibility, so I never developed personal friends. All my friends are actually grain industry people in that I’ve built lifelong relationships with many of them and so it’s just. My world has been the grain industry. That’s all I’ve known, probably since I’ve been 10 years old.
Jim Lenz, GEAPS’ Director of Education and Training: 6:43
Wow, I didn’t know that about you. It’s great to hear so many people getting started with programs that are out there, like 4-H, like FFA. You certainly were one of those and that piques curiosity from early adolescence and before that. So very, very interesting. Now we are talking today about inventory management strategies. I think a great place to dig into the conversation is defining inventory management and secondly, why is inventory management so critically important?
Jim Voigt: 7:13
Simply put, I mean grain inventory management is the process of tracking, analyzing and controlling your stored grains to minimize the losses in quantity, quality on your inbound receipts and your outbound shipments. That’s the simple version of it. Obviously there’s a lot to the makeup of it, but we can go into. There’s a lot of business management tenants that support all these things happening in the role of management and you get into managing assets and working capital in particular, which working capital consists of accounts receivable, accounts payable, and inventory. That’s the key word there. So then, when we look at that inventory piece of it, jim, that inventory is made up of raw materials and processed goods, finished products, parts and supplies. So obviously today we want to focus on that inventory piece and specifically grain inventories. So let’s maybe take a look and have an example of why this is critical for us, of why this is critical for us. Let’s take I’ve got a 6 million bushel elevator that I am operating okay, maybe the value of that’s around $20 million.
Jim Voigt: 8:27
If I put two and a half times my storage capacity of volume through that house a year, I’m looking at about 15 million bushels of grain growing through that facility. Just for assumption, let’s say, of that, 12 million of that is corn valued at $4 a bushel. 3 million of that is beans valued at $12 a bushel. That puts the value of the grain going through that facility annually at $84 million. Obviously most of us don’t have $84 million laying around the ground by grain width. We’re going to have to finance that. So I’ve got interest costs on top of that, jim, that let’s just take the rate of 2% and I’ve added another $1.7 million to the value of that inventory. So when I look at that comparison I got a facility worth $20 million. So when I look at that comparison, I got a facility worth $20 million. I’ve got throughput in one year of somewhere around $86 million, almost four times the value of the facility in inventory. That is why in our industry we have to put a priority on managing those inventories, because it’s our largest investment.
Jim Lenz, GEAPS’ Director of Education and Training: 9:33
It’s about managing risk as well, isn’t it?
Jim Voigt: 9:35
Yeah, it definitely is. That’s a big yes on that. And you know most people. When you think of risk management, the first thing that comes to your mind is insurance In our industry, on the commercial side especially, they think of hedging. Hedging is a means of risk management in our industry, of risk management in our industry. But when we look at the operating side, we sometimes don’t apply that risk management thought process and it’s interesting that we do it in safety. In safety, we do the job hazard assessments or job safety assessments where we go out and we identify our risk and then we find ways to analyze and control all those risks and monitor what we’re doing.
Jim Voigt: 10:17
We can need to do the same thing in our operation processes, apply that same risk management strategy where we’re going to go out there and we’re going to identify the risk we’re going to analyze that risk, what’s the severity of it, how likely is it to happen then we’re going to prioritize which of those risks we’re going to control, how we’re going to treat them or eliminate or reduce them, and then monitor, ensure our plan is working and we need to apply risk management, particularly when we’re looking at inventories.
Jim Lenz, GEAPS’ Director of Education and Training: 10:49
What is the impact of effective inventory management, both operational profitability and sustainability?
Jim Voigt: 10:59
Well, why don’t we back up a second, Jim? We talked about the value of this grain we’re putting through here. Let’s take that $84 million number for this facility we identified. If I had a 1% shrink or loss on product through that facility, that would equate to $840,000. Now, through risk management techniques, if I was able to cut that in half, I would drop that number to $420,000. And if I could get that number down to a quarter percent, which is more where we’d like to see that number, I’ve reduced that to $210,000.
Jim Voigt: 11:33
So you can see that we’ve basically added $600,000 to our bottom line if we can get from that 1% down to a quarter percent. And that’s what our job in management is to minimize those losses, to make sure that we are profitable and profitability drives sustainability. We also have to consider that we may have some quality losses on the grain in there. That would be in addition to that if we’re not managing all our processes correctly, whether we’re over drying or some other things. A third piece of that would be is are we efficiently doing our mix and blends, where we’re taking full advantage of the grain we have in there to generate income? So now controlling shrink and the mix and blend can have a whole lot larger impact on the facilities and profitability than just controlling cost, which is still an important thing we need to do.
