Paying your way – automating adjustment averages
For several years we’ve been seen a shortage of cattle within the UK, creating a seller’s market for farmers and producers that can make it hard for abattoirs to find the margins they need.
Now, as part of its specialist abattoir software suite, powerful algorithms have been developed by Systems Integration to minimise the amount that’s overpaid on the base price, as Rob Stephens, Managing Director of SI (Systems Integration) explains.
“The simple rules of supply and demand dictate that when there’s a shortage of cattle or other livestock, buyers need to make sure they’re offering the best prices if they want to fulfil their orders. Naturally, this can have a knock-on effect to abattoirs’ profit margins as it may necessitate the need to out-compete other businesses and overpay on the base price.
“The software is already delivering savings of 1-1.5% per week, whilst maximising an abattoir’s efficiency and profitability.”
The base price benchmark
“At the start of each week, abattoirs across the UK set the base price they are willing to pay for animals, depending on how management believes the wider market is behaving. This benchmark then feeds into a formula that sets the price for each individual animal, depending on how they are graded, according to the Eurogrid system – something that depends on everything from age to fat and muscle levels.
“With the huge number and variety of livestock that pass through a site over the course of a week, as well as the number of available grades; managing adjustments, expediting payments to producers and understanding the consequences is a constant challenge for abattoirs.
“By taking advantage of the specialised abattoir management software on offer, however, it’s possible for companies to not only improve their profit margins and boost consistency, but also work with farmers and producers, to gradually improve the quality of the animals they’re supplying.
An Automatic Improvement
“While setting the base price is still a task best left to well-trained experts, our livestock payments application analyses the data brought in from an abattoir’s grading station and automatically adjusts the price for each animal.
“These adjustment averages will take account of a wide range of factors, including the farm or producer that supplied it, the type of animal, its grade and whether the cost needs to include commission for the agent. The combined information is run through the programme and used to determine the specification and pricing bracket for the animal.
“When an animal reaches the grading station, a automatic profile is set up and checked against the orders. This ensures that the carcass meat can be sold at the best possible price and with a minimum of waiting.”
“Typically, these adjustments and the ability to efficiently arrange the data, results in a 1 -1.5% improvement in livestock payments per week. For instance, if an abattoir is paying £3 a kg per animal/300kg per head) at a 1,000 head a week, it’s possible to deliver average savings of £9,000 per week.
“In addition to this, our Integreater software can manage every stage of your abattoir operations and record the level of detail that’s crucial to your business, from traceability software to the site’s booking and scheduling systems. The benefits to both operational efficiency and ease-of-use from this can be huge.
“For example, when an animal reaches the grading station, a profile will automatically be set up and then checked against the orders you’re looking to fulfil. This ensures that the meat produced from the carcass can be sold at the best possible price and with a minimum of waiting.
“For the farmers and producers, the time taken to process payments is reduced, as our software incorporates the Eurogrid grading system, and feeds the data captured back into the livestock payment system. The software also checks the farm assurance status, through its integrations with Red Tractor, SPECC and other schemes, which in turn affects the price. And it’s now possible to provide same day payments, as when the batch kill is complete, through use of our technology, the abattoir can automatically price it.
Feeding Back to Farmers
“One of the most useful elements of the automated pricing system is the clear, impartial information it provides. This is vital, as when farmers and producers provide livestock to slaughter houses it’s important that they understand the factors that determined the prices they were offered. After all, if their animals haven’t achieved their target price, they will almost certainly want to understand why their livestock has not achieved the necessary level of grading. For instance, if liver fluke is found on one animal from a farm, chances are that it will affect every animal from that farm. And, as this will mean that the offal has to be thrown away for each animal, the individual value will be reduced.
“With the right information, it’s possible to work with the farmers and producers using the data collected by the pricing software. This could then be traced back to the animals’ conditions and grading and how this relates to their rearing. Helping suppliers make adjustments to feed, health and other parts of the rearing process could allow them to gain greater consistency on price, while you benefit from higher quality animals.
“Livestock payments represent just one element of abattoir operations that SI has developed specific software for. We’ve created proven solutions that will improve your operations from the moment livestock arrives at the abattoir, right through to the boning hall.
“If you are considering an upgrade to your existing livestock systems, our food productivity experts are here to help. We already supply some of the largest meat producers in the UK, Canada and the USA with reliable and state of the art Livestock Systems.