With material price inflation now regularly making headlines, the Supermarkets have staked their intent very clearly: suppliers are largely expected to suck it up.
Richard Shipperbottom, founder of industry specialists Applied Acumen draws upon vast experience of reducing material costs in the food and drink sector over the last twenty years to give us 3 tips for reducing material costs. How many will you implement in 2017?
1 Challenge your material standards – independently!
When a new product is developed and launched, certain assumptions are made regarding the various losses that the manufacturing process will incur, over and above the base recipe. Often, we find that these assumptions have then not subsequently been challenged for a variety of reasons, and when they have been challenged, the premise has been not to make an improvement per se, but rather to adjust margin expectation.
Of course, changing the standards makes no difference to your margins, but the process of examining them always throws up some interesting facts that if acted upon will certainly make a difference. Examples of this include:
- Who is paying for the transfer losses occurring from your inbound goods supplier? This is especially relevant for things like chocolate, say, where you could be paying for the 30+ kilos that return back to the supplier in the bottom of their tanker.
- Your purchasing department buy a ton of ingredient to obtain the target price per kilo, yet 900 kilos are actually thrown away because it goes out of date before it can be used.
- Your standards are based upon imaginary long runs that never materialised, so changeover losses as a % are much higher than planned.
2 Make it difficult, not easy, to waste material
In virtually every step of manufacturing and distributing a food product there are choices we make in regard of making it easy or making it difficult to waste materials. Which choices will you make in 2017?
In designing a product, we see development focus almost exclusively upon the various aesthetic qualities, flavour, packaging, and so on, with cost engineering often a retrospective and subservient step. In manufacturing we see ingredients transferring from one kind of container to another, with consequent progressive losses. We see machine designs likewise tainted with areas only a jet wash could reach, and conveyors with gaps and height changes.
In supply chain and planning we see disconnects between sales and production only a warehouse and extra outside storage can cope with, we see changeovers avoided and changeovers included that shouldn’t be there, and we see uncalled for volumes and batches and remakes, and we see obsolescence and disposals, and damage and returns.
3 Adopt miserly behaviours – act like a bank!
Behaviour – what people say and do – has by far the biggest influence on material waste performance, and how we think determines our behaviour. To change our behaviour, we must therefore change how we think. So, what is wrong in our thinking, when thinking about material waste?
Have you ever walked in to a bank and found pennies, pound coins or tenners lying on the floor, dotted in corners, leaning against various surfaces, and occasionally someone walks by and sweeps up a bit here and there, or once a day, or even once a week a thorough good collection happens? No, of course you haven’t. Would you bank in a place like that? No, neither would I, but for some reason we think it is OK for a food factory to be that way, and it is entirely the wrong mind-set.
Having been in every kind of food factory, right across the world, including the good, the bad and the downright ugly, one thing is clear: get the mind-set right and the rest will follow. If you want to speed it all up, give us a call – and don’t forget to check out our waste reduction FAQ’s here too.