Jim Lenz, GEAPS’ Director of Education and Training: 13:00
There’s so many challenges in inventory management Got to be organized. Inventory management requires a systematic approach. Process encompasses several critical aspects, as you noted. What do you believe are often recognized challenges faced in managing inventory and grain facilities?
Jim Voigt: 13:18
Well, I think probably the first thing that comes to mind is the lack of emphasis on making inventory management a priority in the planning that goes with it, particularly on the operating side and our day-to-day activities. We’re worried about just getting trucks dumped, grain dried trucks loaded out, trains loaded out, whatever it is. So those day-to-day activities consume us and inventory becomes this once-a-month activity we do. That’s kind of similar to going to the dentist and getting a tooth pulled. That’s how we feel about it and we let those daily activities drive what we’re doing. So I think the first thing is just where our emphasis is at in lack of planning.
Jim Voigt: 13:58
But time is another thing. I mentioned all these data activities. We’ve got trucks to dump, crews to schedule equipment, to maintain employees, to manage all these things going on, and they take priority. They truly do, unless you’ve planned out your time management and prioritize the things that are really important. So if you don’t want to have a surprise at the end of the month, you really need to find time every day during that prior month to concentrate on the inventory management program.
Jim Voigt: 14:30
Okay, one of the other challenges we face, jim, is people and every meeting, each meeting I’ve been to in the last year, regardless of the topic, when we start talking about what the barriers to performing our jobs are, it’s finding qualified people, and this can roll over into inventory management as well.
Jim Voigt: 14:52
If I’ve got people that aren’t really qualified working out there on a dated basis, they require a lot more of my time to supervise and I may spend a lot of time training someone who for 60 days and they finally decide this isn’t what they want to do and they leave and they take off. So this additional pressure than what we used to have to manage train find people is really drawing time away from attacking inventories. With that, you know the processes that we need to do that contribute to the inventory thing. You know plant maintenance, how we weigh and grade a lot of things, drying, aeration those all figure into things that will help us down the road. But if we don’t have time to do all the training required to get those done correctly, let alone the training to manage inventory, it puts us behind at the end of the month.
Jim Lenz, GEAPS’ Director of Education and Training: 15:43
Yeah, it certainly does. Definitely big picture planning and thinking here. What are some examples of quantitative losses as well as qualitative losses?
Jim Voigt: 15:55
Well, I think you know the couple I mentioned that come to mind are over-drying, maybe over-aerating, creating excessive moisture losses, and they can also affect quality. So if I’m drying 20% corn and my goal is to have 15 or 15.5 moisture corn come out of that dryer and I’ve got an operator that’s not following the proper procedures or hasn’t received adequate training or supervision, I may have a 14% corn coming out the bottom of that dryer which I’m shrinking and taking loss from the moisture on that.
Jim Voigt: 16:28
Similarly, if I’ve got an aeration system where maybe my plan is to put 15% to 17% moisture corn into a storage, run my fans through the fall and in the spring take out 14, 5, 15 corn, If I over aerate during that winter months, I may have a surprise it may be a little drier. And this is especially true when we look at temporary storage gym where we rely on the fans to hold the tarps on, so those fans are running nonstop, but when we’re running the fan that’s a grain dryer and so temporary piles can create some extra issues from this on shrinkage. As far as weight Quality-wise, the excessive drying with excessive temperatures can cause heat damage. If we’re not managing that storage properly, we’re going to have mold growth or insect activity that’s going to degrade the grain we can get into long-term. I mean improper facility design or lack of maintenance or creating impact points or where we’re damaging grain, breaking it up.
Jim Voigt: 17:30
One of the big things we see a lot in our industry is a procedural thing where something as simple as training operators for the bucket elevator leg is not back legging. When that throat wiper is not adjusted correctly, that grain’s coming down the backside of that grain. We’re breaking it plus using more energy, and just an improper mix and blend can reduce the quality upgrades that we potentially should be putting money in our pocket with. So all these things impact quantity and quality, as well as many others.
Jim Lenz, GEAPS’ Director of Education and Training: 18:00
So many things impact the bottom line here. You’ve outlined some of those areas of losses. Let’s look at a little bit more on the challenges in relation to permanent storage. You mentioned temporary storage there a bit, and since more and more facilities are adding temporary storage of grain, this can also lead to a different set of challenges you highlight a little bit there. Can you expand on that and provide examination on both types of storage?
Jim Voigt: 18:27
Well, as an industry, you look how our storage has evolved. I mean at one time we had a bunch of large concrete houses or old wooden elevators out there and then we got into the area of corrugated steel bins and we had external stiffeners, internal stiffeners. You look at the bin sizes. I mean there was a time when a 48-foot diameter bin was a big bin and now we’ve got these 160-foot I think it’s the biggest one out there monster that holds one bin, holds two and a quarter million bushels yeah, amazing, at the heights of our bin.
