Why the biggest dairy exporter in the world had to embrace the IoT

Let’s look at the impressive stats – 10,000 farmers, 1600 tanker drivers, around 500 milk tankers, 22,000 global staff, , 22 billion litres of milk processed every year, $17 billion in revenue. This is what it means to be the biggest dairy exporter in the world, according to Fonterra’s Infrastructure and Global IS engagement manager, Dave McPherson.

New Zealand-based Fonterra is a dairy co-operative born in 2001 when the country’s two biggest co-ops – Kiwi Co-operative Dairies and New Zealand Dairy Group – merged with the statutory body, the New Zealand Dairy Board.

It is the largest company in New Zealand in terms of economic impact, and produces about 20 per cent or the world’s dairy exports. It’s size gives it many benefits – economies of scale, employment, high turnover, and an avenue to solidify New Zealand’s place as a country that produces high-quality products for local and overseas consumption.

But being as big as it is also introduces a few issues. Not least of which are trying to find better ways to streamline production processes, save on power, and one of the biggest costs – maintenance of the company’s plant, infrastructure and tanker fleet. A mere three years ago, McPherson attended the first Industrial Internet 4.0 Summit in Sydney knowing very little about the Internet of Things (IoT) or Industry 4.0. Now, 36 months later, not only did he give a 40-minute speech on the subject at the latest summit, but the company has embraced the concept at so many different levels – it is a walking advertisement for digitising a business.

“When I attended the first conference back in 2017, I was trying to get a handle on all the hype around IIoT and Industry 4.0, smart manufacturing – all these buzz words that were relatively new to us and we were trying to get a handle on where we could drive some value from the stuff,” he said. “In particular, what we were really trying to find were people that were doing stuff in this space currently and how we can leverage their learnings to speed up our journey.”

When he came to the first summit, he knew almost straight away that Fonterra could embrace the concepts and save itself a lot of money. It was a matter of trying to find out what they could do and how they could implement processes into what they were doing. It didn’t take long.

“I have plenty of examples across our supply chain where we are using new IoT.,” he said. “What I call new IoT is gear supplied by third-party vendors, who are providing us low-cost, battery-powered solutions, which are connected by proprietary networks like SigFox or LoRa, rather than traditional wireless networks. Alternatively, we are dealing with new vendors who are traditionally not in our supply chain.”

Being a co-operative, the company’s shareholders are the dairy farmers themselves. And it hasn’t taken long for those earning their living off the land to take on board some of the technologies brought about by the IoT. It does not cost farmers an arm and leg to do so, according to McPherson.

“There is a huge increase in availability of these low-cost devices, with new vendors coming to market all the time. It has given us a lot of opportunities to grow in this area,” he said. “On the farm we are seeing a rapid growth in the adoption of IoT sensors. Most of this is to do with compliance and sustainability as well as productivity and animal health and welfare. It all starts at the farms. Farmers, like a lot of industries today, are having to be a lot more compliant from a sustainability perspective – wastewater, effluent – everything we manage or farm needs to be measured or monitored. All water usage on farms has to be measured, which is increasingly being measured by IoT sensors and sent directly to councils.”

A big issue on all farms is the treatment of the aforementioned wastewater and effluent. Cow herds produce a lot of both and New Zealand has a lot of regulations when it comes to how these by-products are monitored and treated. IoT-enabled devices offer the perfect solution on the ground.

“One of the more interesting projects we have done recently is wastewater management,” said McPherson. “We own the farms around most of our factories and that is for the purpose of getting rid of our wastewater. We’re monitored by councils about how we manage wastewater and keep it out of the waterways. We set up a project whereby we used irrigators that were pulled out manually across the field. When [the irrigators] are pulled out we have to be sure that they are not getting too close to waterways to make sure the wastewater doesn’t go where it is not supposed to go. It got to a point where one of our plants nearly got shut down because we weren’t doing a good enough job of it.

“We deployed GPS tracking on the irrigators, and, coupled with weather information, wind speed and wind direction, the pumps that control the irrigators would be automatically shut down quickly if there was a possibility the wastewater could spray into the waterways.

“We came up with a very cost-effective solution by using new IoT sensors from a company we had never dealt with before. They came up with a real robust solution, which we implemented very quickly”

Then there is the milk itself. The temperature of milk is regulated by the New Zealand Ministry of Primary Industries for the dairy industry. Farmers need to get the milk down to Ten degrees Celsius within four hours of starting to milk the cows and Six degrees within two hours of completion of milking. The longer the milking takes, the longer it takes to cool, which then shortens the window Fonterra has to pick it up from the farm gate. With some new sensors, it is possible to measure the temperature in real time in the farm-based vats where the milk is initially stored.

“That information along with the volume and the fact that the agitators are stirring that milk will come back to us in real time,” said McPherson. “[This is] a lot of data pinging off 10,500 vats every five minutes, but it gives us a real-time picture that may even potentially stop us picking up milk that we otherwise wouldn’t want, and provides huge efficiency gains in optimising the loading of our tankers knowing exactly how much milk is at each farm – prior to collection”

But it still needs to be kept cool when it is being transported. Fonterra put some sensors on the tankers that came back with results that they didn’t expect.

