State of Food Manufacturing 2013: Slowly Trending Upward
A lack of consumer confidence, prolonged unemployment and concern about regulations still hinder strong economic growth.
A year or so ago, if you asked a food and beverage manufacturer if it had any expansion plans or equipment upgrades in the works, the typical response was, “We’re waiting to see what the new Obama administration will mean for the economy.” Now that President Obama has been in the White House for 20 months of his second term, processors have had a chance to gauge the path of the economy—and the view is still not crystal clear. A lack of consumer confidence and prolonged unemployment still hinder economic growth. Plus, concern over government regulation has risen. However, manufacturers regulated by FDA are beginning to get a clearer picture of how FSMA will affect them. Even though not all FSMA regulations are final, processors know they will need to beef up their food safety measures, and in many cases, this will mean the purchase of lab and automation equipment—both to increase the efficiency and throughput of their plants and to have electronic track-and-trace capability.
Food Engineering’s 2013 State of Food Manufacturing Survey reveals that food and beverage manufacturers are feeling the pressure to increase throughput to meet rising customer demands while producing safe products and keeping costs down. In addition, consumer demand for new and innovative products has placed additional pressure on processors to respond or lose potential sales to the competition. Hands down, processors identify automation and food safety/FSMA to be the two major trends that will shape manufacturing operations over the next five years. Even so, much more is on their minds. When asked what top two trends will change manufacturing operations for the next five years, one processor lists far more than just two items: “Elements and programs to include crisis management, customer service communications, water and water quality, BRC requirements, sample frequency, testing and retention, rapid testing for analytical chemicals and microbiological contamination.”
Processors also need to be sustainable because it saves them money, and in the eyes of some consumers, the processor’s attitude toward “green” can win or lose consumers’ loyalty. In addition, processors must meet new food safety regulations while potentially having to meet retailers’ demands to become GFSI (Global Food Safety Initiative) certified under one or more of its schema. (For more on GFSI, see pages 103 to 110 in this issue.)
FE surveyed food and beverage manufacturers to provide detailed information on the issues and technologies that affect processors’ success and productivity. The survey’s key objectives included:
• How throughput and budgets have changed from last year and where funds are being allocated
• Structural changes since last year
• Methods being used to improve productivity
• Methods being used for food safety.
While 2012’s average company gross throughput compared to 2011 showed a gain of 14 percent, processors are expecting 2013 output to be 17 percent better than 2012. However, while 64 percent of companies are expecting an increase in gross throughput, 31 percent expect throughput to remain the same. In terms of local plant operations, 56 percent of responding readers expect their individual operations will see a 17 percent increase in throughput while 36 percent expect their throughputs to remain the same.
For those processors that expect an increase in gross throughput, the most important reason cited is an increase in business and sales. One reader reports, “Developing and growing market share; businesses that buy from us are experiencing growth in demand for our products.” Another reader notes a higher consumer demand for plant proteins is significantly raising demand for its products.
Successful processors report new customers and business have necessitated higher production, and more efficient operations are propelling them ahead. One reader’s company is grasping a new concept: “Line ownership, moving from traditional production manager roles to brand management. It will integrate the manufacturing roles more fully into our overall organization.” This change allows a manager to have exclusive “ownership” of a particular brand rather than one manager being responsible for several brands, some of which may not get focused attention when something goes wrong with equipment or scheduling.
The few that report a decrease in gross throughput cite reduced demand, a drop in sales, capacity constraints and changes in the industry for their lackluster results. Others blame corn prices, cost cutting in response to consumer demands, lagging sales and the loss of a major account.
With FDA’s proposed rules on produce suppliers, foreign supplier verification and the accreditation of third-party auditors, there is no question food safety is a key issue as processors try to plan production schedules to meet increasing demand. One respondent notes a shift to clean design, “micro design,” to improve quality and prevent contamination. As another processor explains, its current facility was built in the 1920s and had additions every decade or so and, by modern standards, is an inefficient facility. One also wonders how a building of that vintage would meet today’s rigorous regulatory standards. For many processors in this situation, figuring out how to upgrade a building to modern food safety standards is not an easy task, and it may not always be practical.
Not all processors have the budget to build a new state-of-the-art plant. Instead, the typical processor (59 percent of those polled) is spending somewhere under $1 million in 2013 for purchasing production, packaging, process control equipment and professional services.
