Food manufacturers are in an extremely competitive industry, which is typically a low margin business depending on the finished products produced; ingredients and materials used and market opportunity. There are a number of factors that impact profit margins of a food manufacturer.
Inventory, Facilities and Equipment
In speaking with manufacturers, they speak often about two very important assets. One is inventory. Each level of inventory – from the expensive and perishable raw materials to the value added finished products – in most cases have finite expiration dates. Managing inventory through supply chain, distribution, production and procurement planning can help manage margins. The second is their facilities and equipment. Producing food is complicated and expensive. Consumers might go to the grocery store and ask, “why is food so expensive?”. But if they ever had a chance to tour a food production facility, they would probably instead ask, “why doesn’t this food cost more?”
Food manufacturing facilities are very large with complex operations using sophisticated machinery and technology that can cost millions. The slightest interruption of one of these processes or issue with one of the machines can cause production to cease, resulting in an absence of products to sell and a serious break in the supply chain. Managing the entire facility and all components inside them effectively is essential to protecting profit margins and maintaining superior customer service.
There is more to plant maintenance, however, than just the production lines, especially in a food manufacturing facility. Bacteria and other contaminants can accumulate on anything and anyone, which can jeopardize the integrity of food. Food processing facilities and the employees that work in them need to follow strict guidelines to prevent compromising the integrity of ingredients, packaging materials, work-in-process and finished goods. This means in addition to regular machine maintenance, maintaining clean facilities, working equipment such as fire extinguishers and other preventative supplies. One major source of bacteria is the actual plant and warehouse flooring. The slightest chip, scratch or crack can be a breeding ground for many organisms that can contaminate food products.
Effective Asset Management
How can a food and beverage manufacturer ensure that every aspect of their facilities are being properly maintained to ensure food safety, efficient production, essential flow of the elements of the supply chain and ultimately deliver great customer service?
The entire facility – the mechanical, physical and human components of the operation – needs to be synchronized, monitored and managed. An effective Enterprise Asset Management (EAM) process along with a sophisticated system can help manufacturers effectively manage physical assets. An asset management process and system that includes design, construction, commissioning, operation, maintenance and replacement of plant, equipment and facilities can assist in optimizing assets and minimize repair costs.
An Enterprise Asset Management system allows management to gain visibility into asset-related costs and projects with a complete analysis of labor, material and contractor expenses. Inventory management achieves the ideal balance between having the right spares on hand and minimizing inventory investment. All aspects of facility management and maintenance, from the physical buildings to the machinery inside, are synchronized to ensure a smooth operation.
Value and Benefits
Profits are critical to food manufacturers. Reducing costs increases profits. The value that food manufacturers can receive from an effective Enterprise Asset Management system is staggering.
- Reduced Maintenance Expenses
- Increased Production Yield
- Reduced Maintenance Downtime
- Reduced Scrap and Rework
- Reduction in Annual Purchases
- Improved Labor Utilization
- Increased Equipment Service Life
Each of these values represent areas that directly impact profit margins. An effective Enterprise Asset Management solution ensures that a plant is consistently able to meet production requirements at the lowest cost possible, while maintaining the high standards of quality and safety and the ability to become an agile, effective enterprise.