Jim Voigt: 19:03
In the wheat country it’s very common to see 120, 150 foot tall bins, where back here in corn country we try and hold those bins under 100 feet. We’ve got flat bottom bins. We’ve got hopper bottom bins. We’ve got bins with offset draws to one side. We’ve got where we actually have side draws we’re loading trucks out of. We’ve got bins with offset draws to one side. We’ve got where we actually have side draws we’re loading trucks out of. We’ve got a lot of different configurations in the industry on bins and they all react differently. You couple that with.
Jim Voigt: 19:26
Let’s look at duration Typical. When I started in the industry you had a 20th of CFM on and corn you had Maybe if you had really good corn bins had a tenth of a CFM of air per bushel. Those numbers drop to an eighth, to a sixth, to a fifth. We keep adding more air on how we’re managing this grain. So, depending on the configuration, how bins flow because each bin flows a little bit differently it changes how that grain goes in and out and how it stores on turning it. Obviously the different types of grain corn, wheat, beans, rice, barley, canola, whatever are all going to store differently. But we need to also consider moisture and the cleanliness of the grain. And then we’ve got the environmental factors. I mean what’s temperature, what’s humidity? Storing corn is a whole lot easier in Minnesota than it is in Louisiana. So a lot of variables here, jim.
Jim Voigt: 20:23
But to look at the difference between permanent and temporary storage, I guess we need to find that a little bit, because some of what we might call temporary is really something transitional. If I’ve got a bunker or a flat that I have a hard surface in, I’ve got a tunnel with a reclaimed conveyor, I’ve got a permanently installed field conveyor. I’ve got aeration on it but I put a tarp on it. Is that temporary storage or is that permanent storage? I mean, it’s how you want to look at it. But I think our policies and procedures in handling that type of storage have gotten to the point where you really can almost consider that permanent storage, in that the results if I look at the grain going in, my shrinkage on quantity and my shrinkage on quality coming out of those types of piles, if they’re managed correctly, is really not much different than your classic permanent storage.
Jim Voigt: 21:13
Now, true temporary storage, if I’ve got something out there that maybe it’s not even covered, it’s just a pile on the ground, I’m going to pick up right away. I’ve got it down on dirt or grass or rock or something where it’s not this quasi-permanent storage. Yeah, those are opening yourself to greater losses and it takes more management to manage those systems. But you need to think about is what’s the end result going to be? If I know I’m putting a pile out there now just to get through harvest and I’m going to pick it up before Christmas, that’s one thing. But if I’m going to have to carry it through to next May or June, then I have to treat that pile a lot differently, or I’m going to have some shrink surprises.
Jim Lenz, GEAPS’ Director of Education and Training: 21:56
Yeah, so there’s so much to consider and, as you said, temporary versus more permanent storage, the means by and how things are, storage and different capabilities that are out there. You know each one has to be examined. Can you share some examples from your own experiences with these challenges and how they were addressed?
Jim Voigt: 22:18
Yeah, I mean ADM. Well, we’re a large company and we had a lot of the same problems as everyone else has. We just maybe had them on a larger impact. One of the things that I found the way to address these was we needed to work with a team and have strong two-way communication on a daily basis, and I had to do that with the origination team, the trading team, logistics and people. We all kind of sat in a pod in our office to do that. That allowed us to develop basically a plan for the crop year what we were going to seed, what the market conditions are.
Jim Voigt: 22:53
We had to look at whether there are carries in the market or not and were we going to prioritize space for corn or beans or wheat, and then also what quality of grain were we going to need to fulfill our contracts and when and where were we going to need that. So that whole planning communication thing became critical for me in my past experiences. And also I needed to understand what were the capabilities of my facilities, jim. What could they not do? I mean, there’s limits, obviously, to all systems. So I had to understand my strengths and weaknesses and when we were letting out those plans, I had to know what those were and account for those. So I compensate for some of those. You know we developed specific SLPs if we were going to go one way with storing grain or some others if we’re going to go another way. What I did with my repair and maintenance budgets capital investments also were driven long-term from these storage plans, basically what I’m going to call my storage plan, which is part of the inventory management.
Jim Voigt: 23:54
Training was also critical for us in that you know we were working with the accounting department and they provided the leadership for us really in the inventory process and they determined, you know, what knowledge, skills and tools were needed to successfully complete an inventory management process and develop the SOPs. And then we would take that and build a training program for our employees, make sure that we had qualified individuals who were doing the day-to-day activities, impact inventory as well as the inventory process itself. Then, finally, standardization is really helpful in the inventory process where you have these SOPs and everybody’s doing it the same way, when you’ve got multiple locations and you start moving people around or moving people to help during inventory or critical events during harvest. If you have standardized processes and procedures, that greatly can help in managing that inventory piece, maintenance again I’ve mentioned that numerous times but having that facility in top shape, where all the equipment’s running correctly, we don’t have any spillage or leakage or breakage points. We have those all controlled. It’s also very important.
