Business Strategies / Process and Operations

2011 Manufacturing Trends Survey: One Percent Better

Pick an analysis: Either last year's responses were overly optimistic, or 2010 was better than expected or 2011 begins with very cautious optimism.

By Bob Sperber, Plant Operations Editor

Manufacturing PrioritiesLast year, when we asked managers involved in plant and company operations for their expectations of 2010, they predicted a post-recession rebound, and we reported that the proverbial glass was half full. This year, they're just as optimistic about 2011 – no less, thankfully, but no more either.

When asked the perennial question, "How do you feel going into 2011?" 66 percent of respondents reported being "optimistic" and only 7 percent said they were "pessimistic." These numbers match last year's sentiments to a fraction of a percent (results are rounded to whole numbers in this report) -- although, if you want to split hairs, this year's optimists increased by 0.2 percent.

Similarly, when asked if you think your plant's production and throughput will increase in the new year, there was a 1 percentage point increase in the 3-9 percent increase bracket. With the other two "increase" brackets staying the same (see Fig. 6), that was enough to raise all "increase" numbers by the same 1 percentage point, to 69 percent expecting more production this year.

If you expected a full economic recovery in 2010 and a glorious boom in industry-wide production, you're likely to be displeased with the continued if modest gains made in the past year. But if perception is the precursor to reality, the coming year will bring cautious optimism.

This is Food Processing's 10th annual Manufacturing Trends Survey. Invitations went out in late November for the web-based survey. We had 425 total responses, up from 388 last year.

Figure 2 - OptimismSafety first – always
Asked to rank a list of issues according to their priorities for the coming year, processors always have and likely always will put food safety first.

This year, processors gave this issue a score of 8.4 (weighing first-place votes as 10 points and last-place votes as 1), exactly the same score as last year. And while it's probably insignificant, 57 percent of voters ranked it first, down slightly from last year's 60 percent.

Cost control took second place with a 7.9 score; 29 percent of respondents cited it as their top priority. This item did not appear in last year's survey. This affected the statistics a bit as respondents "made room" in their list of priorities for the coming year. But not that much; the following items garnered an above-average priority ranking this year as well as last: Sourcing and materials (6.3 this year vs. 6.5 last year), Inspections/certifications (6.3 this year vs. 6.2 last year), labor (6.1 this year vs. 6.5 last year) and Energy issues (6.0 this year, vs. 6.4 last year).

In addition to that slight downward movement in energy issues, environmental concerns also lost a bit of ground in the rankings, slipping half a point to a score of 5.6.

"Water issues" was another new addition to our prefabricated Top 10 list – but apparently not a good one. It came in ninth, with a score of just 4.6, barely ahead of "consolidation challenges" with a 4.4.

Growth, year after year

Figure 3. EconomyHow are food companies dealing with the economy? When given measurable choices to describe their company's outlook, the largest share of respondents – 44 percent – said, "We're growing," a notable increase over last year's 37 percent – which itself was significantly higher than the 27 percent who expected growth in 2009. All the negative answers (see Fig. 3) were down significantly from last year's report, especially "staff reductions" – this year, 22 percent still think that could happen, but 34 percent thought it was likely last year at this time.

Given the opportunity to provide open-ended answers, cost-cutting figured prominently, as it did last year. One processor explains how his company is "trying to look for cost saving measures in production processes, and trying to source cheaper raw materials so more consumers can be able to afford products." Related comments cited the need to increase yield and efficiency and to lower insurance costs, while others mentioned constraints on labor, capital projects and credit availability.

Labor, salaries looking up

Figure 4. AuditingThis year's outlook for human resources seems to be healthy, as respondents revealed expectations for continued good news.

Staffing was another category that showed a 1 percentage point improvement. Last year, 48 percent of respondents said their plants would maintain staffing levels, 25 percent said staffing would increase and only 17 percent – despite the bad economy – foresaw staff reductions, mostly through attrition. This year's expectations are similar; 49 percent expect to maintain the current level; 26 percent plan to grow their workforce and only 13 percent expect staff reductions, less than four percent of which will come from "active" reductions vs. passive attrition.

