The state of food manufacturing: The need for speed
A focus on lean manufacturing, quality improvements and increased automation helps processors meet rapidly changing demands.
One glance at this year’s Food Engineering State of Manufacturing survey indicates, that for the most part, food and beverage processors are facing a lot of issues—many the same as last year. But this year, increasing productivity through automation seems to be edging out many other priorities. Last year, the emphasis was on food safety, pushed along by FSMA and the need for GFSI certification, which is often required by customers. With so many recalls in the recent past, processors have realized unsafe products not only make people sick, they could put manufacturers out of business.
Assuming processors have a handle on food safety, the next challenge is getting high-quality products out the door faster than competitors, which becomes more difficult as equipment ages. Consequently, processors are concentrating on automation and lean manufacturing to meet rapidly shifting consumer demands. Notwithstanding these challenges, manufacturers know they must come up with new, creative products while keeping prices low and food safe—if they want to stay in business.
- Is your throughput increasing?
- Throughput faces challenges
- The need for automation
- The measure of process efficiency
- Structural changes to improved productivity
- Packaging—the last bottleneck
- Food safety—on target
- Corporate altruism scores high grades
Most processors responding to this year’s State of Manufacturing survey have several reasons for expanding gross throughput at their plants. In fact, 58 percent of respondents, a 2 percent gain on last year’s number, see a rosier picture this year. But the numbers also reveal a potential problem:13 percent expect declines in throughput, opposed to just 8 percent last year. This year, 29 percent are expecting no change in throughput.
Of those that expect an increase in gross throughput, the majority attribute it to an increase in sales or new product offerings. Increases in gross throughput also are attributed to business growth, increased demand and additional equipment to handle the processing demand. Customers who were negatively affected by high commodity prices due to last year’s drought are coming back for business, says one respondent.
But beyond these basic reasons for an expected increase in throughput lay many others. One processor explains it simply, “People have more money to spend.” Consequently, manufacturers are “improving processes to ramp up the making of new SKUs.” Several survey respondents are also adding organics to their portfolios wherever it makes good business sense. But most importantly, processors are expanding their portfolios to keep up with their competitors.
Processors cite several reasons for improved product flow through their plants. One operations manager notes new equipment naturally has higher output, and with better training for employees, retention has substantially improved. Holding onto dedicated, seasoned employees makes a huge impact on keeping lines running because experienced employees know where to look when problems arise.
On the flip side, when production problems continue to plague lines, who benefits? The competition. One operations manager reports an increased customer demand for products because a competitor has been experiencing ongoing production problems.
Engineering departments cite several reasons for increased throughput, from fulfilling increased market demand to technical improvements. One reader who responded to the survey suggests there is more interest among equipment suppliers in the food and beverage industry, which means suppliers are apt to spend money on research to improve processing and packaging machine efficiency. Important too, according to several respondents, is that corporate support for funding new expansion projects has increased. These projects include adding operations and capacity, installing automated systems, building new plants and improving existing ones.
When existing plants are no longer able to support the demand, the only option may be to move to a larger, new facility, which is exactly what Ocean Spray did, moving its juice bottling operations in Bordentown, NJ to the Lehigh Valley (near Allentown) in Pennsylvania. The $110 million, 315,000-sq.-ft. processing and packaging plant can produce 32 million cases of beverages per year, thanks to new Krones and Tetra Pak lines.
According to this year’s survey, equipment and engineering support is growing. One Food Engineering reader reports his company has decreased unplanned downtime and increased production days. Another engineer reports newer technology helps maintain consistent trends and track products through the entire processing/packaging cycle. Some processors also have reconfigured production lines to run faster, increasing efficiency while maintaining environmental controls.
People in quality departments report increased throughput for several reasons, including more demand for products and a bigger export market, improved growing strategies and changes in customer needs. One QC manager cites developing new products and bringing outsourced activities (e.g., co-packing) in house to gain more control of product quality.
If you’re a co-packager, your throughput may be decreasing because your customer is bringing some level of processing in house to reduce costs. But throughput has been negatively affected by several other reasons as well. And many of these, such as weather-related issues, are out of a processor’s control. Additional reasons for decreased throughput are:
- Downturn in demand for carbonated soft drinks
- Declining RTE cereals market
- Consumer demand for less sugary products
- High meat costs and slow sales
- Unfavorable traffic patterns/logistics (often weather related)
- Too much inventory and other market conditions
- Continuing pressure from China and Southeast Asia.
Sourcing key commodities and ingredients is another important issue. For example, cattle and pork supplies have been cut back due to weather-related issues (e.g., the drought causing lack of feed) and porcine viruses. The higher costs of materials to maintain fruit crops, coupled with a declining customer interest, have slowed throughput for one processor. Another processor reports the high prices of raw materials; droughts, storms and a bad winter in the Northeast; and consumers’ cutting back on red meat consumption as obstacles to increased product throughput.
