Case Study: Benchmarking – A tool to drive productivity, change and improve profitability

Benchmarking identifies gaps and opportunities and provides a platform for individuals to stay focussed and facilitates a desire to change and improve in a supported environment. For Kingsley Breeding, manager of Konetta Station, benchmarking “provides confidence in the program that we’re running” and adds, “there are things you can improve, and benchmarking shows where we need to improve, where we need to back off expenses, and helps set key performance indicators (KPIs) around each enterprise.” Benchmarking KPIs helps to inform priorities in the decision-making at Konetta Station, as well as evaluate the practices they are undertaking to increase production, whilst maintaining animal health. For Konetta Station, the numbers add up and benchmarking has improved the profitability of the business.

Konetta Station has been benchmarking for the past 15 years, and was the first of the AJ & PA McBride properties to start. Kingsley is one of 15 members of the South East Benchmarking Group, facilitated by Elke Hocking; prior to the establishment of this group, Konetta Station was benchmarking with other properties across south-eastern Australia. According to Kingsley, the benefit of having a local SE Benchmarking group is that Konetta Station can be “benchmarked with those on the same type of country, running the same type of [enterprises] – and we can compare figures with those doing much the same thing, particularly other McBride properties,” – of which there are four in the group. Benchmarking allows the performance of the property to be compared with the bottom 20%, median, and top 20% using both the local Group and national figures, and places the property on a linear scale for different attributes – including the KPIs.

The SE Benchmarking Group fosters accountability among the members. Each member has hosted the Group, to show them their property and discuss their benchmarking KPIs in detail. “We breakdown everyone’s data in the meetings…Elke will highlight a few things within the group and at the end of the day, each person has five minutes to analyse your [the host] property and give you advice.”

Benchmarking is enterprise-based, though the outcomes flow on to the whole farm. Konetta Station is benchmarked on their wool flock, dual purpose flock and winter/spring calving herd and hence feed in all their data to be analysed – i.e. the total production for each enterprise. Kingsley finds the KPIs the most useful part to consider and make decisions around. “Holmes Sackett – the benchmarking firm regards net profit/Dry Sheep Equivalent (DSE) and net profit/hectare as the most important, with a strong emphasis on DSE/labour unit followed by a return on assets managed”. For Konetta Station in 2018/19 wool outperformed the beef and dual purpose flock.

Benchmarking as part of a local group has been important to provide a platform for Konetta to discuss their performance and to evaluate some of their practices. “We want to keep our stock the healthiest we can…we’re very good at vaccinations and our drench program, testing for drench resistance every two years – but we always thought the money going in was too high.” Benchmarking has enabled Kingsley to evaluate that the animal health cost per DSE at Konetta Station is slightly above average, although discussion with the Group about this concluded their animal health program is one indicator “you can’t really skimp on.” In a similar vein, while supplementary feeding costs were high in 2018/19, Kingsley notes that benchmarking is very dependent on the season and that indicators may flux, depending on how you tweak your system to manage those conditions.

Konetta Station has also put all staff through the Lifetime Ewe Management (LTEM) course and taken the principles learnt there and combined them with what has been learnt from benchmarking to improve the profitability of the business. This has resulted in improving operating efficiencies and improving lamb survival rates, while maintaining animal health and fertility.

The LTEM program focuses on the effects of nutrition and management of ewes. Priorities for Konetta to improve lamb survival and fertility as a result of undertaking the program include:

• maintenance of condition score 3.5, for maximum wellbeing
• planting 2000 trees per year, to provide shelter particularly during lambing
• pregnancy scanning to enable differential management of single lambs and twin lambs (including preferential allocation of feed resources to ewes with twin lambs, to achieve better birth weights in twins and not-so-heavy birth weights in singles), and
• Testing maiden ewes for presence of Campylobacter

“LTEM tells us the last month of pregnancy is very important for birthweight of lambs and we can balance it out now with scanning to preferentially allocate feed.”

Understanding the individual system and interpreting benchmarking figures in your specific context, in conjunction with other objectives like LTEM targets, is important. The climate is the main factor in determining lamb survival for Konetta Station. In winter, 30-40% of Konetta Station usually goes underwater. A compromise has to be achieved to balance nutrition during the last month of joining and environmental conditions at the time of lambing. Kingsley considers lambing conditions as the bigger influence on lamb survival at Konetta Station, hence September lambing, however this subsequently results in a longer and more intensive supplementary feeding period, from January into the last month of joining, in April.

The local benchmarking figures have highlighted differences between properties in the drier, Upper SE and Konetta (Lower SE). Per hectare, Konetta Station is performing well, but per DSE, they are constrained, due to the limited productivity during the winter months. Higher rainfall is not necessarily conducive to good livestock health, as sheep walk in water during the winter months. Per head, the USE properties have better weight gain in winter, better wool cuts, and better lambing and conception rates.

Benchmarking has enabled Kingsley to focus on improving wool quality and quantity through genetic selection and monitoring progress towards this goal. All ewe lambs at Konetta Station are tagged with electronic identification (eID) tags. All ewe hoggets are shorn and their fleeces are weighed and micron tested (with a laser scanner). Kingsley explains, “Not many people are doing it, but it is the best way to keep your best breeders. We have got to be where we want to be at 18 microns and we’re now increasing fleece weight.” Based on this monitoring effort, 3500 of the best performing ewes are designated to the merino line (18 micron), 1500 to the dual purpose line (19-21 micron) and approximately 300 are culled.

About the technology, Kingsley adds, “the wool industry isn’t going backwards, it’s very innovative and to watch our own staff go around with barcode scanners on their belt is something to see.” Laser scanning and selection of ewes is one component of improving the wool cut; the other is genetic selection of rams. McBride’s have their own merino stud and maintain contact with the stud master to improve their performance, reflected in the benchmarking figures.

One area of the benchmarking report where Konetta Station is not in the top 20% is in return on assets managed. Holmes Sackett regards this KPI as highly important, although to Kingsley, Konetta Station’s performance for this metric is justified by the values of the business; “We’re nudging on the top 20%, but we’re not breaking in there because we’re prioritising spending on repairs and maintenance, fencing, pasture investment and employees homes – as much as pushing it all into production.” Into the future, Kingsley says he will continue benchmarking so they can continue to improve. Future focus for improvement will be on reducing expenses without compromising staff and continued improvement in overall production.