Preventing loss: taking decisive action can result in manufacturers making significant savings
As economies around the world continue to be pressured by the effects of the coronavirus outbreak, preventing losses within confectionery, bakery or snacks manufacturing operations is of core importance. Graham Godfrey, a Confectionery Production editorial board member looks at the issue across the sector
No manufacturing operation is 100% efficient and loss prevention is a useful process for identifying, analysing and improving areas where the business may be losing money or opportunity.
Losses can take many forms, but for the purposes of this article I am going to consider some of the more obvious and damaging ones:-
- Loss of the full benefit of ingredients and packaging you may purchase
- Loss of the inputs of labour, energy and ingredients you use in manufacturing your products
- Loss of the skills, knowledge and experience in the workforce
By focussing on these key issues, it may be possible to significantly improve the profitability and value creation within the business and make available resources available for other improvements, new products, marketing, etc.
A very quick first level analysis for product can be, for an accounting period:-
- Take the weight of ingredients purchased, add or subtract for water in the process – this gives a net total input weight
- Calculate the good product out in two ways:-
• Nominal output – nominal unit weight multiplied by number of units sold
• Actual output – actual average unit weight multiplied by number of unit sold
• Compare the two and start to wonder where all those expensive ingredients have gone
The difference should not be more than about 5%, if it is (and it nearly always will be) start analysing. Similarly for packaging material:-
- Find the number of wraps purchased (this shouldn’t be too difficult to calculate)
- Find the number of units actually produced
- Again, compare the two
This approach is simplistic, but it’s quick and easy and will tell you the size of the problem. You can extend the principle to look at plant operating time vs actual units produced, vs theoretical, and of course for individual products and manufacturing lines.
Loss of Ingredients
It is easy to lose value in ingredients. Simple things like ensuring packaging does not get damaged, expiry dates are carefully monitored and spillage when dispensing may seem obvious and “things we do” but are they actually “things you do” or are they ”thinks you think you do”?
Expiry dates are a particular problem for small to medium producers, where a product may only be made occasionally. It may be possible to produce a part processed material with a new “start point” in its shelf life from an ingredient in danger of expiry for technical reasons. If a product is discontinued ensure that you find a profitable use for any redundant ingredients, even if it just a temporary product to recover an ingredient otherwise wasted.
Maybe only part of an ingredient is being used, for example skins or shells from nuts. Businesses should search for profitable outlets for anything which they currently discard. It may even be possible to incorporate something you are currently discarding into a products – for example the skins from a nut roaster might be able to be ground finely and used and it is interesting to note that a company is selling pasteurised and very finely ground cocoa shell as a partial (and high fibre) replacement for cocoa powder
Expensive ingredients can also be “lost” by inaccuracies in weighing out and dosing, An accurate measuring and handling system for flavours, for example, can yield real savings and, in all probability, an improvement in product quality and consistency. You should regularly audit recipe compliance in ingredient dispensing and ensure that “rounding up” or “just use about half a bag” have not become custom and practice. Recipes and batch sizes can usefully be rationalised such that supplier quantities (full boxes, bags, bottles, etc.) are used up in a single operation to avoid waste and weighing out is made easier
The same sort of considerations apply to packaging materials, damage in storage and movement around the factory, redundancy, etc.
Loss of Inputs
There are many inputs required to convert your ingredients into finished products. A proportion of all of them can be lost too easily.
I differentiate between scrap and rework, which are perfectly good material which could be used back in the product and waste, unsatisfactory material which has to be disposed of (generally at a cost).
Rework and scrap not only absorb ingredients but they also waste the labour, energy, management and every other cost element of your manufacturing overheads, even if material is reclaimed. Waste is of course a total loss and often incurs a disposal cost.
Any or all of these equates to increased cost for the good output produced:
- Failure to design processes and products to absorb their own scrap – all processes have a degree of loss, and all processes should be designed to absorb this without creating waste to be disposed of
- Scrap created on start-up and shut-down, good product not packed because of wrapping machine outages. Specific plans and procedures are needed for all of these
- Unsatisfactory product at any stage of the process allowed to continue to further stages of the process and further inputs before finally becoming scrap
- Slow response to product quality issues at any stage of the process
- Lack of response to endemic quality, performance or efficiency issues
- Poor weight control resulting in average weight excessively high to achieve required averages – generally referred to as “give away”
- Scrap and rework becoming waste due to lack of control, monitoring and poor storage.
- Poor wrapping machine performance, due to product, material or operational issues resulting in poorly wrapped product and poor yields
Essential cleaning will always result in some losses, but at the point at which the cleaning cycle starts there may still be good, recoverable materials in the process. These should be saved in order to reduce cleaning losses and effluent costs even if some manual intervention is needed
Loss of Skills
Very few companies truly understand the depth and value of their people at all levels. It is vitally important to understand the day to day operation of the business at successive levels. In essence any manager should fully understand and be able to carry out the real tasks of the people he supervises. Line workers are the worlds best industrial engineers, they will always find the easiest and most efficient (for them) way of doing a job. This has both positive and negative aspects of course, sometimes corners are cut that you don’t particularly want cut.
With this understanding, a positive atmosphere and with proper rewards for the people concerned an atmosphere of “continuous improvement” can be engendered where everyone works towards best practice without considering it in any way a threat. This is sometimes referred to as “Kaizen” – originally a Japanese developed culture of positive continuous improvement.
In many businesses this may require a significant change of culture and this needs to be championed from the top down via a “coalition for change” which shows that change and improvement are a way of life and something the business values and rewards.
An equally important issue is to have a detailed and agreed by contract plan for anyone leaving the business. Obviously IP such as process and recipe details need to be respected, but every employee from operators to directors will have a huge amount of inherent knowledge of how the business and in particular their part of it actually works, often in spite of rather than because of company models and policies.
It is therefore essential that anyone leaving the business is asked to write a full account of their functions, internal and external contacts (including any ways in which the business operates “in spite of” rather than “because of” its structures). This need to be requested and supported in a totally amicable way and (if possible) rewarded. This is particularly true for longer serving employees who may have seen many changes (good and bad) over their time in the business.
This is not to say that you will agree with everything said, but even if 10% of the information is of positive use, it is better than not having it
No business or operation can make the dangerous assumption that it cannot improve. Change and improvement through loss prevention can always reduce costs and increase efficiency, the secret is in identifying the opportunities and then acting upon them.
You can be certain that if you are not improving, your competitors certainly are and they will build a competitive advantage over you if you do not take action.