This year’s study reveals processors are setting aside more capital for the purchase of production, packaging and process control equipment, software and professional services. In 2013, 20 percent of location budgets were designated for this category; this year’s results show an increase of almost 5 percent to 24.59 percent. Interestingly, this increase is coming from opposite ends of the budgetary allotment spectrum. For example, 31 percent of respondents are designating 1 to 5 percent of their budgets to this category; last year, the number was 24 percent. Meanwhile, budget allotments of 6 to 20 percent of total expenditures are consistently lower—almost half of 2013’s results. However, budget allotments of 21 to 50 percent are consistently higher than last year’s numbers, 13 vs. 6 percent of respondents.
When it comes to allocations for purchasing equipment, software and professional services, 16 percent of respondents say their budget would fit in the less-than-$100,000 bracket, a 3 percent decrease from last year’s figure of 19 percent. The number of processors allocating from $100,000 to $5 million remained almost unchanged from last year, but those with budget allotments over $5 million jumped from 14 percent in 2013 to 19 percent in 2014.
Breaking down the numbers a bit more, 48 percent of 2014 respondents indicate their location’s budget for the purchase of packaging and processing equipment is the same this year as it was in 2013; more than a third indicate their budget has increased, on average by 39 percent. Almost half (46 percent) of the respondents—who say their budgets for production, processing and packaging equipment have increased—have seen increases in excess of 25 percent.
A majority of this year’s survey respondents (57 percent) say their budget for manufacturing automation and control hardware and software is the same as 2013’s, compared to 66 percent of respondents with unchanged budgets last year. However, 34 percent say their budget has increased by 26.4 percent—double last year’s average increase of 13 percent.
What’s more telling about priorities in 2014 budgets is what purchases are planned for hardware and software. Almost one-half (46 percent) of respondents plan to purchase both motion/motor control hardware/software and programmable controllers (PLCs) in 2014, compared to last year’s numbers of 28 percent for motion products and 33 percent for PLCs. The emphasis on automation—especially for packaging—has taken priority over the purchase of lab analysis equipment and software, which ranked second highest in 2013, with 32 percent of processors purchasing this equipment. In 2014, only 27 percent of respondents plan to buy lab analysis products, decreasing their rank to number seven in 2014’s table of likely purchases.
In addition to installing automation to improve output and efficiency, many plants are making structural changes to improve their competitiveness. In the past year, 42 percent of survey respondents have added a new line and/or changed a process, followed by 38 percent that have expanded/renovated/added capacity to existing plants and/or added manufacturing staff. Thirty percent have added engineers, and one-quarter have installed advanced automation systems. One in five has consolidated manufacturing facilities, and 14 percent have outsourced more work.
Overall equipment effectiveness (OEE) is a measure or key performance indicator that determines the effectiveness of a processing and/or packaging line. This year, respondents’ OEE numbers are down slightly from last year: Of the locations that calculate the measure, the average current OEE is 71.68 percent, down from last year’s 74 percent. Processors also set their targets a little lower, an average of 78.95 percent vs. last year’s 83 percent.
While food processors seem to have taken a more realistic look at OEE expectations, they have, nevertheless, found other ways to fine-tune and improve output through various continuous improvement (CI) programs. At the top of the list, 52 percent of respondents indicate they are following lean manufacturing principles, an increase over last year’s figure of 47 percent.
This year, 34 percent of processors indicate self-directed work teams augment their CI programs, whereas 26 percent reported using this approach last year. One processor notes using a team approach can actually reduce head count, making the operation more effective as employees take direct ownership of the process. This processor also reports cross-training for operators to do PM activities improves uptime and output.
This year, 35 percent of processors state they have taken recommendations from third-party audits; 33 percent have total quality management (TQM) systems in place and/or are following Six Sigma practices. Last year, 44 percent of respondents reported practicing TQM; the percentage of those following Six Sigma and using third-party audits remained relatively unchanged.
While CI programs can improve productivity, sometimes more major surgery is indicated to meet consumer and customer demands. For example, one processor notes the demand for high-protein products will require a change in processing equipment capabilities. Another processor says more retail product offerings are creating the need for upgraded packaging and graphics. A manufacturer adds that more customization of product forms (packaging to meet customer demand) and better-for-you trends such as gluten free and non-GMO make the addition of new lines and equipment vital to staying in business.
In addition, one-quarter of respondents have installed advanced automation systems and consolidated manufacturing facilities. Automation systems, however, can be problematic when it comes to longevity—or more specifically, obsolescence. “Electronic obsolescence as a facility ages (15 years and more) is a real concern,” says one engineer. With PLC obsolescence, there is a need for global engineering tools that can be deployed anywhere in the world with identical applications and configurations, adds another Food Engineering reader.
