The 5 key questions everyone should ask to make their food factories more profitable….but rarely do…
17 August 2012
Maintaining profitable momentum in today’s roller coaster economic environment is a challenging task. Whilst management recognise that focussing on short term financial stability can be counter-productive, sanctioning capital investment to improve productivity when resources are stretched can be a difficult call. Challenges include:
• Rising global raw material costs
• Pressures from large retailers to reduce prices.
• Increased legislation and red tape
• Increasing staff costs
• Potential fines and brand damage resulting from EPWs and RTMs
However despite these restrictions, every company can start to deliver improved profits without significant pain by addressing 5 very important questions…
1. How can I reduce the waste my plant generates?
2. How can I ensure that I manufacture my products consistently - right first time?
3. How can I accurately measure and reduce my over fill /over pack?
4. How can I be sure that my finished goods are correctly labelled?
5. How can I get visibility and control of my unaccountable losses?
All companies need to make a profit, but maintaining profitable momentum in today’s roller coaster economic environment can be a challenging task. Making money in the fast moving fresh food industry is particularly difficult and the challenges of managing large volumes of low cost items, with limited shelf life, moving at high speed through the supply chain can be daunting. Whilst management recognise that focussing on short term financial stability can be counter-productive in the long run, sanctioning capital investment to improve productivity when resources are stretched can be a difficult call. For food companies, this dilemma places significant demands on their resources and key challenges include:
• Rising global raw material costs
• Pressures from the large supermarkets and retailers to reduce prices.
• Increased legislation and red tape
• Increasing staff costs
• Potential fines and brand damage resulting from EPWs and RTMs
‘Let’s get by now and look at this again next quarter’ is an all too often comment in the board room. For many years, the IT industry has struggled and in many cases failed to help the food industry find effective solutions to these issues. Unfortunately isolated IT solutions are typically overly complicated and expensive to implement, failing to gain buy in from management and factory floor operatives. In parallel they usually fall short of effectively integrating the factory floor and office environments.
It is recognised that the ideal scenario would be a centralised real time information databank that was continually updated and used throughout the plant. However, many legacy applications tend to work in batch mode, which can only be updated at certain times of the day or night. As a result, product can have moved through the manufacturing chain while the systems play catch-up, thereby making the task of controlling key elements of the production process very tricky. This is compounded further by fluctuating demands such as seasonal supply factors and special promotions. The problem is that in many food manufacturing environments it isn’t easy to accurately collate the data without a huge amount of disjointed manual effort.
However ground-breaking developments within factory floor solutions clearly demonstrate that, despite these restrictions, every company can start to deliver improved profits without significant pain by understanding more about the dynamics of their processes and implementing solutions based on the answers to the questions outlined above.
1) How can I reduce the waste my plant generates?
Food processors are under pressure, both from consumers and legislation, to reduce the amount of waste they produce and to consume water and energy more efficiently. However it would appear there is disproportionate effort being given to finding alternative ways of disposing of the food waste, rather than looking at the root cause by reducing the amount of waste companies generate in the first place.
…waste is often simply viewed as ‘inevitable’
A key problem in all this is that waste generation within the food processing chain is unpredictable and can emanate at any time and at any part of the process, making it even the harder to regulate and manage. Unfortunately in many food manufacturing operations, waste is often simply viewed as ‘inevitable’ and without a structured system to measure and control waste, it is very difficult to bring the work force on-side to contribute to its reduction.
Waste generation can occur anywhere in the plant - from goods in to goods out - resulting from a diverse range of operations and processes. A key problem is that if certain waste generation sources aren’t identified quickly in real time, processes can rapidly continue to produce excessive waste.