The survey found that on average, a fifth of each processor’s budget is dedicated for equipment and services. One in 20 processors (about 6 percent) sets aside more than 50 percent of its budget for equipment and services. But nearly half (47 percent) of the processors surveyed have set aside only 1 to 10 percent of their budgets for equipment and services. However, approximately two-fifths (41 percent) of processors polled expect to spend between $1 and $5 million or more for plant equipment and services.
Two-fifths of respondents at production facilities also indicate their company’s 2013 budget for the purchase of production, packaging and process equipment is, on average, 15 percent higher than their 2012 budget. Nearly half (45 percent) report their company’s 2013 budget to be the same. About 15 percent of those surveyed expect their 2013 budget for plant equipment to be less than 2012’s budget.
At many new plants, every process parameter is monitored and acted upon by the plant automation and control system. Automation systems not only fine-tune process control and assure every batch is produced on spec and with maximum efficiency, they also provide software records of all important process parameters (e.g., HACCP kill temperatures or pressures, CIP temperature, pH, time, etc.), and they provide electronic records of every ingredient’s origin and in which product batches these ingredients were used. In addition, this data integrates with packaging and labeling systems so the right information goes on the label. In short, a complete track-and-trace record is automatically provided to a higher-level ERP system, and when combined with lab results from laboratory information management systems (LIMS), this provides an acceptable record to regulatory agencies and facilitates fast recalls. Since there are fewer staff members in these plants, all the information has to be available anywhere. The cloud and VPN (virtual private network) technology are extending the reach of data to mobile users. One processor reports replacing its stationary HMIs with tablets so more operators will have access to information and controls.
Though FDA outlined new production regulations earlier this year, many processors are confused and unsure about what to implement to ensure compliancy. ERP software provider iRely surveyed several food and beverage processors and found the vast majority (almost three-quarters) know FSMA will affect their operations. But nearly half were unsure of how to implement the necessary changes, according to Sudhakar Kaup, iRely CTO. FDA states FSMA upgrades to ensure full compliance with new tracking rules should cost about $13,000 per average manufacturing plant, says Kaup. Yet nearly half of the plants iRely surveyed hadn’t planned any resources to address FSMA upgrades, according to Kaup.
Whether $13,000 will cover FSMA compliance is another matter. Just a GFSI audit to qualify for selling to a major retailer could easily cost as much as $8,000 and take two to four days to complete, and this doesn’t count the time and expense needed to prepare for it—not to mention the cost for any additional hardware or software to be compliant. (See “GFSI Update,” FE, March 2012.)
FE’s survey revealed 13 percent of respondents think FSMA will create an undue burden. For example, 11 percent are considering a redesign of building airflows and water, 10 percent think FSMA will demand they redesign their production lines, and 2 percent believe they will need a new building.
For the vast majority of processors, however, the picture of FSMA compliance is sharp and in focus. Nearly half of the companies polled by FE are already practicing what FSMA preaches, while a third have created a checklist of what is needed to comply. Three-quarters of processors polled currently have a food safety management system in place. Close to three-quarters of responding processors also have food allergen controls in place, audit their suppliers and/or copackers, have lot-level traceability and have worked out a recall plan.
About three-fifths of responding processors provide comprehensive staff training, do microbiological and/or chemical testing of raw materials and ingredients (often in their own labs) and have cGMP programs in place. About half of respondents have a paper-based HACCP program; 36 percent have electronic HACCP programs. About half of the processors surveyed have case and item level traceability, but only 11 percent have an electronic signature capability for processing steps.
Although the FE survey found processors have increased their budgets for manufacturing automation and control hardware and software by 13 percent compared to 2012, processors with increased budgets represent only 28 percent of those polled. Two-thirds (66 percent) of respondents have kept their budgets the same as 2012’s, possibly indicating a trend of waiting for more specifics on how to meet new regulatory standards.
Of those making process control hardware/software purchases, about one-third are purchasing programmable controllers (PLCs), lab analysis equipment/software and digital sensors and transmitters in 2013. Next-popular purchase choices include motion/motor control systems (28 percent), plant control systems upgrades (28 percent), HMIs (25 percent), other controllers and advanced controls (22 percent), sanitation/CIP systems and/or software (20 percent). Those planning to purchase preventive/predictive maintenance software represent 16 percent of respondents, and automated track and trace, 15 percent. A quarter of respondents don’t plan to purchase any items in this category.
Two-fifths of companies responding to FE’s survey have added a new line and/or expanded/renovated/added capacity to existing plants in the past year; more than a third have changed a process and/or added manufacturing staff. Yet a tenth of companies have made no changes at all.