Jim Lenz, GEAPS’ Director of Education and Training: 25:09
In my past experiences A lot of industries, not just the agriculture industry. It’s no secret. They’re becoming fewer in number of organizations, but they’re becoming larger. Isn’t all because of organic growth. A lot of that can be because of mergers and acquisitions. So when you talk about standards, jim, isn’t that a big challenge to organizations becoming larger? Isn’t that always something that needs to be a priority during these acquisitions?
Jim Voigt: 25:35
Well, obviously, when we look at an organization’s prior acquisition, we tried to get a feel for what their culture was, what their management style was, before we brought them on board. It gave us a little jump on that process, jim. Once they came in, you had to respond pretty quickly to make changes to get things aligned. Adm was kind of a unique company. We approached things considerably different than a lot of companies. We had no organizational charts back then. We had no job descriptions. We didn’t do budgeting. We dealt on a lot of setting expectations and accountability. Inventory management was a key part of that. Management was a key part of that. When we acquired a lot of these other companies, their emphasis on inventory management wasn’t as high as what ours were. We saw a greater value in it. We made changes very quickly to introduce our concepts into those new facilities and we provided the training and the leadership and supervision for that to take place. It was frequently a challenge.
Jim Lenz, GEAPS’ Director of Education and Training: 26:40
Yeah, I can imagine. Hey, Jim, as we continue this discussion, it’s important to establish a clear understanding of terminology. The terms and their implications are essential for effective inventory management for grain facilities or in-grain facilities. They help in maintaining hacker records, inventory records, optimizing storage practices, ensuring grain quality and making informed market decisions. So I’m curious and listeners may be curious, just to get on the same page here, because we have so many people also joining the grain industry who are absolutely new to the industry. Can you share with the listeners some of those important terms and their meanings associated with inventory management and grain facilities?
Jim Voigt: 27:22
Sure, Well, let’s start with one. We’ve thrown out the word shrink, which is basically just the actual physical loss and weight between inbound and outbound shipments, and that can consist of moisture shrinks, handling shrinks or accounting errors or possibly even theft. Then there’s the word variance, and you think variance is similar to shrink, but really, when we talk about variance in inventory management, it’s just the difference between the cause for these variances and making whatever adjustments are needed to bring the records into agreement. One that’s kind of a little difficult to get your arms around sometimes for new people in the industry is something called pack factor.
Jim Lenz, GEAPS’ Director of Education and Training: 28:11
Okay.
Jim Voigt: 28:12
When you place grain in a grain bin, over time that grain, the pressure and the weight of the grain at the top of the bin, is going to push down on the grain in the bottom of the bin. It’s going to compact. It’s going to remove some of the air spaces between the grain. So when I fill that bin say I fill a bin clear full I can come back 30 days later and I can put more grain in that same bin because it’s compacted. So there is a mathematical correction factor I can put on when I’m measuring grain bins and this is just pure mathematics and there’s three or four different models out there to do it. But it’s a calculation to show you, looking at test weight and the bin measurements and bulk density rather than test weight, if you want to use that term where you can calculate how much that grain is going to compact. So when we measure a bin we have to apply that factor to it to get a more accurate reading. Now there’s some concern that the models out there may be not reliable over a full range of different commodities in different size bins. So there’s a lot of studies being done. The Ag Research Service of the USDA, plus people like University of Kentucky, have been doing the research on seeing if there’s a more empirical, scientific way to do those calculations. And one of the real concerns is there’s not been a lot of studies done on these large diameter bins the 105s, the 132s how compaction is really taking place. Fact factor is a big one.
Jim Voigt: 29:52
Angle of repose is another term we use a lot and simply stated when you pile grain up it’s going to peak up and at the point where that grain stops flowing it becomes static. It becomes that measurement of the angle of that is the angle of repose for that particular commodity. Now that can vary. Obviously it’ll vary between commodities, but it can also vary based on the moisture and the amount of form, material or dockage or stuff that’s contained in the grain.
Jim Voigt: 30:22
And when we’re measuring, often you’ll hear coned or an inverted cone. And when grain is placed in a bin and it hasn’t been emptied or say you cord the bin and you refilled it, you’re going to have that peak or that cone on the top of the bin. That’s referring to the cone. If I’ve pulled from the bin to the point where that cone goes down and it’s just inverted or opposite of being full, that’s what’s known as an inverted cone, the contrary or different, for those is where we’ll have an irregular surface. So if the bend’s not flat, somebody can go in and level it out, which we tend not to do anymore because of bend entry issues.
