Feed regs: From formulation to sales

Feed regs: From formulation to sales

*Dr. Adam Fahrenholz is assistant professor in the Prestage department of poultry science at North Carolina State University. Dr. Charles Stark is the Jim & Carol Brown associate professor in feed technology at Kansas State University. Dr. Leland McKinney is with DFS Inc. in Johnston, Iowa.

WHEN we talk about feed regulations, we almost always focus exclusively on what happens in the feed mill. Of course, there is good reason for this, since that is what the rules affect and where inspections are made.

In the total decision-making environment, however, regulations affect both before and after feed manufacturing, all the way from formulation to sales.

Formulation, in the majority of cases, focuses on some form of least-costing, which is exactly what it sounds like: figuring out how to deliver the necessary nutrients to the animal for the lowest possible cost. The constraints we use to make decisions may be more or less flexible depending on things such as the species and production system.

For example, the private (or on-farm) manufacturer wants to produce a low-cost feed, but since some ingredients, especially cereal grains and potentially forages, are already owned, how least-cost is determined will be a little different. The integrator, on the other hand, ships in every ingredient used and is most interested in the highest margin per pound of meat sold, so it is often looking to manufacture the most economical feed possible. A commercial company also wants to produce an economical feed but is more conscious of things like pellet quality, color and consumer preference for the presence (or absence) of certain ingredients. If they can sell the feed for a price that exceeds the extra costs in formulation, then it makes good business sense to do so.

However, new regulations may change some long-standing assumptions on how formulations are developed. Consider, for example: A particular set of formulations has always depended on a certain ingredient to keep costs down and animal performance (or feed quality or any other driving factor) high. Now, however, as we work towards compliance with the Food Safety Modernization Act (FSMA), we realize that this ingredient may carry some new hidden costs. Perhaps we feel it requires some increased evaluation under current good manufacturing practice (CGMP) requirements, or perhaps we identify a hazard requiring a preventive control. Either way, an extra workload on the feed mill may have an impact on whether that ingredient is still cost effective.

Consider also: A particular medication has been used to keep animals healthy and promote performance. Now, that medication is becoming a Veterinary Feed Directive drug. Is there a cost associated with the extra effort required to use that medication, and if so, is it worth it?

In general, the purchasing department (or the person who handles purchasing in your facility, probably while wearing four other hats) is responsible for determining which ingredients should be purchased and how much. While purchasing doesn't necessarily make formulation decisions, there is certainly a feedback loop involving costs and availability going back to the nutritionist and/or formulator. Purchasing also works with quality assurance on items such as ingredient specifications and contracts. As anyone who has been involved in this part of the operation knows, there is a lot going on and a lot to keep track of.

Considering FSMA's CGMP requirements for plant operations, especially regarding the handling of raw materials and other ingredients, it may make good sense to train purchasing personnel on the specific requirements focused on shipping container examination, raw material storage and condition and evaluations related to mycotoxin contamination.

Along the same lines, the sanitary transportation rules lay out specific requirements for shippers, loaders, carriers and receivers. In order for purchasing personnel to work effectively with suppliers in the development and fulfillment of contracts, some basic understanding of these regulations would likely be beneficial.

Finally, though it is likely to be a somewhat rare situation, if your facility does employ a supply chain program, does your purchasing department know which suppliers they may use and what to do if, on a temporary basis, they need to bring in ingredients from an unapproved supplier?

 

Sales role

Since a number of our articles have discussed how regulations affect the feed mill (with more on the way), let's skip right past making the feed and get to sales. If you're glass half-full, you're thinking, "Finally, let the other folks think about regulations for a minute." If you're glass half-empty, you're thinking, "That sounds about right. Let's worry about everyone else; who cares about the feed mill?"

In the commercial system, sales and marketing are responsible for actually generating the profits. Integrators are obviously in a different boat, but many of the same concepts related to commercial sales staff may apply to technical service personnel.

The inputs from sales usually relate to one of two things: (1) providing feed specifications that match the desires of the marketplace in order to maintain sales volume, and (2) keeping customers happy. Of course, this works its way back to nutritionists, purchasing and the feed mill. We know that customers may expect to see certain ingredients, don't want to see others and generally want their products to have the same physical appearance and quality. In general, customers don't like change (right up until they demand it), and good business sense has always said the customer is always right.

Of course, customers don't necessarily keep up with regulations. Unless we make the effort to educate them, there is no particular reason for us to expect them to understand why we may have to make changes in how we operate, how much we charge or even what is in their feeds. If you are working in sales, you simply want to do whatever you can to make the customer happy to keep those sales numbers up.

There are two options. First, you can opt not to train sales staff on regulatory changes and tell them "that's just how things are," or you can make sure they're informed on what changes are coming and why certain decisions are being made. It's certainly worth remembering — depending on the specific circumstance — that the relationship with the sales staff is the strongest and sometimes is the only relationship the customer has with your company.

As new regulations come about and existing ones change or evolve, a lot of decisions must be made as to how to formulate, purchase ingredients for, manufacture and sell feed. Because all of these operations are affected, it may be worth considering that the issue isn't who needs to be trained but, rather, who doesn't.

Volume:88 Issue:12

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