“Our tankers are not refrigerated and our storage silos at factories are not refrigerated. It is critical that we try and get that milk temperature down on the farm as soon as possible and keep it there before it gets processed. Where we measured the temperature in transit we used these little sensors which were very cheap,” he said. “We measured all different points of the tankers. The top, where we thought there would be the most impact from a heating perspective with regards to the sun. It turned out it was the heat coming up from the road – it was the bottom of the barrels that were getting the most heat between the pipework and the cab and the barrel and the truck.

“Once we found these hots spots, we worked with a couple of companies on coatings we could put on the tankers to eliminate the heat. We’ve had about six different coats sprayed onto a number of tankers and using sensors we are starting to see some great benefits, which has led to zero increases in temperatures,” said McPherson.

Some farmers are even going one step further by monitoring the cows with wearable sensors. “[Farmers] can tell when [the cows] are drinking or eating, how long they are spending standing up eating,” he said. “It also tracks their temperature, which will give warning signs of when the cows are getting sick – all of these things affect productivity for the farmers.”

One of the biggest expenses of Fonterra is running its tanker fleet. Maintenance of the fleet is a cost that affects the bottom line, but is something that can be addressed thanks to IoT devices.

“Simple telematics will tell you how to reduce your maintenance costs of your fleet – monitoring things like engine temperature, revs and brake wear,” said McPherson. “But we can also monitor the drivers and the wear and tear caused by their driving. When the system was first installed, we had 1500 drivers in the fleet and they start out with 100 per cent score at the beginning of the day. Depending on how they drive the trucks, they would lose points. Initially they were getting scores around the 92 per cent mark, but we are now at 99.7 percent. With a 500-odd fleet of tankers, you can understand there are some big savings in our fleet maintenance costs.”

And how did the drivers feel about being monitored. Doesn’t it have a tinge of Big Brother about it?

We had a few challenges in that area, but generally they got it. They got why we were doing it, and have got on board as they take a lot of pride in their job and are driving professionals.”

One thing the company has found – as is a common theme among those taking on board IoT devices – is the amount of data that is created. At the device layer in their NZ Manufacturing plants alone, the company pulls about 430,000 time series data tags into its PLCs in real time. Once that data is combined with set points and other values of the PLC, that accounts for about 40-million-time series data tags. It uses around 250,000 of them, but, going forward, it is expecting that will grow to four million data points that it will be tracking and storing.

A lot of companies are also looking at automated condition monitoring, otherwise known as predictive maintenance, as it relates to the IoT. Fonterra spends millions of dollars a year on maintenance of its manufacturing plants. Given the seasonal nature of its business it has a 100 per cent of the company’s assets running at 100 per cent of the time for a couple of months a year at peak. Then it becomes less intensive.

“Our maintenance programme is usually done in winter and we pull every pump, motor and valve and replace bearings just because we’ve done it for years,” said McPherson. “With the IoT sensors, we should be able to save a lot of money by finding out if we actually need to do it in the first place. For us, to be able to predict the failure and then allow downtime in our plants to do the maintenance means we don’t have the overhead of a huge number of people working across our manufacturing facilities in the off-season.”

Other areas where the IoT is making an impact is in the supply chain and dry storage. Again, temperatures have to be measured in the storage areas, and with New Zealand summers becoming hotter, it is increasingly becoming an issue. The company also has small magnetic devices that are fitted in the hinge of containers. When it is closed and turned on it is sending out GPS coordinates of the location of the container, temperature inside the container, humidity and whether there is light getting into the containers.

“You get real-time alerts when these containers are being opened somewhere along the supply chain,” said McPherson. “Sometimes along the customs borders. Sometimes when we don’t really want them to be by someone who has stolen a container. Sometimes, we’ll get a customer complaint when it turns up damaged. These sorts of devices are allowing us to track issues in the supply chain where these things might happen.”

The company recently did 200 trials of a random number of containers going to various places around the world. The containers were pinging out data giving locations and other information that was captured at the same time. It’s helped Fonterra identify issues that were going on that it otherwise wouldn’t have known about.

“For example, we’ve had containers sitting in Chicago in the winter time in -9 degrees and customers have complained about what that has done to the product,” said McPherson. “Other scenarios where we’ve had damage to containers or pallets where they have opened it up and bags have burst or the pallets are damaged and customer complaints have come through quite regularly. That is a great little device that gave us a head’s up when there was a problem.”

Fonterra is an example of a company that less than three years ago, had hardly heard about the IoT, or what it would mean for its business. Now, the IoT has become part of its everyday life of doing business. And what of the future?

“Increasingly the challenge for us now, and a lot of companies, will be across the supply chain where you are pulling data through these IoT sensors to these third-party cloud solutions,” said McPherson. “The real challenge will be how we integrate it back into our systems.”

And what is McPherson’s final word on the IoT and what it means for doing business?

“A lot of this is around changing business processes, taking people on the journey, getting them to understand the reason why traceability is important,” he said. “A lot of people think it is a Big Brother thing. In reality, it is just the future of what we have to do with this traceability across our food chain and that, in the long run, is a good thing.”


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