Food processors today are threatened by unprecedented industry challenges, including record-high costs for materials, energy, transportation and labor. Under mounting pressure to maintain profit margins, food companies announce extreme measures every week. Dramatic hikes in consumer product prices, reformulations using cheaper, lower-quality ingredients and even plant closings are now common subjects of news headlines.
To cope with these increasing external cost challenges, progressive food companies are exploring previously untapped opportunities for margin improvement, right within their existing factories. They are measuring efficiency gains and production cost reductions ranging from 15 to 40 percent and margin improvements of five percent and more, and they are achieving these results in less than six months.
This paper presents an executive perspective on the underlying challenges in the food industry. It suggests a practical agenda for a strategic and tactical response through systematic introduction of lean and continuous improvement techniques and daily operating best practices. The result is breakthrough performance improvements due to engaged employees working with real-time operational performance data. With real examples from food processors, the paper discusses how use of techniques under the heading of Breakthrough Performance combined with measures of people-based performance that are used widely in other industries has initiated a quiet revolution in food plants in the U.S. and Europe during the past 18 months.
This is the first of a series that will unfold the story of using these new approaches that use best operating practices, the latest manufacturing operations management technologies and the principles of the balanced scorecard to leverage the untapped value of human capital in the food processing industry.