Ferguson Plarre Bakehouses

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Even during an economic slowdown, innovators will rise to the occasion. A bakery in Victoria, Ferguson Plarre Bakehouses, is doing just that as my colleague Craig Beaver has recently uncovered in a recent article in Manufacturing Supply Chain Magazine.

Savings on carbon emissions by the company demonstrated that by some fairly straight forward engineering delivered landfill, gas and electricity emissions reductions of 92, 76 and 62%, respectively, along with water savings of 2.5Ml per annum. This led to an overall reduction of more than 5000 CO2e annually and tens of thousands of dollars in cost savings, a strong business improvement in itself.

But what caught my eye was the story around how the improved safety culture of the bakery was reducing bottom line costs, and well below its industry peers. The company has demonstrated a strong correlation between sustainability effort and performance, and its safety metrics. For example, during the transformation to a sustainability–focused business, turnover reduced from 10% to 2 % per annum, incidents reduced by 58% from 33 to 14 per annum, and near misses decreased from 29 to 21 per annum.

As Craig illustrates, aside from the impact of carbon emissions and energy savings, it’s worth taking a deeper look at the impact of their sustainable business practices on their health and safety performance.

As a simple exercise:

They employ 150 people.

Assume average salary of $75,000 per annum.

Total wages bill equals $11,250,000 per annum.

Industry average worker’s compensation premium for their sector is 3.8860% of payroll.

Therefore their worker’s compensation premium should have been $437,175 per annum.

The really interesting piece here from a HSE perspective, is concurrent with their sustainability program, Ferguson Plarre Bakehouses have achieved significant improvements in their safety performance, such that their worker’s compensation premium is 1.8394% of their payroll – almost half the industry average!

Therefore their estimated workers compensation premium is in fact $206,932 per annum.

This equates to an estimated saving of $230,243 per annum.

As Craig points out, this is on top of all the financial returns from their other sustainability initiatives documented in the article.

This company is no stranger to those of you working in sustainability. Ferguson Plarre Bakehouses clearly have the ingredients for success as a sustainable business, taking the principles of sustainable development and mixing them into their every day work.