To reduce waste effectively you need to understand the ‘where’, ‘how’, ‘when’, ‘what’ and ‘who’ of waste generation. The causes fall broadly into two main categories:
• Repetitive waste at recognised locations in the plant
• Dynamic waste occurring anywhere without warning
Waste can present itself as tangible product within the plant that needs to be recycled/sent to landfill or as excess product passed on to the consumer, which again impacts on profit. The key catalysts for waste are:
• Inadequate stock management/rotation resulting in ingredients going out of date before use
• Incorrect storage conditions/temperatures
• Spoilt batches and sub-batches resulting from inaccurate and inconsistent recipe formulation
• Spoilt batches and sub-batches resulting from inconsistent cooking/processing
• Unnecessary waste from over-pack/overfill
• Waste resulting from under-weight packs that cannot be reworked
• Waste from excessive use of one or more ingredients in ready meal/snack assembly
• Excessive waste from trimmings occurring throughout the process
• Waste that cannot be recycled within the process itself
• Wrongly labeled product that cannot be reworked
The costs associated with waste within the food manufacturing environment are complex and include:
• Cost of wasted raw material
• Cost of disruption to production
• Cost to dispose/recycle waste
• Hidden costs of increased water, energy and fuel usage associated with the production of waste
• The hidden cost to reputation (possible brand damage) through inconsistent product quality
The potential to improve profits through controlled waste management is significant. Waste management systems must enable management to be proactive rather than reactive to waste. They should be easy to implement, simple to use, allowing personnel to record waste simply and effectively from specific factory locations. In such systems, simple touch screen terminals are ideal with intuitive prompts to help the user work through key waste related criteria, which should include:
• Operator ID
• Where the waste was created
• What the waste type was e.g. packaging, finished product, ingredients, film etc.
• What the reason was for the creation of the waste
• Time/date of waste recording
• Quantity by weight/volume
From such data, electronic reports can be generated over a user-defined date and time period to show trends including:
• Total waste for all types across all or specific lines/processes
• Total waste identified against specific reason across individual lines/all lines/by product
• Waste recorded by individual operator IDs
Modern technology allows such systems to provide active email alerts so that management can be advised of any pre-set threshold violations and act immediately.
One thing is clear - high waste levels need not be a fact of life. A high percentage of waste generated in the food processing environment is wholly avoidable, provided a factory floor management system is in place that operates in real time throughout the plant from ‘goods in to goods out’. Investments in such systems are very low risk and the rewards are highly profitable in terms of cost savings and possible increased business resulting from improved green credentials.
2) How can I ensure that I manufacture my products consistently - right first time?
Consumer demand for high quality nutritional prepared foods is increasing rapidly. In order to satisfy the complexities, varieties and required presentation of such products, many of the food manufacturing processes involved rely on manual recipe formulation and assembly procedures. Despite increasing implementation of ERP (Enterprise Resource Planning) systems within the food industry, the factory floor data fed back to these is predominantly manually gathered providing only limited snap shots of what is going on.
Recipe Formulation is at the heart of a wide range of food manufacturing processes and in a nutshell, its precision and effectiveness set the benchmark for maintaining product quality, optimising stock management and minimising costly waste in processes that have to rely predominantly on manual assembly procedures.
..checking ongoing recipe consistency and assembly can be complicated without correct controls in place
If the recipe process does not involve checks at each stage to ensure that ingredients are added in the right order and in the right proportions, by the time errors are found it’s almost certainly too late and either product quality suffers or batches and sub-batches have to be scrapped. The assembly process is further complicated by a wide range of ingredient preparation processes including dicing, slicing, shredding and cooking.
Imagine how easy it would be if it the overall assembly process were controlled by a central system that managed the whole process from start to finish ensuring optimum product consistency. Starting out it generates the BOM (Bill of Materials) for a particular finished product and then distributes it to the relevant workstations. Before this, it checks the stock levels for all available ingredients and optimises date coding selection to minimise waste.
