Competition in the food and beverage sector in Asia Pacific is intense, which puts pressure on producers and distributors to become more efficient if they want to stay both competitive and profitable. In a sector of high-volume and low-value perishable goods, having accurate insights into costs, margins, inventory, production and the supply chain can be the difference between surviving and thriving.
Consumers are more demanding too, calling not only for greater variety but for more information on the product they are consuming, where it was produced and where its ingredients are sourced from.
Manufacturers in the food and beverage sector are faced with the challenge of providing a wide range of goods that are safe to consume and are compliant with mounting regulations. With short ingredient expiry dates, tight timelines and the need to be price competitive, even quite minor bottlenecks can have a significant impact on profitability. Therefore, it is essential that bottlenecks are quickly identified and removed to ensure the long-term viability of the business.
When the solution becomes a bigger problem
For many companies in an effort to reduce bottlenecks and become leaner, their instinct is to minimise, minimise, minimise, reducing cleaning and changeover time. However, in the rush to eliminate extra steps, food and beverage producers can sometimes cause new bottlenecks to occur. These can severely reduce throughput, impact product quality, cause delays and annoy customers, resulting in orders being cancelled.
Typical bottlenecks in a food and beverage plant could involve a fault in critical machinery requiring urgent maintenance or a key worker getting sick or going on holiday. These long-term bottlenecks are unpredictable, and their impact can vary from fairly minor to major delays. Australian manufacturers must deal with long-term bottlenecks regularly and should strive to eliminate them.
Systemic bottlenecks that are causing persistent production delays, such as specialised equipment with consistently long queues, need to be dealt with. Some producers will experience significant downtime due to breakdowns and other than regular planned maintenance schedules to keep machinery operational, factories must have contingency plans in case of a worst-case scenario.
With lean manufacturing, it is all about finding the constraint, which is the piece of equipment on the production line with the lowest net output. No matter how fast the other machines can run, the entire line will never be able to run faster than this machine. That is why we call it a constraint, because it constrains the output of the line and this issue needs to be resolved as it will significantly impact profitability.
How bottlenecks impact profitabilityThe main way bottlenecks impact profitability is by compounding the effect of downtime along the production line. Downtime costs manufacturers a huge amount of money. By one estimate, companies in the food and beverage industry experience as much as 500 hours of downtime every year.
Fortunately, it is easy to calculate exactly how much this compounding effect is costing producers. They should determine the difference between what they are producing and what they could be producing if the bottleneck did not have to stop every time another machine on the production line went down.
ERP software provides manufacturers with a structured view of how their processes, systems, data and people are designed, so they can identify ways to be leaner and remove these types of bottlenecks. This can be critical especially when dealing with increased complexity and growth, therefore manufacturers need a way to review, revise and revamp operations right down to the individual process level.
Supply chain visibility & traceability
With the rise of global food and beverage product recalls, more regulations than ever before have been implemented to protect the end consumer and here food safety is covered by the Australia New Zealand Food Standards Code. This aims to lower the incidence of foodborne illness by strengthening food safety and traceability throughout the food supply chain.
When a food product is found to be deficient or contaminated, the first vital step is to trace and account for every suspect item throughout the value chain. This requires an ERP solution with traceability capabilities which must be able to track several units of a stock item from the same lot or batch number. Once these have all been found, manufacturers can then implement product recalls or quarantine suspect goods.
Most food products are made up of a wide range of ingredients that come from different providers, often located around the world. Additionally, most food and beverage finished products and ingredients have a limited shelf life and can quickly perish.
The food and beverage sector supply chain is incredibly complex and presents many challenges. Complete visibility of location and status of shipments is therefore essential for freshness and just-in-time-arrival of ingredients needed for the processing schedule. An advanced supply chain system that allows producers to make real-time adjustments can be a clear advantage and will help manufacturers to avoid supply chain bottlenecks and surplus stock.
Surplus stock management
When sales teams do not have clear visibility of surplus and expiring stock, companies tend to end up with a combination of fire sales and price erosion. Customer service takes a hit as well due to a lack of understanding of available stock. With an ERP system that provides forward visibility of any excess and expiring inventory, sales can put the right plans in place to maximise sales and minimise waste and heavy discounting.
The agility to make changes
To minimise the stress associated with eliminating either production, people or supply chain bottlenecks, food and beverage manufacturers need strong ERP project management with careful planning to steer the change management process. For most businesses in this sector, irrespective of size or structure, change is not easy, but this can be done more effectively if they have a structured view of their entire business. This will enable them to see the logic of how processes, systems, data and organisational hierarchies are designed and can easily make changes.