Twice as many respondents (18 percent) compared to last year (9 percent) report an acquisition by or merger with another company, either of which can make integrating systems and knowledge bases tricky for engineering staffs and system integrators. Integration issues, combined with a reduced operations staff, also can increase the difficulty of moving projects ahead. Not every facility undergoes a major operation to improve productivity. As with last year’s survey, most facilities look at upgrading equipment as the top way to increase throughput. This year, 71 percent of respondents need to upgrade some equipment; 17 percent say they have a great need for equipment upgrades.
One processor suggests machine operators must take the ownership of lines and equipment, and once they have assumed it, they will become the “experts” of the equipment they run day-in and day-out. However, constant change makes it more difficult for operators and engineering staffs. For example, one engineer notes, “With our latest merger, certain equipment lines that are currently being used to manufacture product here are going to be redesigned by our sister company, affecting our ability to make engineering changes on the fly.”
Undoubtedly, packaging can slow down an entire operation, and the bottleneck can appear almost anywhere, from the filling stage to sealing and cartoning to palletizing. One respondent views packaging automation as both labor intensive and slow. Another believes the packaging operation is his facility’s weakest link. According to yet another survey respondent, packaging, case packing and palletizing need to be automated to reduce labor costs, and KPIs must be measured and tracked to increase control and performance.
Several other issues loom in the packaging operation:
- Old equipment needing constant repairs
- A change to pouch bagging
- Packaging changes—from paper to poly
- Different-sized products
- Insufficient automation in labeling and packaging
- Hand sorters
- Switching from high-ox to low-ox packaging
- SKU proliferation
- Network connections/monitoring of equipment
- Handling “micro-brands.”
It’s not surprising 52 percent of survey respondents indicate upgrading packaging equipment is number one on their list for improving packaging operations, while 45 percent say improving throughput is number two on their list for fixing packaging operations. The third ingredient to improving packaging operations is training operators and involving them in maintenance and improvements. Other areas of improvement—include improving availability and uptime, increasing changeover speed, decreasing energy usage and adding X-ray or metal detection systems.
On the topic of the Food Safety Modernization Act (FSMA), the responses track closely to last year’s for the most part. Thirty-eight percent of respondents say they already practice what FSMA preaches, down from 46 percent last year. A new question—whether processors have adopted a GFSI scheme as part of their food safety plans— garnered a 31 percent favorable response rate. This may partially explain why fewer respondents say they are creating a checklist of what is needed to comply with FSMA, with 21 percent saying they have created a check-off list, compared to last year when 32 percent of respondents said they created a FSMA checklist. Slightly more processors are moving toward electronic recordkeeping.
Processors have several food safety methods already in place and in use. Nearly three-quarters (74 percent) are using lot-level traceability, and 68 percent have a food safety management system in place. Seventy percent say they have a recall plan in place; 69 percent say they are performing comprehensive staff training in food safety. About two-thirds of respondents have systems for food allergen controls and audit suppliers and co-packers.
The percentage of processors with cGMP programs and microbiological and/or chemical testing of raw ingredients is about 8 to 9 percentage points lower than last year. While respondents having paper-based HACCP plans in place decreased from last year (54 to 48 percent), the number of those with electronic HACCP programs increased from 36 percent in 2013 to 41 percent this year.
|Who participated in this year’s survey?|
Information in this report is drawn from the April 2014 survey of Food Engineering readers. This year’s makeup of respondents includes 43 percent from engineering; 18 percent, operations management; 12 percent, quality control; 9 percent, general administrative management; 4 percent, production management; 4 percent, R&D; 2 percent, packaging; 2 percent, purchasing; and 6 percent from other categories.
Processed meat, poultry and seafood products (18 percent) and baking and snack food products (16 percent) account for about a third of the respondents. Ten percent of the participants work in the beverage products industry, while dairy and frozen novelty products, flavors/ingredients/supplements and frozen foods/prepared meals each account for 8 percent of the respondents. The remainder of respondents include cereal and grain-based products, 7 percent; shelf-stable foods, 6 percent; candy and confectionery products, 4 percent; corporate and divisional headquarters/R&D/pilot plants, 3 percent; and other, 12 percent.
Nearly four out of five respondents’ organizations have a corporate social responsibility or sustainability program in place, the majority of which include workplace programs; last year, 73 percent reported having such a program. Workplace programs (such as safety, diversity, etc.) are in place at 94 percent of the processors responding to the survey, up from 84 percent last year.
Processors that calculate water and electricity use per unit of production number two out of three this year, up from last year’s 59 percent. While there wasn’t much change in the reporting of social responsibility/community outreach programs (72 percent this year vs. 73 percent in 2013) and greenhouse gas/carbon footprint calculations (36 percent this year and last), the number of food processors involved with the GRI/G3 (Global Reporting Initiative) increased to 18 percent this year, compared to 11 percent in 2013.