Jim Lenz, GEAPS’ Director of Education and Training: 31:06
So if I don’t have a cone, or an inverted cone and level it out, which we tend not to do anymore because of bin entry issues.
Jim Voigt: 31:11
So if I don’t have a cone or an inverted cone, I may have an irregular surface where the bins hung up to one side or materials hanging on the walls, or if it’s large diameter bins, I might have a still-eyed mite sticking up. Those are irregular surfaces and very difficult to measure. We talked a little earlier about handling losses. Those are the physical losses of grain by weight due to receiving and moving and shipping grain through the facility to be in dust spills. Breaks create those issues. Moisture losses would be the actual reduction in weight due to the loss of moisture and that can be through natural or artificial drying such as grain dryers or irrigation. There are standardized moisture tables out there that you can use to calculate those moisture losses.
Jim Voigt: 31:53
Then there’s the term total shrink and that’s basically just combining my handling losses and my moisture losses to come up with a total. One of the terms you’ll hear frequently in inventory is cutoff time. So when we go to take inventory, ideally we shut the facility down. We’re not taking any grain into the facility, we’re not shipping grain out of the facility. We’re not transferring grain within the bin to bin or around. We’ve also cut off all the paperwork. There’s no new documents being created. Typically this time is known as a cutoff time, where this ends at three o’clock on Friday. This is our cutoff time for inventory. That is usually established by the accounting department.
Jim Voigt: 32:35
Grade factors that’s just a standardized determination of quality and condition of the grains. But what I wanted to apply that in was when we look at grain factors on soybeans. Form material on soybeans is treated differently than most other grains in that under the USDA standards, the percentage of weight of form material of soybeans is actually deducted from the received weight at the time of grading, even though you may be putting that weight into your bins may be. Putting that weight into your bins is not accounted for. So it’s kind of a little bonus, if you will, in managing our soybean inventories.
Jim Lenz, GEAPS’ Director of Education and Training: 33:19
Can you provide us with a brief overview of what some people may refer to as traditional inventory control methods used in the grain industry and how they differ from more modern methods being employed today? And also, please take into consideration processes and procedures.
Jim Voigt: 33:30
You know, I think, jim, if you look at the basic process of taking inventory, it’s creating documents for what you’ve received in the quality. It’s measuring a bin. It’s making adjustments for pad factor, drying losses, aeration losses. In moisture. You may apply a handling shrink, like on corn. On wet corn. At ADM we applied a 1.4 shrink factor to account for all those handling losses, and then we added the moisture shrinks on top of that, those handling losses, and then we added the moisture shrinks on top of that.
Jim Voigt: 34:07
So all those processes, those have been around for a long, long time. There’s nothing new. If you were following those to the T back 30 or 40 years ago, you still had a very good inventory management program. You could achieve the same results, or plus the same results you can today with the technology, or close to the same results you can today with the technology. Now, what’s changed today, though, is we have more automation of source documents. We have scale tickets and grading certificates that are automatically dumped into the system. From a commercial standpoint, we used to sell brain contracts by hand. Now those are automated. Computers are doing those very actively, very quickly. We’re seeing automation and the use of controllers out in the plant in areas such as drying and aeration. That’s taking some of the human air out.
Jim Voigt: 34:57
And obviously one of the big variables in measuring grain is a person dropping that tape. I had instances where we had some really crazy readings. At one location, jim and we investigated it. We were using the tape the guy measured bins with every day. Well, that tape had gotten a screw conveyor. One time the bottom six feet of it were missing. So the guy who used it daily knew the six feet were there missing. He added to all his measurements every day when he turned them in. But the people doing the inventory did not know that and so those six feet were disappearing in every bin when we measured them. So technology now has the ability to go in and scan the surface of these bins, creating 3D imaging and simulation to show you exactly what that surface looks like and calculate the quantity in it. That’s where the change is. It’s the automation, the technology and the measurement and the document handling and then controlling the processes.
Jim Lenz, GEAPS’ Director of Education and Training: 35:55
I mean the green industry. It is an innovative industry I know there’s a lot of industries going has gone through changes. The green industry is certainly no different. Just with the evolution of tools and applications and technologies within industry Tools and software they’ve been huge on inventory, tracking and management, hasn’t it?
Jim Voigt: 36:15
Yeah, yeah. And what that does is it makes the information a lot more timely and accurate, particularly the source documents, the use of computers and software and automation, scanning devices, network systems where all the information is collected and dumped in together. It reduces the time to enter data and reduces that human error. In a lot of cases it lets us get more into looking at individualized data. Individualized loads and settlements can be matched up very easily in real time and we can get more real-time management of the inventory no more at with just the click of the mouse. That ability to look at stuff in real time allows for a more constant monitoring and ability to address the variances immediately, instead of waiting. And you know, two weeks later in the month I want to take inventory to trying to figure out what happened. Yeah.