More than a quarter of companies surveyed are adding to the engineering staff. About one-fifth are installing advanced automation systems and adding production shifts, while approximately one in seven is consolidating manufacturing facilities, often choosing newer or better-located facilities.
One way to measure line optimization is through overall equipment effectiveness (OEE). While it seems manufacturers are cognizant of OEE, some haven’t been able to improve the numbers as much as they would like—at least on average. While several processors have improved their OEE from 65 to 90 percent by eliminating bottlenecks only software could find, the survey finds disappointing average results. For example, average OEE for respondents in 2011 was 67 percent; in 2012, it was 74 percent; and this year’s OEE average remains at 74 percent. While processors set an 81 percent OEE target in 2012, they bumped the target up to 83 percent for 2013.
While OEE can be improved through several methods, in terms of overall productivity, 85 percent of processors responding to FE’ s survey indicate upgrading equipment is the preferred method to improve productivity and is their most important need. Closely related is the need to improve skills training of line supervisors (81 percent) and line operators (78 percent). Roughly three-quarters of survey respondents indicate additional needs that include improving maintenance systems, installing process control upgrades and improving the monitoring of key performance indicators (KPIs). Other productivity enhancers cited by processors include improving marketing/production communication, communications between manufacturing levels/areas, flexibility on existing lines and supply chain management.
To improve packaging operations, most processors are training operators and involving them in maintenance and improvements. Improving changeover is the second-most popular strategy, but processors realize that to improve changeover speed, changing out and upgrading equipment will likely be necessary. Other key strategies mentioned include improving throughput, decreasing energy usage, increasing availability/uptime, adding inspection equipment and changing packaging materials.
Getting employees involved with continuous improvement programs is another way to increase productivity. Nearly half of the companies responding to the poll have implemented lean manufacturing while slightly less than a third follow Six Sigma practices. Other methods to improve quality and productivity include total quality management (44 percent of respondents use it), total productive maintenance (31 percent) and theory of constraints (7 percent).
Thirty-seven percent of respondents seek recommendations from third-party audits to improve their operations, and 26 percent use self-directed work teams to increase productivity. While it may be difficult to imagine, 14 percent of those polled have no continuous improvement program in place.
One issue that hasn’t gone away, but varies from location to location, is the availability of skilled tradespeople, technicians and engineers to work in food plants. Many respondents have worked with system integrators and engineering houses to obtain some of the skills they need when they can’t hire the right people. (For more on this topic, see “The employee engagement challenge: Hiring, training and retaining key staff,” FE, August 2013.)
While there may be questions about fulfilling FSMA compliance issues, food processors are well aware they not only need workplace programs; they also need to reach out into the community and be sustainable as well. About 84 percent of respondents have workplace programs (such as safety, diversity, etc.) in place, and about three-quarters of them have social responsibility/community outreach programs in place—such as charitable contributions, etc.
In addition, 59 percent of the respondents have a system in place that measures water and electricity use per unit of production. More than a third (36 percent) do greenhouse gas computations and measure their carbon footprint. About one-tenth also do GRI/G3 (Global Reporting Initiative) reporting. v
Information in this report is drawn from an April 2013 survey of Food Engineering readers. This year’s survey respondents were a little more evenly distributed between engineering (25 percent) and operations management (21 percent) compared to last year, which was more heavily weighted to engineers—36 percent and 15 percent respectively. Quality control professionals represented 16 percent of respondents while general administrative management personnel numbered 15 percent of those polled. R&D professionals counted for 10 percent of the audience, with nearly equal percentages from production management, purchasing and packaging.
Beverage category respondents (19 percent) and processed meat/poultry and seafood products respondents (19 percent) accounted for almost two-fifths of the total number participating in this year’s survey. Other categories included: baking and snack food products, 9 percent; cereal and grain-based products, 9 percent; flavors/ingredients/supplement suppliers, 8 percent; dairy and frozen novelty products, 7 percent; shelf-stable foods, 6 percent; candy and confectionery products, 5 percent; and frozen food and prepared meals, 5 percent. Respondents from corporate and divisional headquarters, R&D and pilot plants accounted for 4 percent of the total.
Respondents according to company size included: 100 employees or fewer, 25 percent; 101 to 250 employees, 32 percent; 251 to 500 employees, 25 percent; 501 to 750 employees, 7 percent; 751 to 1,000 employees, 1 percent; and more than 1,000 employees, 10 percent.