Like so many things which seem easy, it is often not so simple, but is becoming more of an essential requirement in today’s competitive markets.
Most manufacturers will appreciate that their business conceptually is simple enough …. a conversion process of raw ingredients and packaging into quality finished products that go out to customers and stay out. So why isn’t it simple too?
What turns the simple ideology into a complex business is the extent of variants (number of SKUs in the product portfolio) and the number of process variables to be standardised, optimised and managed, to ensure that, not only are the finished products totally compliant, legal and of consistently high quality, but they need to be manufactured at a cost that each company can afford.
Even if it was once possible (and that in itself is a debatable point) to spend whatever is necessary in order to create quality products, that is no longer a commercial reality.
I was recently talking to a vegetable processor serving all of the UK supermarkets, who’s spokesman told me that they had managed to obtain the same volume of orders from all their customers that they had last year, but at lower prices. Whether we like it or not this, for so many manufacturers, is a commercial reality. The supermarkets, even if they were minded to allow a price increase from their own-label suppliers, would soon find themselves at a competitive disadvantage with other multiple retailers, especially the discounters.
Contrast this reality with that of the beleaguered manufacturer who, just this year, has had an increase in minimum wage to absorb, increased pension contributions, increased raw ingredients and packaging costs (contributed to by the fall in the value of the pound) and increased energy costs. This relentless pressure and perpetual dichotomy between fixed selling prices and constantly increasing input and conversion costs, can indeed be crippling and has sadly forced some manufacturers out of business altogether.
Our concern is that, unless the remaining manufacturers recognise that they must be willing to look inwardly to reduce risk and conversion costs, whilst maintaining high quality standards, then even more may risk going out of business.
It probably wouldn’t be right in an article of this nature to not make some mention of Brexit. We have already touched on the fall in the value of the pound which at least, to some extent, has been caused by the uncertainty surrounding the future beyond Brexit. Sadly, we have lost three years during which this uncertainty has increased and consequently the value of the pound continues to be depressed.
No Measurement without Recording,
No Recording without Analysis,
No Analysis without Action,
No Action without Measurement
Golden Rules of Performance Improvement
However, the biggest threat for many manufacturers is not Brexit, but the possibility that their supermarket customers will be forced, through their own High Street competition, to source products at still cheaper prices.
Even if we assume that the raw material costs for most manufacturers are very similar for comparable materials or products across the European spectrum, we can no longer ignore the fact that the UK has one of the highest minimum labour rates in Europe and that many of the products available in supermarkets, especially many of the staples, can be produced in other countries, especially in low wage economies, at lower prices. Against our minimum wage of £8.21 an hour, for example, the minimum wage in Bulgaria (the lowest of the EU countries) is £1.50 per hour.
It is easy to see, therefore, that even though UK manufacturers are under enormous pressure from both ends of their manufacturing spectrum, the pressure they face today could be small compared to the pressure they may face tomorrow if UK supermarkets choose to source more of their products abroad.
We hear and read almost daily of factory automation, artificial intelligence (AI) and Industry 4.0, etc., all of which, with suitable investment, will doubtless help to improve the efficiency of European manufacturing operations, but many will realise that much of the UK food manufacturing industry, such as fresh vegetables and fruit, ready meals, is still very labour-intensive and it, therefore, follows that companies manufacturing these labour-intensive products will continue to face the biggest risks from low wage economies.
Half a century ago, when I began my career in the food and drink industry, it was not unusual to find companies that were so heavily overstaffed, we often found three people doing one person’s job. In those days, the people available had time to optimise their manufacturing processes by carrying out such useful things as process capability studies, in order to set optimum control limits. Now, because of systematic reduction of the headcount to reduce costs, we are more likely to find one person ‘doing three peoples’ jobs’. Therefore, it is now virtually impossible for such things as manual process capability studies to be carried out.
Even where companies cannot afford or justify a full commitment to automation, they must appreciate the value of instant visibility as a pre-requisite to sustained performance improvement and optimisation. Where in the past, companies may well have costed a product and added in a safety margin to cover mistakes, this is no longer viable. So for all the reasons mentioned above, companies facing this relentless pressure of price and cost, must continue their internal performance improvement initiatives.
This means that they must, at the very least, deploy systems which are not paper dependent, (as they carry little or no discipline, and no instant visibility), in order to be able to present immediately to the whole team both when mistakes occur and also show performance improvement opportunities that can be instantly acted upon.
Systemisation is therefore absolutely essential for any company seriously intent upon minimisation of risk and wastage, whilst maximising Right First Time, every time, at lowest manufactured cost. It has become impossible to manage all the expanding complexity and variation within most conversion processes by simply introducing more paper records.
As there is for many companies, such a significant level of wastage contained within the conversion process from raw materials to despatch, to implement a paperless system with the visibility mentioned above should provide rapid and cost-effective improvements, such that no new money is required. The right system for the right application would therefore be financed from the cost of wastage, already normalised and sustained within the conversion process of many operations.
Welcome to the Paperless Factory!