Jim Lenz, GEAPS’ Director of Education and Training: 37:09
So great tools out there to take advantage of for sure. So you’ve shared some insights in the use of inventory management systems, or IMS systems, and their benefits. Anything else you want to add to that?
Jim Voigt: 37:21
Well again, I mean they’re you know they’re going to help you with tracking your inventory in the real time on a low-by-low basis and you can look at purchases, deliveries, receipts, processing, storage, shipping, all those things you can tie into that IMS and the accounting.
Jim Voigt: 37:45
People particularly love it in settling contracts and knowing where their position are to pass on to the trading side and the amount of errors that have been reduced in settling grain contracts and the time that turns that over.
Jim Voigt: 37:52
That’s been a very positive response from a customer service standpoint. Having the traders have access to this knowledge and knowing what quantity and quality we have in lets them make more informed decisions on how and when they’re going to sell grain and the benefits from an operating perspective. You know we can offset a lot of our challenges but the more we reduce stress from errors and pressure on time, the greater the morale is for our facility, the happier people are working there and quite frankly you know this people issue is a challenge for all of us and if we can improve that work environment for our employees through the use of automation it makes it a lot easier to find and retain people and I’ll be honest, you know I like scanning bin technology. I have yet, in my 50-year career, met a person who really enjoys climbing up the side of a bin on a ladder when it’s 10 below, with a 30-mile-an-hour wind, to go up and drop a tape in it.
Jim Lenz, GEAPS’ Director of Education and Training: 38:56
Data analytics, real-time monitoring. It’s been a game-changer in optimizing inventory levels and so much more. Yeah, who really wants to do that? I mean, jim, you’ve provided a comprehensive examination of inventory management for whole green podcast listeners. What are your recommendations for best practices in inventory management?
Jim Voigt: 39:18
Planning is my number one, I guess I’d say, jim, understanding your facility and knowing what its capabilities are. Standardization is very important. Training, if you look at all the things we do, whether it’s receiving grain, drying grain, these same principles apply to all the activities we do in the facility. And so we don’t normally think about inventory management except once a month, and sometimes we don’t apply the logic we need to to it. So if we just do some of the things we do every day on a common sense basis and apply that to inventory management, we’ll see great improvements.
Jim Voigt: 40:00
Forecasting, jim, is a little bit of a challenge for our industry in that there are so many variables. We need to plan, and I’m a strong, firm believer in we plan, but every plan needs one or two or three or four contingency plans. In our industry, the weather is our big variable. What kind of crop are we going to have coming in? What’s the quantity? What’s the quality coming in from the farm? When is it going to come in? Those are issues. What’s the cost of freight out there? What’s quality coming in from the farm? When is it going to come in? Those are issues. What’s the cost of freight out there? What’s going to happen All these things.
Jim Voigt: 40:30
Look at carrying the market. Is there value in holding grain and carrying it in the future versus selling it today? Those decisions have to be made. We’re impacted by domestic policies. We’re impacted by geopolitical situation. The Ukraine crisis is a classic example of total disruption of the grain markets. What China feels like doing on a day-to-day basis as far as importing grain has huge impacts on us. The cost of money all of these variables make it extremely difficult to forecast any degree of accuracy. We can look at historic data and that, but every year is going to be different and we have to be flexible enough and confident in our capabilities that we can have a plan and we’re going to be able to change it and come up with a new plan as market conditions dictate.
Jim Lenz, GEAPS’ Director of Education and Training: 41:23
Being nimble. Good planning, have good systems in place. That all makes sense. Hey, I was wondering if you could share with our podcast listeners, as they may be curious, if you have any case studies in real life success stories you’d be willing to share. Do you have any real life examples, in particular for inventory management implications in the industry and, if you do, how did those strategies lead to cost savings and improved efficiency?
Jim Voigt: 41:47
Sure, Well, as I mentioned, Maydium has grown through acquisition. We acquired a lot of companies, I don’t know.
Jim Voigt: 41:53
10 or 12 companies in an eight-year period. Typically all those companies had their own culture and business models and plans and they were contrary to ours. One particular company we acquired was experiencing pretty large shrinks across the board throughout their facilities. I’m in excess of 1% and that was accepted in that organization as normal. Obviously, based on our experience, that wasn’t normal. So when we started digging into why was that happening, we found a number of things that came to light. We had in our program that they didn’t.
