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2013 Manufacturing Trends Survey: Labor, not Energy, the Concern in 2013

Jan. 9, 2013
While economic uncertainty remains, respondents expect more growth.

Labor issues are of greater concern to food manufacturers as they enter 2013 – but not as important as cost control and food safety – while worries about energy cost escalation have all but disappeared (that was a surprise). Manufacturers are a bit less optimistic than they were at this time last year (or in the past three years, for that matter), yet more plant operations executives foresee production increases of 20 percent or more and additions to their workforces.

Those are some of the results of Food Processing's 12th annual Manufacturing Trends Survey. Invitations went out in November for the web-based survey. We had 249 total respondents, up from 205 last year.

Safety first

Each year the survey asks food processors to rank 10 pre-selected major concerns. As has always been the case, food safety ranks No. 1. This year 59 percent of respondents indicated this was their most important concern, up slightly from 53 percent last year. No surprise really, when one considers the catastrophic results of not prioritizing food safety. In second place for the second year is cost issues, with 27 percent naming it their top concern for the year (down 3 points from last year).

What's more interesting is how our respondents rank the other eight concerns. Last year, inspections and certifications came in third with 21 percent of the vote, but this year that vote fell to 10 percent – apparently most companies earned their Global Food Safety Initiative certificates last year. Instead, labor moved up to third place with 11 percent, about the same as last year. Sourcing and materials also won a 10 percent vote (totals exceed 100 percent because respondents could select more than one top priority).

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Energy concerns recorded the biggest drop in first-place votes, from seventh place to dead last (10th) in the rankings this year – although it had higher second, third, etc. votes than most other concerns. So using a weighted scoring method, its 5.7 point score was in sixth place, higher than environmental concerns, automation, water issues and consolidation challenges. But still lower than its overall ranking last year.

We also asked voters to tell us about major concerns they did not find in our top 10 list. Among the responses were issues such as accurate forecasting for expansion, commodity price volatility, availability of raw materials, transportation costs, matching capacity with demand and implementing lean manufacturing. The Food Safety Modernization Act also was a concern for "lack of clarity in what the regulations will require and how some companies are anticipating and reacting to that lack of clarity." Another food processor pointed to the weather: "Our biggest concern now is the effect of the Midwest drought and how that will affect supply and price of our ingredients."

A long way to go?

We reworded our question about dealing with the economy. Last year we asked only if you were growing (45 percent said yes). This year, we split that response and found 12 percent "growing fast" and another 47 percent "growing slowly" – that adds up to 59 percent growing at least some. However, 27 percent were turning to staff reductions and salary cuts to deal with the lingering difficulties, and more than 12 percent indicated plant closings and consolidations. About 10 percent were outsourcing to save money.

Looking forward, most of those who took the survey say they expect to add to their employee ranks (37 percent) or maintain staff levels (41 percent), compared to around 14 percent who plan to further reduce staffing either actively or passively. That compares favorably with last year, when 18 percent were bracing for staff reductions and just 28 percent had planned on new hires.

Asked about plant production forecasts for 2013, 19 percent foresee increases of 20 percent or more, up significantly from 11 percent last year and 16 percent the year before. Altogether, 72 percent expect at least some increase in production at their own facility this year – within a percentage point of last year – while only 7.6 percent are planning for a decrease.

When asked about the production outlook for their entire company, 32 percent of respondents expect their company to expand the number of manufacturing facilities this year, up significantly from 23 percent the year prior. Just 12 percent (roughly matching last year's number) said they expect their companies to consolidate this year.

While these numbers are encouraging, respondents were cautious about their optimism. When asked "How do feel going into 2013?" only 60 percent express optimism, down from 63 percent last year and 66 percent in both 2011 and 2010.

As for salaries, just 4 percent of those surveyed anticipate a decrease, while 41 percent expect salaries to increase. A year ago, a similar number planned on payroll increases but a higher percentage (5.6 percent) expected to trim salaries.

Capital spending may be in for a drop in 2013. 35 percent of respondents say they will spend more this year than they did in 2012, whereas 47 percent expected to spend more last year at this time. This year 10 percent have trimmed their Capital Expenditure budget by some measure.

Also, 35 percent report they have delayed capital spending projects in the past year due to the economy. That is up from 32 percent a year ago, but not as drastic as 2011, when a full 45 percent hit the brakes on capital projects.

This year's respondents listed a variety of project types they hope to tackle in 2013, including warehouses, production and packaging expansions, a new plant in Kentucky, updated manufacturing software and adding automation in warehousing, production and throughout the plant.

Knowing that food safety is the top priority among food companies, we also asked some questions about what steps processors are taking to protect against incidents and to verify compliance with food safety regulations.

Of those surveyed, 72 percent indicate they implemented new food safety measures in 2012. That reflects a slight up-tick in implementation compared to the year prior when 70 percent said they had taken food safety measures in 2011. Nearly 70 percent say they will launch new food safety initiatives this year, up 2 points from last year.

Employee training and third-party certification remain the two top steps food processors are taking to improve food safety. Those two also topped the list in 2012.

Respondents were allowed to list multiple approaches, and 69 percent mentioned employee training this year, while 47 percent planned for third-party certification. HACCP plans are in use or in the works for 39 percent of survey-takers this year, compared to 46 percent of those who answered the question last year – that's kind of odd.

Speaking of certification, we asked participants to name which certifications they were involved with. The top answer remains Safe Quality Food, which was noted by 49 percent of respondents this year, up from 40 percent in the 2012 survey. The British Retail Consortium program was second this year with 22 percent, 1 point down from last year.

Automation has changed food manufacturing substantially in recent years. This year, nearly 18 percent say the entire plant is automated, 48 percent say production is highly automated (less than the 54 percent answering that way in the year prior) and 35 percent indicate their packaging areas were stocked with robotics. Nearly 16 percent of survey respondents say they still have no automation in their food plants.

Energy and green initiatives

Green initiatives, which can help both the bottom line and a company's reputation with consumers, have been important for some time. Our survey shows that for as much as 82 percent of food manufacturers surveyed, those programs continue to be important heading into 2013.

However, 6.6 percent said that in light of the economy, green initiatives are "becoming less important" to them. That's up from the 5.6 percent who gave that answer in 2012. The number who said the importance of green initiatives was "about the same" also increased from 46 percent going into 2012 to about 53 percent of those surveyed for our 2013 report.

Asked what initiatives they are pursuing, food processors had a variety of responses reflecting a range of actions from simple common sense steps to comprehensive programs. They included "increasing use of recycled content materials," "water reuse in the process" and "motion control lights and sky lights in the warehouse." One respondent indicated his or her company was "already on track," and had "reached goals and (would) continue monitoring towards a zero-landfill facility."

Energy consumption can certainly be considered in concert with other green initiatives, but energy can also be a simple bottom-line issue. When the latter is the case, energy concerns enter and leave the spotlight as prices fluctuate. With energy prices somewhat at a plateau, this year's respondents put less emphasis on energy consumption than we have seen in the past.

When asked "how are you approaching energy management?" 53 percent of those surveyed did say they are "taking steps in energy conservation" but 29 percent said it is "not a burning issue right now" – up from 24 percent last year. 27 percent are conducting energy audits and 22 percent recycling or redirecting energy throughout the plant. 5.3 percent of respondents are looking at cogeneration and nearly 11 percent are looking for alternative energy sources (down from 16 percent a year ago); 5 percent are installing solar panels.

This article originally appeared in the January 2013 issue of Food Processing Magazine.

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