CDC Factory

Whats for Supper? The Challenge of Increased Demand

December 4, 2008

As consumers become more economically minded and stay home for dinner more frequently, food companies are benefitting from a spike in demand for their value-based products. Certainly this is good news, but this rise is temporary. As soon as the recession is over, demand will level off again as consumers go back to their favorite restaurants again.

Where most food producers habitually respond to rises in demand with plans to expand their plants, there are two compelling reasons not to do so in the current climate:

  1. Given the temporary nature of the demand spike, permanent expansions are not advisable. The capacity increases needed for today are not sustainable in the long term, and if plants expand now, they will have idle lines later.
  2. The credit crisis makes borrowing money for capital improvements difficult or costly to get. "Capital Preservation" is the theme of the moment. Board rooms loathe borrowing and investing.

Food and beverage companies have a unique challenge, then: how do they capitalize on this spike in demand in a timely manner, while the current boon is upon us, and do so in a way that gives them the flexibility to decrease capacity as demand settles back down?

The answer is in the power of the plant floor. New research we've conducted with AMR Research, which I mentioned in an earlier blog post, shows that through better processes and use of the plant workers, it is easier than many food executives think to immediately increase capacity to meet demand without capex. In fact, according to the research, many food companies are working under false assumptions that they are already operating at or near their peak efficiency levels when they actually have substantial room for improvement.

However, as I discussed previously here, the first requirement is metrics. Without the ability to see what the shop floor is doing — and without confidence in what you are seeing — a food producer cannot see the people and process factors that impact capacity. In-plant metrics reveal the gap between the perception of peak efficiency and the reality for improvement that enables a lift in capacity — just when food companies need i