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Ferguson Plarre Bakehouses

  1. 1. 38 38 Y ou just have to mention the word ‘sus- tainability’ and for many people, their eyes glaze over. There is too much emotion and subjectivity around the subject. Everyone has a different definition and a dif- ferent point of view, and the politicians aren’t helping at all, given the way they have politi- cised the whole debate with continuous scare- mongering. The challenge today is to shift the paradigm from seeing sustainability as a cost of compli- ance to a return on investment, where the greater the investment, the greater the return. When you break the subject of sustainability down into objective building blocks, you will see that sustainable manufacturing, sustainable operations and sustainable supply chain man- agement is just smart business. With the ever-rising costs of fundamental inputs including energy, fuel, raw materials, labour, waste disposal, etc., it is smart business to: 1. Reduce electricity consumption; 2. Reduce gas consumption; 3. Improve fuel efficiency of vehicles; 4. Reduce water consumption; 5. Reduce landfill and waste disposal costs; 6. Reduce raw material input costs by smarter product design; 7. Reduce reworking by better quality control; 8. Reduce work-in-progress by better produc- tion planning; 9. Improve supply chain efficiencies by better supply planning; 10. Reduce warehousing space by better CPFR; 11. Reduce the inventory holding costs of both current and obsolete stock by better CPFR; 12. Improve staff productivity; 13. Increase staff retention; 14. Enhance public profile and brand awareness; … and the list goes on. Each of these initiatives directly, or indirectly, reduces greenhouse gas emissions, and in doing so can be classified as a sustainability initiative. In the first part of the 20th century, safety was not a big issue. Now look at the priority given to safety. There is a whole science around safety that has delivered significant reductions in workplace accidents, injuries and fatalities. In addition to the saving of life and limb, sub- sequent benefits are the substantial savings in both the direct and indirect costs of accidents. Research has shown that these improvements in safety performance have also led to increased productivity and greater staff retention. Sustainability is to the 21st century what safety was to the 20th century. Whilst Australia leads the world in many initiatives, unfortunate- ly, sustainability is not one of them. In March, 2013, the European Union pub- lished the DIN EN 16258 standard for Green Logistics. This standard will enable companies in the transport industry to calculate green- house gas emissions for each freight delivery. Freight forwarders in France, and suppliers to France, will need to verify the CO2e emissions generated by their respective transport activities from July 2013 onwards. This will eventually come to Australia. In the UK, leading soft drink producers and suppliers, including Coca Cola and Britvic, have signed onto the Soft Drink Sustainability Roadmap initiative, a supply chain study that aims to reduce the environmental footprint of the industry’s products and operations. Here in Australia, the industry (including Coca Cola) is fighting a nationwide deposit-based recy- cling scheme. Australia is just now rolling out an e-waste strategy under the National Television and Computer Recycling Scheme, whereas Europe and the UK have had one for a number of years now. How many people in Australia are aware of this scheme, let alone know the location of their nearest drop-off depot? Sustainability is more than just tofu and kaftans, it is smart business. More than tofu and kaftans Craig Beaver MHD Supply Chain Solutions — September / October 2013 S UPPLY C H AI N38
  2. 2. The Australian Stock Exchange (ASX) Corporate Governance Principles and Recommendations (Revised Principles) defines environmental and sustainability risks as Material Business Risks. Under the Commonwealth Corporations Act 2001, company officers have a duty of care, and must exercise due diligence and fiduciary responsibility, to manage these material business risks. In December 2012, the Pike River Coal Mine Royal Commission recom- mended that individual company officers consider, if asked, how they could demonstrate to a legal authority their own personal duty of care and due diligence to manage material business risk (around safety). Even though the inquiry was held in New Zealand, these findings will have serious repercussions for any company officer here in Australia. The definition of officer can be found in Section 9 of the Corporations Act 2001 (C’th), which provides that officers are persons: • of a prescribed position (e.g. director, company secretary etc.). • who make, or participate in making, decisions that affect the whole, or a substantial part, of the business of the corporation. • who have the capacity to affect significantly the corporations financial standing. • in accordance with whose instructions or wishes the directors of the corporation are accustomed to act. In the broader context, every Australian company officer (under the widest definition of the Act) should ask themselves, if required, how they could demonstrate to a relevant authority their own personal due diligence, duty of care and fiduciary responsibility in managing the material business risk of sustainability, as well as safety. Leading by example One Australian company that is future-proofing its business is Victoria’s Ferguson Plarre Bakehouses, a fifth-generation family-owned business that has survived a depression and two world wars in the 20th century, and the recessions and a GFC in the 21st century. Its operation consists of a franchised bakery chain supplied by a central bakery facility at Keilor Park, an outer suburb of Melbourne. By embracing sustainable business practices to future-proof its business, Ferguson Plarre Bakehouses have reduced: • Landfill by 92% • Electricity consumption by 62% • Gas consumption by 76% • Water use by 2.5 million litres, and • Staff turnover from 10% pa to 2% pa. (Source: Sustainable Baking by Ralph Plarre) In addition to the resultant efficiencies and cost savings, this has allowed Ferguson Plarre Bakehouses to reduce its carbon emissions by more than 5,000 tonnes of CO2e annually. Smart business. The range of initiatives in its emissions abate- ment programme, at the purpose-built head baking facility at Keilor Park, includes: • Rainwater toilet flushing for office and staff amenities. Ralph Plarre (4th generation) and Steve Plarre (5th generation) planting trees as part of their Greenfleet carbon offset program. MHD Supply Chain Solutions — September / October 2013 S UPPLY C H AI N 39 39
  3. 3. 40 40 • Solar-heated hot water for office and staff facilities. • High-efficiency air conditioning for offices, staff amenities and climate controlled produc- tion areas involving outside air optimisation to reduce power consumption. • All hot water required for cake production is pre-heated by energy recovered from the refrigeration systems. This equates to a saving of over 600 tonnes of CO2e per year through reduced gas consumption. • Use of the heat recovered from freshly baked products (using exhaust fans and the heat taken from cooling tunnels) to heat the main production area in winter and to minimise heat-bleed into refrigerated areas. This equates to a saving of over 2,700 tonnes of CO2e per year through a 60% reduction in power usage per square metre. • Installation of fully integrated SCADA (Supervisory Control And Data Acquisition) energy monitoring system to allow real-time monitoring of all energy consumption, both individually and collectively to allow full moni- toring of all energy consumption of electricity and gas and the resulting CO2e emissions. This information is displayed on a screen in a high-traffic corridor and brings an amazing level of awareness to the team. • Over 100,000 litres of rainwater tanks plumbed for irrigation and truck washing, resulting in approximately 625,000 litres saved per annum. • Introduction of Victoria’s first diesel hybrid truck with Sustainability Victoria. The company will measure fuel use and bench- mark the results against the fleet to assess the effectiveness of this technology and the likely payback period. Specialised insulation was sourced for the cabin to reduce weight and the associated emissions from carrying such weight. • The latest bulk raw material handling equip- ment eliminates approx. 450 bags/week from the system and halves the company’s require- ments for land fill. Co-mingled waste has already been reduced by 50%. • A wastage regime that sees 95% of all waste directed back into recycling streams (includ- ing plastic, steel and assorted metal, card- board, and food). • Certified carbon neutral paper used to make all cake bags and an oxo-degradable additive to all plastic bags to help accelerate decom- position while maintaining the strength neces- sary to hold the weight of a large cake. • An approval to go ahead with a 99kW solar panel installation, which will generate 10% of all power required to bake their award winning cakes and savouries. All of these initiatives had very positive ROI and payback periods ranging from one to five years. These demonstrated and validated cost savings are a direct result of Ferguson Plarre Bakehouses having a robust, properly balanced and integrated sustainability strategy. Smart business. In addition, having this robust, properly balanced and integrated sustainability strategy has greatly improved Ferguson Plarre Bakehouses safety performance. Between 2010-11 and 2012-13 its reported inci- dents have reduced 58% (from 33 to 14 per annum). Similarly, between 2011-12 and 2012-13 its reported near misses have dropped 28% (from 29 to 21 per annum). This has meant a direct 25.7% savings in its insur- ance premium. The projected average industry premium rate it operates in is 3.8860%; Ferguson Plarre Bakehouses’ premium rate is of the order of 1.8394%. This is just smart sustainable business!! In conclusion, sustainable manufacturing, sustainable operations and sustainable supply chain management is just smart business that can deliver a very real and very tangible return on investment when you have the properly balanced and integrated sustainability strategy. Sustainable business is just smart business. Craig Beaver is the principal of The Great Southern Land Consulting Group. For more infor- mation call 0409 975 335 or email cdbeaver@ bigpond.net.au. For more information about Ferguson Plarre Bakehouses’ sustainability performance and awards visit www.fergusonplarre.com.au/History/ Greenhouse-Challenge.html MHD Supply Chain Solutions — September / October 2013 S UPPLY C H AI N40

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