On the issue of salaries, things are looking up. We ask two questions in our survey: What actually happened to salaries in 2010? And what do you expect will happen in 2011? Last year, 35 percent of respondents expected salaries to rise at their plants, and this year we found that salaries actually did increase for a larger share: 45 percent. (Another 45 percent of plants maintained salary levels from 2009 to 2010, 6 percentage points higher than expected.) A rare miscalculation in your expectations last year: About 3 percent expected salaries to decline at their plants, while a year later, double that number reported an actual decrease. Ouch.

Coming into 2011, 40 percent expect their facility to increase salaries; 36 percent expect to maintain 2010 levels and only 2 percent predict a decrease.

SQF leads food safety programs
Figure 5. SalariesIn keeping with their ranking of food safety as an even stronger top priority for 2011, a greater number of respondents are implementing new food safety measures in the past year. More, in fact, than they expected to do: 70 percent said they would implement new measures in 2010 and 75 percent reported that they actually did so. Now, coming into the new year, 73 percent report plans for increasing food safety.

The specific practices they have or will implement for better sanitation or food safety:

  • More employee training (77 percent)
  • Further development of HACCP plans (61 percent)
  • Third-party verification/certification (59 percent)
  • Improved pest control (39 percent)
  • Sanitary equipment upgrades (38 percent)

A large minority, 34 percent, reported no change in practices from last year – after all, many initiatives are ongoing. Additionally, 25 percent reported various measures in open-ended responses that overwhelmingly dovetail with food safety-related certifications.

Figure 6. ProductionAmong such food safety programs, the SQF Program of the Food Marketing Institute's Safe Quality Food Institute retains the lion's share – 51 percent – of respondents citing at least one such initiative. This is in keeping with mega-retailer Walmart's mandate to have its suppliers choose a program compliant with the overarching Global Food Safety Initiative. For the other responses, see Fig. 4.

Zeroing-in on pathogens, processors were asked: "Compared to last year at this time, how concerned are you about E. coli, salmonella, listeria or other pathogens?" The results are somewhat reassuring in that 66 percent of respondents report the "same level" of concern – these worries never go away." Last year, 60 percent held that belief. About the same level of processors have less concern today than last year (16 percent vs. 15 percent last year), and fewer respondents, thankfully, answered that they are "more concerned – I think more incidents are coming." (18 percent this year vs 25 percent last year.)

On a related note, ingredient/food tracking and tracing programs are on the rise, with 81 percent of processors reporting that they have one in place, up from 76 percent last year.

Capital returning… without 'green' energy?

What might we expect plants to spend on improvements next year? Among the 71 percent with knowledge of their company's capital spending budget for 2011, 45 percent report some increase, in contrast to 39 percent last year. Leading the charge, 15 percent of respondents this year expect capital spending to rise more than 10 percent, vs. 9 percent of respondents last year.

Figure 7. FacilitiesPlants and companies are still cautious in their spending, but seem to have loosened the reins to let more capital projects through than in the darker days of 2009. When we asked whether respondents deferred capital projects in 2010, 37 percent said yes – but that was 10 percentage points fewer than those who deferred projects in 2009. Additionally, 45 percent said they did not defer projects in 2010 – 14 percent fewer than 2009. (The data do not correlate fully, but the trend is consistent.)

One area where capital spending and overall plant priorities may be in "wait and see" mode is energy conservation. We gave you eight possible answers to choose from, and nearly every one dropped by 2 or 3 percentage points – and "not a burning issue now" rose by 3 points. However, this survey was taken just before the year-end runup in oil and gasoline prices.

One of the most seemingly egregious oversights in this area is the percentage of respondents who report "negotiating with energy providers." This year, 14 percent say they are doing that vs. 20 percent a year ago. This would seem to indicate that either:

  • Energy prices aren't as high, or volatile, as consultants and suppliers would have processors believe; or
  • The need for better energy management is real, but processors do not see it; or
  • Maybe you already started this last year.

Similarly surprising/disappointing answers were given to our query on your company's "green" initiatives. Direct year-to-year comparisons are not valid, as we added "same priority" to the possible answers this year. Nevertheless, 37 percent said they're "more important" (was 69 percent last year), 5 percent said "less important" (vs. 11 percent last year) and 9 percent said "green" initiatives were "not important"(20 percent last year); 49 percent said the priority is about the same.

In conclusion, a big thank-you to this year's 425 respondents – we know this is a long and complex survey and it comes at a time of year when many people are off. And congratulations to those two of you who won our $100 American Express gift certificates; we hope it helps pay off some year-end bills.