At each workstation, simple prompts guide operators through the formulation process; ensuring each and every ingredient; each and every sub batch is correctly mixed and collated. Any deviations would prevent operators from proceeding until the issue has been resolved. It would be able to control the manual addition of micro ingredients, pre-mixes, sub batches and bulk additions. In the background data would be continually updating any ERP system with real time factory floor data and full electronic traceability would be an integral part.
3) How can I accurately measure my over-fill /over-pack at any given time?
Our appetite for freshly prepared, nutritional ready meals and hand-snacking products has grown dramatically over the past decade. To satisfy the consumer, meals and snacks need to be visually attractive, tasty, nutritional and sensibly priced. They also need to be reliably consistent to make sure we continue to buy them. To meet these parameters, food manufacturers have to meet a variety of tough challenges, targets and legislative obligations. To remain competitive and profitable in such situations manufacturers must have real time control of their assembly process as part of an operation that can react swiftly to changing customer requirements. Manufacturers have to get it right to survive.
Yield Control management is an essential part of the overall meal assembly process. Unwanted giveaway in terms of too much of a particular ingredient being added to a meal can impact on how the product looks and tastes as well as adversely affecting profitability. Adding too little also affects taste implications and, in addition, potentially leaves manufacturers open to the risk of breaching packaging legislation and upsetting the client.
Effective Yield Control leads directly to:
• Reduced giveaway
• Improved quality
• Improved productivity
• Reduced waste
• Increased profits.
The key to successful Yield Control is to implement a system that is easy to use by operatives, yet provides management with comprehensive real time data from the factory floor. The difficulty is that if the assembly process is operator dependent, without effective control, inconsistency is inevitable. Operatives are under pressure to match speed with accuracy, but in striving to ensure packs meet the minimum target weights excessive ingredient usage very rapidly occurs, as operators rarely get time to adhere to targets.
This has a major affect on profits and actual data from large manufacturers shows that just a few grams excessive giveaway of a key ingredient such as prawns or bacon rapidly translates into monthly five figure financial giveaway levels. On site trials have highlighted that if real time automatic target weight compensation can be introduced that continually monitors and adjusts individual operator’s target weight patterns, giveaway can be reduced to fractions of a gram, whilst still ensuring pack weight compliance.
4) How can I be sure that my finished goods are correctly labelled?
Leading food retailers and supermarkets are insisting on increasingly high levels of customer-driven labelling-related information from their suppliers, delivered consistently and always with total accuracy. Any errors or inaccuracies are rapidly and severely punished with heavy fines. Most major retailers have established comprehensive guidelines for their suppliers relating to a wide range of packaging and labelling issues. These codes of practice combine international recommendations and company specific requirements. However interpreting and implementing these requirements can be a daunting and expensive task. Failure to comply leaves companies vulnerable. Wrongly labelled products create a financial exposure for the manufacturer that is unsustainable and must be eradicated. Companies need a system to manage this risk automatically so that they police 100% of their production. With pressures increasing from supermarkets in parallel with growing consumer awareness, nothing less than 100% will suffice.
Problems associated with labelling errors through inconsistent line control include:
• Production disruption and delays
• Costly RTMs or EPWs
• Brand damage
• Loss of customer confidence
At first sight ensuring that the correct label with the correct information is placed on a packaged product shouldn’t be too hard. In fact for high volume automatic processes such as canning and filling, it is relatively straightforward. However many fresh products such as ready meals or sandwiches are still hand crafted in relatively short runs. Outside normal day to day buying patterns, consumer demand for fresh food products is affected by a diverse range of factors including climate and weather patterns, major sports fixtures, holiday periods and advertising campaigns.
Major retailers have to ‘anticipate’ our fluctuating requirements, ensuring they don’t over-order or run out prematurely at peak times. Getting it right is difficult and to meet these challenges, significant pressure is, in turn, placed on suppliers, resulting in rapidly changing short run order requirements mandating swift turnaround times. In such situations, rapid line changes present a major challenge especially when it comes to labelling. Manual set up systems will result in labelling errors.
