The 1990s proved to be an unusual decade for food manufacturing.
It was particularly frightening for food engineers, who were shoved out of their organizations in droves as processors sought to cut salaries -- some grown heavy with 25 or more years of tenure -- from their cost structures.
Companies such as Frito-Lay and Kraft, which once had huge in-house engineering staffs and equipment-making operations, yielded to trend and economic pressures. They sacrificed in-house assets and leaned on equipment suppliers and engineering firms for "proprietary" equipment, yielding strengths they once regarded as a major competitive advantage.
But the '90s also was a decade of exploration and innovative, out-of-the-box thinking that continues into the new century … even as downsizing continues to trim the manufacturing ranks.
Engineers and manufacturing execs stepped out of the food mines and examined how the manufacturing arms in other industries with similar concerns were organizing and operating. They looked at high-performance work teams and cross-functional project teams and pushed decision-making down to well-trained operators close to the action. They explored outsourcing models that seemed radical departures for many companies and formed alliances with engineering firms.
Some of it worked, some of it didn't.
Lean or Six Sigma?
Lean manufacturing and Six Sigma may be buzzwords in other manufacturing industries, but they're not in the food industry's lexicon. Both methodologies -- if you embrace them, they become philosophies - come from the discrete manufacturing world and have a difficult time translating into the world of batch, where piece-by-piece measurements are difficult, if not impossible, and variability is a fact of life.
Simply put, lean is about removing waste from the process; Six Sigma is about reducing, maybe eliminating, variability though a disciplined, incremental improvement process.
Lean is "all about giving your customer exactly what he wants and only what he wants; maximizing the things that add value to your product and minimizing or eliminating the things that don't," says Vernon Spaulding, vice president of integration services at Data Specialists Inc. (www.dataspecialists.com), Elkhorn, Wis., which does consulting and custom software for food plant automation. He came out of the auto industry, which has embraced both philosophies, and now is on a mission to bring them to the food industry.
"Companies spend millions of dollars a year on activities that add no value to the product in the eyes of the customer," Spaulding laments. However, even he admits some of those overhead activities include food safety, traceability, regulatory compliance - things that are untenable to eliminate.
As for Six Sigma, "There really are unique variances in food production and any batch process, which make Six Sigma difficult," he says. "I see food manufacturers doing one or two of the components that may be part of a lean or Six Sigma program, but no one who's doing it all."
Why not? The answers are usually the same, he says. "The absolute No. 1 reason is 'we don't have the time, the money or the labor resources.' Second is education -- they just don't how these programs work and how they can save their companies money." Other food industry-specific reasons are the lack of baselines and poor measurement systems.
"In the food industry, nobody is really doing Lean or Six Sigma thoroughly," agrees James Maurer, national managing partner in the Consumer and Industrial Products Practice of Grant Thornton LLP (www.foodprocessing.com/gt/knowledge), the international accounting and business advisory firm. Indeed, in the 2007 Survey of U.S. Food & Beverage Companies, which Food Processing sponsors with Grant Thornton, 42 percent of respondents were employing some "lean thinking" methods, but less than 9 percent were using Six Sigma.
"In an industry already dealing with thin margins and high cost of raw materials, there is great potential for these incremental improvements. Companies making progress in these areas have significantly reduced their costs," says Maurer.
"For many food companies, maybe 70 percent of the cost is in raw materials and other direct costs. That leaves only 30 percent you can control," he continues. "But even this 30 percent is a huge opportunity for companies who take lean to the next level." Maurer pegs freight, information technology procurement, maintenance (especially contractual) and even benefits as costs capable -- and worthy -- of being better managed.
Alliances with engineering firms became commonplace at the end of the previous decade as processors tried to accommodate engineering loads their downsized departments could not handle.
In one of the better-known examples, Kellogg Co. (www.kelloggcompany.com), Battle Creek. Mich., outsourced virtually all its engineering in an alliance with Jacobs Engineering -- which, in turn, hired many of the same laid-off Kellogg engineers. That relationship has continued to evolve over the past 15 years.