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Soaring costs can be avoided with expert consultation

RMR Process is seeing firsthand the challenges being faced by the food and beverage industry with regards to rising construction costs.

For RMR Process director Peter Taitoko, the challenges being faced by the food and beverage industry due to the rising costs of building materials and land, also present an opportunity to reduce both capital and operational costs simultaneously. 

RMR Process knows first hand the impact rising costs are having on food and beverage manufacturers, which informs its approach in creating opportunities to reduce capital and operational costs. Image: RMR

Taitoko has seen first-hand the impact rising costs are having on manufacturers, particularly those looking to expand operations. 

“At a time where our food and beverage manufacturers should be capitalising on the opportunities to invest in our industry and strengthen our global position, they’re facing more and more challenges just to remain competitive and profitable, let alone having the confidence to expand operations,”
he said. 

“The challenges currently being laid out by food manufacturers in the senate inquiry are real and we’re seeing it across the entire industry. 

“Supply chain, freight, energy, and labour costs are major contributing factors and we’re cognisant of this from the early discussions we have with companies looking to expand. 

“Manufacturers are getting hit from all directions. They’re the value-adders in the supply chain and producing world class products but their growth is being stifled by increasing costs and an inability to effectively pass the costs on.”

Companies that are rising above these issues and actively build are then faced with the challenge of rising costs of real estate and construction, as well as the ex-cessive timeframe for most town planning processes, apparently still a hangover from the pandemic.

Taitoko says that once the decision has been made to relocate, it’s possible to reduce the footprint requirements of a new facility by breaking down all the elements that go into the facility design.

“When planning a new facility or expansion we need to understand the company’s supply chain, where the pressure points exist, primarily from a cost perspective,” he said.

“For example, if we can work with the supply chain partners to reduce the amount of incoming and finished goods held on site, then it’s possible to reduce the spaces required for warehousing. 

“We also look at whether we can make the factory go faster, in a smaller footprint with lower energy requirements while increasing capacity without increasing head count and if we can, the result can be significant reductions in both Capex and Opex. Optimising the way the manufacturer operates today means a downsized footprint when designing a new facility. 

“We will aim to reduce construction costs wherever possible, in fact we’d rather in-vest in faster processing and packaging lines than real estate in all instances, the trick is to work out how to make this possible.”

This is a key approach by RMR Process in recent projects.  

One Queensland client engaged RMR Process to help them with expanding its operations, specifically into new factory space adjacent to the existing facility.  

But after in-depth consultation with the experts at RMR, that new factory site has been put on the backburner and instead the investment will be spent on new process and packaging equipment and small finished goods warehouse.

“We’ve saved them many millions of dollars through that process as the warehouse is far cheaper to build than a food factory and doesn’t require an onerous town planning process”
said Taitoko. 

“In some cases, a new manufacturing facility is still necessary, and we can help to find the right site, but we’ll still lean towards a brownfield site which involves fit-ting out an existing building.

“There’s an argument that existing sites come with legacy issues, but the cost to rectify these issues today can still be significantly lower than the construction costs for a new build. 

“The best possible outcome is to find a vacant food facility that can be easily made fit-for-purpose as this can avoid major construction costs and lengthy planning periods if the site is deemed a “change of use” by the local councils.

“We strongly encourage our clients to plan ahead by having a record of recent land and building sales or rentals. When the right site comes along you should know what your returns and serviceability look like if you succeed in purchasing or renting.”

Taitoko believes that the traditional model of scaling Australian food and beverage manufacturers requires a major rethink and believes that more than ever we need a wholistic supply chain strategy to take some pressure off capital and operational costs for manufacturer.s 

“Another interesting example is with a manufacturer that we are working with right now. We are helping them divest out of their real estate and downsize their footprint,” said Taitoko. 

“The process is quite outdated with minimal automation, so to achieve the goal we’re investing in newer technology, higher speeds and more automation.  Through this, we can downsize real estate footprint while simultaneously speeding up the factory.”

Once the new footprint has been minimised, another great way to reduce capital and operational costs is to consider innovative offerings such as outsourcing energy supply.   

“We now work with third-party providers that can provide heating and cooling as a service so rather than paying energy companies for electricity to run cool rooms and gas to run boilers, they can provide the infrastructure to remove gas, reduce electricity demand and still provide heating and cooling to the site,” said Taitoko. 

With Scope Three emissions targets now a significant factor within the industry, the major retailers are now placing additional pressure on manufacturers to provide carbon emissions data.

The option of reducing the site energy requirements and outsourcing supply can reduce capital and operational costs, as well as help to chip away at the Scope Three emissions targets, so there’s significant upside for many sites with this type of model. 

Taitoko said this was only a small sampling of the expert consultation provided by RMR Process and the positive outcomes therein. The expert team of engineers at RMR Process, which specialises in designing and building world class food facilities and processes will help manufacturers make the right investment decisions during their
growth phases.

He encourages stakeholders within the industry to utilise the invaluable insight they provide which will ultimately save a client money, while still achieving their operational goals. 

To learn more visit www.rmrprocess.com. 

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