Jim Voigt: 42:27
One of the big things is we attempted to get an empty bin cut off, or empty bin measurement, on every single bin in our 460 million bushels of permanent storage every year. We didn’t always succeed in that but we always tried. The thing is, the most accurate bin to measure is an empty bin. The second most accurate bin to measure is an empty bin. The second most accurate bin to measure is a full bin. This particular firm had not done any empty bin cutoffs in five or more years. They really did not know what they had.
Jim Voigt: 42:57
Secondly, my old boss at ADM. There was a gentleman named Bernie Kraft. He had a thing that says you can expect what you inspect, which means you need to have enough knowledge. Be out active in your facilities, know what their capability is of, know how your people are operating, to manage those things. And this particular firm, their operating group, never left their corporate office, they never went out into the field and the results of that showed. The other thing they had was no standardization processes and each individual facility was allowed to kind of operate on their own and in some cases shift to shift. They operated differently. We came in and instituted our empty bin cutoffs. We went in and did that actually at the purchase and we would empty a bin, run another grain into it. So we turned the inventory so we could measure every bin empty.
Jim Voigt: 43:47
I, physically, and my team physically, went through all the facilities and we got to know the people understand where they were at, what processes we had, what tools we needed to provide for them to be successful, what training. And then we went in and put in our standardized SOPs throughout on how we ran day-to-day as well as conducted inventories SOPs throughout on how we ran day-to-day as well as conducted inventories. By doing that, within a year’s time, we took that 1% plus shrinkage down into that quarter to a third of a percent range, which was a substantial amount of money.
Jim Lenz, GEAPS’ Director of Education and Training: 44:18
Wow, great example. Now the field of inventory management. It’s rapidly evolving. With new technologies, innovations, we see progression. What emerging trends are currently shaping inventory management in the grain industry?
Jim Voigt: 44:32
Well, I think the cost of these systems has always been a barrier, jim. They’ve been around for quite a while. Other industries have used them a lot. We’ve had limited introduction into the grain industry, but the costs are coming down as technology is becoming more common. It’s more affordable.
Jim Voigt: 44:50
The other issue we’ve got is this pressure on finding help.
Jim Voigt: 44:55
I mean it’s difficult to find just a warm body, sometimes put in a facility, let alone a qualified warm body.
Jim Voigt: 45:02
So this is driving us to look at more technology and more automation and integrated systems, the concept of being able to collect all your data automatically through various monitoring equipment, computer entry type stuff that’s done automatically, where it can also be verified, verified, and then getting that into a central network where all the data is stored and can be analyzed and actions taken, whether those actions may be fully automated using the computer or going forward in artificial intelligence, whether it’s still a human making those decisions, but the fact that we have timely, accurate data at the click of a mouse to make decisions off of, accurate data at the click of a mouse to make decisions off of, that is our future For those of us who embrace that. I think it’s going to be a bright future. For those of us who are a little hesitant on embracing that, sustainability may become a challenge. So embracing change is always scary, jim, but it’s kind of the Darwinism thing in there that those of us who adapt to the changing environment around us will survive.
Jim Lenz, GEAPS’ Director of Education and Training: 46:12
That’s good advice that you give the grain facilities ensure they remain ahead of these trends, or make considerations to have good, sound decision-making tools as we look at preparing for the future. Hiring the right individuals to oversee inventory management is crucial for the success of growing facilities. In your experience, Jim, what specific skills and experiences should facilities look at when hiring for these roles?
Jim Voigt: 46:38
Well, typically the lead in the inventory process, jim, is on the administrative side, in a smaller location. It may be a facility manager or it may be a designated, you know, head and counter controller. They’re going to provide the direction, the leadership and help lead that team. In that those individuals typically want someone who is, you know, organized, disciplined and has very good communication skills. When we look at the people involved from an operating perspective, these are the people you know, maybe two levels we can look at the management supervisory level and we can look at the employee, the people doing the work level.
Jim Voigt: 47:21
Let’s look at that one first. First, I want someone who’s got a good attitude, is willing to be trained and to listen and who strives to perform and be part of a team. So, you know, they’re going to follow those SOPs that we have out there and if they feel that there’s something in them that doesn’t make sense, they’re going to ask you why, why are we doing this? Explain this to me. And those are the type of employees I want working for me out, you know, in the facility. From a leadership standpoint, I’m looking for people who are driven or focused. I really like the guy that tells me he wants my job. He has, you know, wants a future in front of him because he’s going to accept challenges and responsibility and do the best he can. But again, organizational skills and strong, strong communication skills and someone that’s willing to learn. I strive to learn something new every day and I’ve been in this industry 50 years and I pretty well accomplish that every day. There’s just a lot of information out there, and especially with all these changes in technology.
