Food and beverage: Top practices, issues and metrics
Continuous improvement, cost containment and shipping accuracy are guiding operations in food and beverage warehouses, distribution centers and manufacturing facilities.
By Gary Forger, Editorial Director -- Modern Materials Handling, 5/1/2007
>>For more on this industry, tune into Modern's Food and Beverage Trends Webcast
What’s top of mind for operations managers in the food and beverage industries? In a nutshell: cost containment, continuous improvement and shipping accuracy.
That’s what more than 250 managers told Modern in an e-mail survey that asked them to identify leading practices, issues and metrics in the food and beverage industry. But that’s not all they told us. Other top-line takeaways include:
- 83% expect company sales to increase in 2007 compared to last year.
- More than half anticipate higher activity levels at their facilities this year and next compared to 2006.
- Lift trucks and accessories, printers and rack/shelving top buying lists today.
- Looking out two to three years, two- thirds plan to increase spending on materials handling equipment.
These and other results detailed in this article are the third in a series of industry surveys being published by Modern this year. In January, we covered industry in general and in March the automotive industry. Three additional surveys will be published later this year.
Business expectationsIn comparison to overall industry, operations managers in food and beverage are more optimistic about business conditions this year.
Only 67% of managers across industry were looking for a better year in 2007 compared to 83% in food and beverage who say that revenues will increase 10% on average this year. Only 3% expect a decline in business conditions.
They also expect higher activity levels at their facilities during the next two years. Of those at manufacturing sites, 61% are looking for more activity. For general industry the number was 52%. Interestingly, fewer food and beverage managers, just 49%, at warehouses supporting manufacturing expect more activity. Again, that’s more optimistic than general industry which came in at 42% for those facilities. At stand alone warehouses and distribution centers, 56% call for more activity, also higher than the 42% for general industry.
Buying plansTo support all that increased activity, food and beverage operations managers have big plans for buying more materials handling equipment and systems now and into the future. In fact, 67% say their spending will increase in the next two to three years, 29% say it will stay the same and only 4% expect it to decline.
The threshold for making those purchase decisions at the plant or warehouse level is fairly low. On average, expenditures above $172,000 require input from corporate headquarters. Nevertheless, a majority (61%) say they have a pre-approved capital expenditure budget of $533,000.
Just as in general industry, more than 60% of food and beverage managers say that new information systems will be more important in meeting their goals than traditional materials handling equipment. As the chart at right shows, four of the top six investments are information system based—printers, bar code scanners, warehousing software and wireless terminals. Lift trucks and accessories and rack/shelving are the only traditional materials handling equipment at the top of lists now and for the next two to three years. Those priorities almost precisely mirror those of general industry.
Practices, metrics, issuesWhen it comes to practices, metrics and issues, food and beverage has a profile that mirrors general industry in some instances but is quite distinctive in others (see charts below).
Manufacturing practices, for instance, in food and beverage almost exactly mirror general industry in terms of ranking. The exceptions here are trading partner collaboration and just-in-time production, which switch positions on the chart, and lot sizes of one and outsourcing, which also switch positions.
While priorities are the same across manufacturing practices, the level of importance is widely different. At the top, continuous improvement is considered very important by 77% in food and beverage and 74% across industry. Lean manufacturing is in the second spot for both groups, but considered very important to only 47% in food and beverage compared to 61% across industry, a significant difference.
Build-to-order, No. 3, is at 38% for food and beverage but 48% for general industry. JIT production is at 36% for food and beverage and 45% across industry. There is an even larger difference for just-in-sequence practices, with food and beverage at 30% and general industry at 45%. All other percentages are within a much smaller range, however.
Over on the warehousing side, the most important practices to food and beverage and general industry don’t match up as closely as in manufacturing. Continuous improvement is once again tops and by almost exactly the same percentage. But workload planning jumps from No. 4 in general industry to No. 2 in food and beverage. Furthermore, workload planning scores 63% with food and beverage managers compared to just 55% across industry. Lean inventories are in third for both with a 6% lower rating in food and beverage. Value-added services comes in fourth for food and beverage (52%) compared to second for general industry (63%). Carrier scheduling and same-day order shipping swapped spots on the chart but the percentages were lower for both in food and beverage.
The story in metrics for all of food and beverage is much less exciting. There are minor shifts in position, but for the most part food and beverage metrics mirror those of general industry.
When it comes to issues, however, food and beverage has some standouts. As might be expected, cost containment is No. 1 (76%) as it is in general industry (85%). Similarly, ergonomics and safety holds onto third.