The key to success requires a combination of centralised control of all the key elements of the packing line together with the latest label reading and optical recognition technologies.
This approach ensures the safe and secure setup for all elements of the packing line. This enables the rapid automated setup of ,b>Date Coders, Inline Barcode Scanners (1D and 2D), OCV equipment, Printers, checkweighers and Metal Detectors from one selection at a central PC screen. By automatically checking the whole set-up of the line from one central PC, it can be ensured that there are no errors at the beginning and end of a batch and, most importantly, on a continuous basis throughout the batch run.
In parallel, printed labels are checked and collated before going onto the line. Use of the latest Optical Character Verification (OCV) technologies can detect a much broader range of labelling issues, including misplaced/misaligned or partially missing labels. This not only detects faulty labels but also optimizes pack presentation and consistency.
5) How can I get visibility and control of my unaccountable losses?
More and more of today’s food manufacturing companies are becoming reliant on ERP systems to coordinate and control their operational activities. On the face of it there are very attractive reasons for going down the ERP route. Benefits include a single system to support, rather than several small and different systems; a single applications architecture with limited interfaces; and access to management information unavailable across a mix of applications. In principle more integration should mean lower costs. However many companies are not able to optimise the effectiveness of their ERP system, leading directly to so called ‘unaccountable losses’ sometimes of double digit magnitude.
…unaccountable losses are the direct result of lack of real time factory floor data
The notorious ‘unaccountable losses’ usually emanate from the inability of the system to access and use essential factory floor data in real-time. Lack of accurate information, right through from ‘goods in’ to ‘goods out’, can cause a serious ‘profit-sapping’ problem. In such fast moving, ever-changing environments, keeping the finger on the pulse is critical. For companies who typically manufacture their products based on pre-defined recipes, ERP systems normally work on preset targets for the batches and all subsequent upstream and downstream calculations assume that during the process these targets are met - precisely. Under normal circumstances they have no real-time information to contradict this assumption and under these circumstances ‘unaccountable losses’ always occur.
The solution is to implement a system that brings the all-important real time control to manufacturing processes, unlocking the potential of ERP and allowing systems to react to actual information rather than historic or calculated data. Manufacturing Execution Systems (MES) can bring this level of control by coordinating dynamic processes across the plant floor, improving productivity and profitability.
The solutions given in this White Paper can improve profitability by:
• Reducing and controlling waste
• Improving product consistency and virtually eliminating spoilt batches
• Reducing giveaway to fractions of a gram
• Eliminating wrongly labelled product leaving the factory
• Eradicating unaccountable losses
• Reducing direct labour overheads through increased efficiency
• Improving overall product quality
It can be seen that there is a common thread running through the solutions to these questions in terms of the requirement for coherent real time data from the factory floor. It is possible to address the challenges, either through individual modular solutions at critical stages of the process or as part of a plant wide MES. Clearly investment levels versus ROI are a major consideration in the decision process. Evidence shows that modular implementation can have a rapid ROI and bring tangible benefits in months rather than years.
Manufacturing Execution Systems can be complex, expensive and very time consuming to implement; requiring significant input from both client and supplier. Reality shows that it can take years to develop a satisfactory, fully integrated working system.
It is quite clear that manufacturers want the control, functionality and profit improvements that an MES would deliver, but ideally without the hurdles and costs associated with the development and implementation. Fortunately there are fixed functionality ‘off the shelf’ MES solutions that can be installed into existing plant and bring immediate improvements to the manufacturing processes. In many factories this satisfies more than 80% of the manufacturing control requirements for ready meal producers; starting at goods-in right through recipe formulation, meal assembly, stock control, packing and labelling and finally on to goods out. Fixed functionality solutions cost a fraction of bespoke MES installations and take around 30% of the time to implement.
For further information, please visit www.marco.co.uk or telephone 01342 870103 E-mail firstname.lastname@example.org