Jim Lenz, GEAPS’ Director of Education and Training: 48:26
Yeah, curious minded goes a long ways. Now, for those who are in inventory management, that’s part of the job. How does it contribute to the overall success and growth of the facility?
Jim Voigt: 48:36
I think you can look at a couple of ways. If you’re controlling the quantity and quality losses, you have one thing you’re going to prove employee morale because you’re going to have a bunch of people out there in the facility going what the hell are you guys doing? So morale is going to improve from that. You’ll definitely see improvements in profits. As you know, in our example we saw $600,000 that went to the bottom line. Those improved profits will help ensure the sustainability of the company and its ability to service its customers. If we can improve that customer service, customer satisfaction, experience, that is the true key to sustainability and success.
Jim Lenz, GEAPS’ Director of Education and Training: 49:20
Wonderful. You’ve kind of said that before, but I just wanted to ask a summary statement. But that last one you haven’t mentioned before yeah, providing prime customer success. Jim, we thank you for being a member of Jeeps and for your contribution to today’s important message on the GEAPS Whole Grain Podcast. We know many of the individuals listening today to the show are GEAPS members, but I know there are many listeners who are not Jeeps members and they are in the grain industry. But before we conclude, I’d like to start a sentence and I would love for you to conclude the sentence, Jim, being a GEAPS member to me means, means what.
Jim Voigt: 49:56
Well, it’s being part of an industry where, working together, we can assist in feeding the world, and knowing that I have a network of people around me that can help me succeed in my personal and business goals.
Jim Lenz, GEAPS’ Director of Education and Training: 50:12
Thank you, jim Boyd. You’ve been an active member of the Grain Elevator and Processing Society for many years and, of course, you’ve even served as past international president and chairman of the Board of GEAPS. You have a special audience right now listening who have dedicated their careers in the grain industry. For those who are considering to be Jeeps members, could you share from your experience what makes being a GEAPS member so special? How can being a GEAPS member support their career in their organization?
Jim Voigt: 50:41
Well, Jim, it gets back to, I think, one of the first comments I made about not being the smartest person in the room. When you come into this industry, you are definitely not the smartest person in the room. You’re ignorant to how this industry operates and does business. And ignorant is not a bad word, it just means transfer of knowledge from old, gray-haired folks like myself to the new people coming in behind us in the industry. And I don’t know any place that you can go where that pool of knowledge exists at a greater level than within Jeeps and where you have people that are willing to share that knowledge with the folks coming behind them. I think that’s the true value of GEAPS it’s a depository of readily available knowledge for people to advance their personal and business careers.
Jim Lenz, GEAPS’ Director of Education and Training: 51:40
Jim, thank you so much. On behalf of the entire GEAPS staff. We thank you for your contributions to the organization and its members and customers. Now you’ve offered an in-depth examination of inventory management here in the podcast. It’s such an important topic. It really offers the greatest potential return to the profitability of a company, and so we just applaud your perspective. It’s really a special treat to have you on the show today. Thank you so much.
Jim Voigt: 52:06
Well Jim.
Jim Lenz, GEAPS’ Director of Education and Training: 52:07
I’d like to thank you.
Jim Voigt: 52:08
I’m honored to be here and I would like to say we didn’t get down into a lot of detail in this podcast today. Time did not allow that. But I’ve had the opportunity and the pleasure to work with GEAPS on upgrading the 501 section of training on inventory management section of training on inventory management and in that 501 course we get into a lot more of the details on the specific SOPs in grain inventory management.
Jim Lenz, GEAPS’ Director of Education and Training: 52:34
Yes, your contribution to that module has been instrumental in the upgrading of the course and we’re excited to share that at the time of this. Recording will be very soon and that’s a great place to add value to your understanding of concepts related to inventory management coming up for you listeners. So stay tuned to that. Essentials for Supervisors. Thank you so much, Jim, Appreciate it. Thank you.
Jim Lenz, GEAPS’ Director of Education and Training: 52:57
The Whole Grain Show is a production of GEAPS the Grain Elevator and Processing Society. The Grain Elevator and Processing Society is the largest organization dedicated to advancing the grain handling and processing industry. To learn more how GEAPS can support you, your career and your organization, be sure to visit www. GEAPS. com. That’s G-E-A-P-S dot com. Hey, if you’re a vendor or supplier of the industry, the Whole Grain Podcast offers a terrific opportunity to spotlight your business. The podcast offers a terrific opportunity to spotlight your business. If you are interested in us developing audio ads to support your product or service, or if you and your organization want to sponsor an episode and be a featured guest, please reach out to me, Jim Lenz, Director of Global Education and Training at GEAPS, and we will help you get started with the process. My email is james@geaps. com. We look forward to connecting with you everybody, thanks for joining us for another episode of whole grain. Make it a great day.
