The State of Food Manufacturing
From recall readiness to raw material and energy costs, Food Engineering readers weigh in on issues affecting workers and the workplace for food manufacturing.
Escalating energy prices were top-of-mind topics when this year’s State of Food Manufacturing survey was mailed to 3,000 readers of Food Engineering, and while sustainability programs helped put the spotlight on conservation efforts a year ago, sky-high costs for all types of fuel put teeth into energy-savings programs this year. Presented with a list of 20 automation purchases their facilities intended to make, 16% say energy management software is on the shopping list, making it the eighth most frequently cited expenditure. In previous surveys, energy management consistently ranked at or near the bottom.
Energy and water conservation also top the list of trends that will most affect manufacturing operations over the next five years, dislodging the perennial number one issue, food safety. A year ago, fuel and energy costs was the fourth most-frequently mentioned issue.
If energy costs are the most pressing concern, raw material prices aren’t far behind. Three-fourths of readers indicate their companies have been forced to raise prices to cope with higher raw material costs.
In an open-ended question on energy’s impact, some tie rising energy prices to raw material costs. Manufacturers are deploying a variety of tactics to temper the impact of energy, with 56% saying they have cut costs in other areas and 42% indicating their firms have absorbed rising raw material costs. Switching to cheaper ingredients is another response, with one quarter indicating formulations are being changed and 12% sourcing ingredients off shore. Remarkably, one in 20 say their firms are moving manufacturing itself off shore as a hedge against higher material costs.
Profits are being pinched by energy costs in ways not seen since the Arab oil embargo. “Freight costs are up 30%, impacting profits,” one respondent wrote. “We’re estimating a 5% drop in sales because of energy,” another wrote. Increased energy prices are having a profound impact on profitability, with one reader pegging it at “20% off the bottom line.”
Responses are as varied as the companies themselves. “Currently looking at ways to self-power our facility through our own byproducts (i.e., methane gas),” one individual wrote. Energy-efficient lighting and cooling systems are being installed at many facilities, along with variable frequency drives and motion sensors to turn off utilities when not in use. A common refrain is that dollars for replacement equipment and other priorities are being shifted to energy-saving initiatives.
Looking for Mr. Goodplant
Third-party audits of plants’ record keeping, sanitation procedures and quality control are a growing fact of life in today’s production environment, with many large customers laying down their own criteria for policies and procedures. A series of survey questions gauged how much time is being invested in audits and how production professionals view those events.
Every other month is the norm, with readers reporting an average of 5.99 third-party audits at their facilities last year. The median is three third-party reviews, with one in eight plants undergoing 10 or more in 2007.
Almost half the respondents say audit-related activities required 100 hours or less of staff time last year, but others spent significantly more time. Overall, the average was 314 hours.
While audits certainly have their detractors, food professionals overall give the independent reviews a positive assessment. “A reliable means to check your processes” and “thorough but reasonable” typify many of the written comments. Generally, food professionals say there is value in the feedback they receive. “I like the direction they are headed in,” one reader wrote. “There is never too much food safety.”
More negative reviews resulted from audits that were too perfunctory than too picayune. Several respondents complain about the lack of standardization, with one writing, “too many versions of the same questions.” As long as people are investing time and money in them, audits should be as rigorous a possible, several said. “Our house audits are tougher than all six outside audits,” a reader wrote.
Six years after the Bioterrorism Act mandated tracking and tracing procedures in food, manufacturers are comfortable with their capabilities. Presented with 20 options for process control investments this year, only 22% indicate automated tracking and tracing systems are in the mix, half the proportion in 2006. Tracking and tracing slipped to the ninth-highest automation priority, down three spots from 2007.
Food professionals are confident in their recall readiness. Records and tracking information on all materials and ingredients are cited by 55% of respondents as the must-do best practice for effective track and trace. The next most frequently mentioned practices-software/barcodes and mock recalls-are cited by only 8% and 7%, respectively.
Almost half of the respondents indicate worker safety programs are being beefed up at their plants, though the specific actions are many and varied. Air quality monitoring and ventilation are in place at one in 10 plants, while dust explosion and arc flashing are top of mind at 8%. The OSHA Star program, employee health screening and even exercise programs were mentioned as initiatives that are underway.
A more formal approach to continuous improvement is taking root. A year ago, readers were somewhat vague about improvement methodology; today, specific initiatives are cited, with lean manufacturing and total quality management leading the way. Six Sigma is practiced at a third of America’s plants. Only one in 10 say no continuous improvement initiative is in place.
Most food manufacturers have invested in asset-management systems, though the results are decidedly mixed. Half of respondents say their facilities failed to realize a return on those investments, and 14% put ROI in the 1-3% range. However, the investment was justified for some, with 4% reporting ROIs of 7-9% and 16% pegging it at 10%-plus.
Asset utilization is a growing concern, with many respondents flagging overall equipment effectiveness as a key metric. Almost one in five mention better OEE reporting as a key to productivity improvement.
One in seven expect facility throughput to increase at least 10% this year, with added flexibility the key factor for almost a third of them. Advanced automation will drive big production gains for 15% of respondents, while 73% say they will build or add a new line.
Capital budgets are up 5.4% this year. The outlays represent on average 21% of overall facility budgets. That’s down two points from a year ago, with a similar slip in automation and control spending as industry reacts to a down economy.
Productivity gains will be achieved at existing plants with updated automation systems, physical improvements or both. In fact, expanding or renovating a facility to boost capacity is perennially cited as the most common structural change at food companies, and this year is no exception. About half the respondents say their plants expanded in the last year. Plant expansions are the fifth-most frequently mentioned strategy for productivity improvement, up sharply from years past.
Slightly more plants reduced manufacturing staff than added bodies, a departure from recent years when net staffing was increasing. Outsourcing has slowed down, with 18% citing it as a structural change, down from 29% two years ago. New plant construction is also down sharply from recent years.
Retirements may finally be winnowing the ranks of food engineers, and finding the next generation is shaping up as a major challenge. Twelve percent of respondents indicate their engineering staffs were downsized last year, about the same rate as the previous four years. Only one in 10 added engineers, a sharp drop from the 16-19% rates of the last three years.
Who answered the survey
Engineers account for a third of the 171 responses to the 29th Annual State of Food Manufacturing survey, with operations managers making up another 22%. The 6% survey response rate is in line with previous surveys.
Production management, quality control and R&D professionals each constitute 10% of the response base. Almost half of the other 15% come from administration and general management, with the remainder scattered in packaging, purchasing, maintenance and other functions.
Baking and snack-food producers and processors of meat, poultry and seafood products are the dominant product categories, with each accounting for a fifth of the responses. Dairy/frozen novelty products and frozen foods/prepared meals each represent 7%. One in 10 are based at headquarter locations or pilot plants and R&D facilities.
Head counts of 100-499 characterize the work locations of 55%, with a third at plants with 500 or more employees. Another 16% work at plants with fewer than 100 employees.