Throughput, which was fourth for general industry (66%) jumps up to second with food and beverage (72%). Company growth moved up from fifth in general industry (65%) to fourth with food and beverage (68%). Training, however, dropped from second in general industry (71%) to fifth in food and beverage (59%). That makes training standout as one of the top issues by both groups but valued significantly less in food and beverage.
| Equipment/software | Recently invested, % | Invest in 2-3 years, % | Food and beverage rank | General industry rank |
| Lift trucks and accessories | 71 | 60 | 1 | 1 |
| Printers | 65 | 47 | 2 | 2 |
| Rack/shelving | 60 | 48 | 3 | 3 |
| Bar code scanners | 58 | 49 | 4 | 4 |
| Software for warehousing | 55 | 45 | 5 | 5 |
| Wireless terminals | 45 | 46 | 6 | 7 |
| Packaging | 41 | 38 | 7 | 9 |
| Dock equipment | 41 | 39 | 8 | 9 |
| Totes, bins & containers | 36 | 29 | 9 | 6 |
| Software for manufacturing | 33 | 31 | 10 | 8 |
| Conveyors/sorters | 32 | 36 | 11 | 11 |
| Planning software | 31 | 34 | 12 | 11 |
| RFID | 25 | 39 | 13 | 14 |
| Voice systems | 11 | 17 | 14 | 17 |
| Automated storage | 10 | 18 | 15 | 14 |
| Hoists, cranes, monorails | 10 | 9 | 15 | 13 |
| Automatic guided vehicles | 4 | 8 | 17 | 16 |
| Issue | Very important | Food & beverage rank | General industry rank |
| Cost containment | 76 | 1 | 1 |
| Throughput | 72 | 2 | 4 |
| Ergonomics and safety | 72 | 2 | 3 |
| Company growth | 68 | 4 | 5 |
| Training | 59 | 5 | 2 |
| Labor availability | 53 | 6 | 7 |
| Cycle times | 48 | 7 | 6 |
| Capital availability | 47 | 8 | 8 |
| Hours of service | 41 | 9 | 9 |
| Facility consolidation | 31 | 10 | 11 |
| Trading partner collaboration | 29 | 11 | 12 |
| Smaller, more frequent orders | 27 | 12 | 10 |
| Outsourcing | 20 | 13 | 13 |
| Practice | Very important, % | Food & beverage rank | General industry rank |
| Manufacturing | |||
| Continuous improvement | 77 | 1 | 1 |
| Lean manufacturing | 47 | 2 | 2 |
| Build-to-order | 38 | 3 | 3 |
| JIT production | 36 | 4 | 4 |
| Trading partner collaboration | 32 | 5 | 6 |
| Just-in-sequence production | 30 | 6 | 5 |
| Build-to-stock | 27 | 7 | 7 |
| Lot sizes of one | 18 | 8 | 9 |
| Outsourcing | 17 | 9 | 8 |
| Postponement | 14 | 10 | 10 |
| Warehousing | |||
| Continuous improvement | 79 | 1 | 1 |
| Workload planning | 63 | 2 | 4 |
| Lean inventories | 54 | 3 | 3 |
| Value-added services | 52 | 4 | 2 |
| Carrier scheduling | 50 | 5 | 6 |
| Same-day order | 43 | 6 | 5 |
| Trading partner collaboration | 34 | 7 | 7 |
| Compliance with trading partner requirements | 34 | 7 | 7 |
| Crossdocking | 30 | 9 | 9 |
| Outsourcing | 23 | 10 | 10 |
| Reverse logistics | 18 | 11 | 11 |
| Postponement | 14 | 12 | 12 |
| Metric | Very important,% | Food & beverage rank | General industry rank |
| Shipping accuracy | 89 | 1 | 1 |
| Inventory accuracy | 88 | 2 | 3 |
| On-time shipping | 86 | 3 | 2 |
| Picking accuracy | 79 | 4 | 4 |
| On-the-job injuries | 75 | 5 | 5 |
| Inventory levels | 71 | 6 | 7 |
| Daily throughput | 68 | 7 | 6 |
| Order fulfillment costs | 67 | 8 | 8 |
| Labor hours | 61 | 9 | 10 |
| Order cycle times | 50 | 10 | 9 |
| Activity-based costing | 42 | 11 | 11 |
| Dock-to-stock time | 36 | 12 | 12 |
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