Food Factory Executive

Feeling the Squeeze Between Rising Costs and Price Pressures: Break Out and Take Charge

Dramatic hikes in consumer product prices. Products reformulated with cheaper, lower-quality ingredients. Smaller package sizes. Plant closings. These are today's news headlines in the food industries. Food companies are doing all they can to stay out of headlines like these.

Meanwhile, consumers are cutting back their spending in the face of rising debt, gas prices and food prices.  In times like these, they can lose their loyalty to premium brands and select private labels. Branded product makers are feeling the squeeze, and need to keep prices low—which means keeping costs even lower.

It's time to get tough. Successful food executives will recognize that this is no time to panic—it's time to get competitive. Those who take direct and immediate action, capitalizing on fear and uncertainty, will establish a sense of urgency in their organizations, display strong leadership and implement long-overdue changes.

The question is: how?

According to a comprehensive benchmark study with more than 100 food plants in North America and Europe, the answer lies in empowering the factory workforce.  The study, to be released later this year in conjunction with a survey by AMR Research, uncovered these alarming trends:

  • Over-reporting of efficiency metrics is rampant across food manufacturing plants and plant networks.  Gaps between actual and perceived performance levels are the norm, not the exception. (Read more.)
  • Above-average performers (leaders) share the common practice of empowering their shop floor workers to take corrective action when production problems arise.  Below-average performers (laggards) were unlikely to have these practices in place. (Read more.)
  • Failure to empower the workforce resulted in nearly $100 million in lost annualized profit, costing companies 3 to 5 points on their bottom-line profits.
  • Leaders experience efficiency gains and production cost reductions ranging from 15 to 40 percent and margin improvements of 5% and more—and they are achieving these results in less than six months. (Read how one company is getting these results.)

The answer: To move from "laggard" to "leader," food manufacturers are getting more honest in their efficiency metrics, and then giving their shop floor operators the information and ability to make corrections that ensure that factories reach their productivity targets.

For additional information on how food companies can improve performance, read the new white paper Surviving the Perfect Storm in the Food Industry: How Progressive Food Companies Are Finding Shelter within Their Own Factories.