The ongoing impact of COVID-19 on the food industry and its supply chains
COVID-19 will continue to make an impact on the food industry and its supply chains. FE spoke with a few experts from the A&E/C community to get a wide-angle view of some of the key issues.
“The COVID-19 pandemic has the potential to drive significant change to the food and beverage supply chain,” says Keith Perkey, vice president, Haskell Food & Beverage Division. Previously processors were reluctant to have extra capacity in warehouses or on production lines; however, given the learning that will come from the supply chain disruptions caused by COVID-19, that model may change and drive additional capacity to be constructed. There is also a significant likelihood that a contagious virus will add complexity to how manufacturing systems are laid out to provide additional social distancing and monitoring if necessary.
The surge and shift in customer and consumer demand from the foodservice channel to retail, driven by increased at-home usage due to COVID-19 sheltering-in-place precautions, will result in some consumer packaged goods manufacturers seeing a corresponding increase in volume, revenue and profit, says David Ziskind, director of engineering, NextGen Ag, Black & Veatch. Additionally, many food manufacturers may want or need to address their facilities and operations to be even more prepared in the event a similar situation would occur again. This could result in manufacturers upgrading or renovating facilities to better address flexibility in producing a variety of product sizes, etc., as well as employee safety best practices.
Funding has become more available. “With ‘cheap money,’ companies can build a facility for their projected future needs with either traditional bank financing or asking for extended payment terms from vendors,” says Ziskind.
However, often much of this investment is driven by the need to update older facilities to meet Food Safety Modernization Act compliance standards, says Brian Commerford, Food & Consumer Products Group, Burns & McDonnell. “We are also seeing investment increases in new processes and production lines as the demand grows for innovative products and packaging. On the other side of the investment spectrum, greenfield plant spending is primarily taking place in the dairy and meat processing sectors.”
What about renovating a brownfield site? Saving a few dollars by purchasing an existing or brownfield facility may not make sense, especially if a manufacturer might inherit a design that is not ideal for its needs, or a facility that contains existing pathogen loads, says Ziskind. Combined with state and local incentives, greenfield facilities for large manufacturers tend to make sense.
Automation can help solve some of these problems and is gaining traction, particularly in packaging, warehousing and distribution operations, says Commerford. Thanks to rapidly advancing artificial intelligence technologies, automation provides repeatability and removes human error. The use of automated storage and retrieval systems (ASRS) is increasing in popularity as processors look to reduce labor costs across their supply chain networks. ASRS can be used for a wide variety of food product types in both the ambient and refrigerated spaces. As demand for fresh foods increases, distribution and warehousing facilities need to be in closer proximity to consumer markets, where real estate prices play a major factor in total cost of ownership.
For more on the state of plant construction, see FE’s Annual Plant Construction Survey.