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Standardization suits Stonyfield Farm, (sidebar)

Stonyfield Farm blends environmental/economic goals
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FILED IN:  Sustainability  > Strategy
     

Stonyfield Farm's packaging strategy emphasizes source reduction and the use of package graphics to promote the company's environmental and social views. But when it comes to selecting machinery supplier standardization is critical. "Standardization is important to us for a variety of reasons" explains John Daigle vice president of operations. He says that by working together for years a bond develops whereby the vendor can begin to anticipate Stonyfield Farm's needs. "We realize that we could maybe get a better price per individual unit if we go out and shop at every vendor but that would necessitate having buyers on board and additional infrastructure. We're a small company that can't afford that. Our vendor has to be our business partner. We expect the vendor to come in here conduct training work with us on OSHA concerns and so on" says Daigle. He says Stonyfield Farm purchases equipment based on "just-in-time investment" needs. The strategy is more complex than just buying equipment when it's needed and when the capital is available. "We have a long-range plan of what we anticipate our future needs will be and then we invest in the appropriate machinery to meet that plan" says Daigle. 'World-class' suppliers Daigle says that years of experience at a competitive yogurt producer helped him when he joined Stonyfield Farm in 1997. At that time Daigle was given the responsibility of upgrading the company's packaging capabilities to meet growing sales demands. "When I began here I did a complete vendor survey of equipment from around the world evaluating what each company could bring to the party." The key factors that sway equipment decisions he says include: * Business responsiveness/local vendor representation or how quickly a vendor can respond to the company's service needs * Vendor spare parts inventory * How frequently the vendor changes technologies. "In the yogurt business" Daigle says "there's been a lot of equipment consolidation. So it's possible that a machine bought two years ago with a specific filling method or type of drive may now be completely different. If you don't specify the exact technology you want you can get caught with two almost completely different machines from the same company." A major advantage of standardization he suggests "is that people at our plant know how a filler or case packer operates" on any of the Londonderry NH plant's four packaging lines. "Start-ups and maintenance are all easier that way." Daigle says: "We've standardized on fillers case packers controls and on parts such as bearings and O-rings. For instance we have 48 O-rings per filling machine and there are four machines. We change them about every other month so standardization is important in terms of replacement. "All of the controls logic and electronics are the same for these machines so if there's a problem we can troubleshoot them the same way. If we bought equipment and parts from different vendors we'd end up storing so many different parts that it would become cost-prohibitive." When it comes to economics "we get pretty good purchasing power" through standardization Daigle notes. "If you divest all your purchases to different vendors to them you're just another guy calling" he believes. "But if you've standardized like we've done we tend to get attention. "If we were going to negotiate either repair parts or the price of a new filling machine by being a larger player and spending more dollars per year in their spare parts business [we] have greater leverage to talk about a discount." Asked to describe how the company determines return on investment for machinery Daigle says "it's a difficult thing to do when you're in a high-growth mode as our company is. To support that growth we needed to invest in equipment. There are a lot of different depreciation models to determine ROI but I think most companies' 'hurdle' rates are between 24 and 30 months and that's where we are--with some equipment even better than that."

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