A coordinated approach to asset management has value for facilities, equipment and the people responsible for both.
From the board room to the break room, improving asset performance through better management is on the minds of a lot of food and beverage manufacturing professionals.
A sleek new building that sips energy and utilizes natural light is all well and good, but the assets of production pay the bills. Managing the equipment and machinery in the plant is front and center in organizations’ thinking, come good times or bad. When new plant construction bottomed out in 2008 and 2009, relocation of production lines sustained many of the architectural engineering (A/E) firms serving the food industry. “Think of it as a line on rollers,” Walt Staehle half-jokingly says. Much of the relocation work is driven by a focus on boosting supply chain efficiencies, allows the former Kraft production manager and current Siemens automation executive, but the activity underscores a simple truth: It’s easier to walk away from a building than a production line.
“Over the last two years, companies have tried to be as efficient as possible in the space they have” to avoid undertaking new construction, observes Michelle Comerford, who heads Austin Consulting’s site selection group. An uptick in greenfield projects began in late 2010 as economic pressures eased and manufacturers maxed out production capacity in existing plants, but decommissioning and relocating of lines accounted for a lopsided share of the Cleveland-based A/E firm’s business in the recent past.
By and large, line relocations are driven by one of two factors: a desire to fortify a regional production network to reduce or better manage supply chain costs, oftentimes by lowering labor costs. Line relocations can backfire, however. One food engineer recalls the unfortunate fate of a dry soup manufacturer that used to operate in his facility: After being shipped several hundred miles to another plant, the well-tuned production line never performed the same and eventually was mothballed. The human assets left behind proved to be the key to efficient throughput.
“As technology develops, the importance of labor skills increases,” acknowledges Comerford. “There’s something to be said for building up the skill level in a community over many years.” Recognizing the importance of skilled operators, maintenance technicians and others, food companies often relocate a core group when production shifts to another location, making quality of life a consideration in site selection. The people side of the equation is not limited to highly automated production. “Fresh-cut produce is highly manual and requires specialized people with unique skills,” she notes. “It can take more analysis to move that type of operation.”
The acquisition wave that engulfed the food industry at the outset of the 21st century produced a glut of facilities that had to be divested. More than 40 Pillsbury plants transferred to General Mills ownership when that 2001 merger closed, putting thousands of managers, maintenance professionals and others in the accountants’ crosshairs. Reduced overhead is the essence of synergy from a business management perspective.
“Synergy means people are going to be fired,” concurs Brian Boyle, senior managing director of McGladrey Capital Markets’ food & beverage group. The Chicago investment banker, who represents both buyers and sellers of food plants, believes the industry is evolving toward a hybrid model in which manufacturers will maintain one megaplant and a network of regional production facilities to ease distribution vulnerabilities as fuel prices increase. Boyle considers many factors when deciding if a plant should be shuttered, and some are beyond the control of the local staff. Nonetheless, the viability of a facility and the jobs it supports is affected by the level of its automation and the quality and working condition of its equipment.