Food and flavors manufacturers have been greatly challenged by a wide range of shifting market dynamics that have impacted almost every aspect of their businesses. But while revenue is largely driven by these shifts (including changes in consumer taste and trust levels, regulation/compliance and more), a company’s overall profitability is a direct result of how efficiently the manufacturing process is run – and not changes in the industry.
In fact, smaller food and flavors manufacturers can often out compete larger entities thanks to the agility that comes with their size and which allows them to more quickly embrace new solutions, approaches and practices that lead to greater efficiency.
For any size manufacturer, though, reducing production costs by even just 1/100 of a cent can significantly boost the bottom line. This means even the smallest changes can lead to significant increases in profitability, both immediately and over time.
Given today’s food and flavors business environment it’s especially imperative that manufacturers carefully examine their operations to discover where they can make less extensive and more gradual changes to address inefficiencies, increase overall productivity and reduce the type of risks that break companies.
Here are 5 ways to increase your profit margin through small changes and with minimal disruption:
#1 – Start with an Audit
While a company-wide audit is the obvious starting place when seeking to increase overall profitability, it’s also true that serious gains can be made as a result of auditing almost any individual aspect of the food and flavors manufacturing process.
Those not ready for a large-scale overhaul can benefit from audits of energy use, equipment, systems, the supply chain (including supplier relationships) and many other areas.
EFI Group has found that even a single adjustment in equipment efficiency, for example, can lead to big rewards. A few examples of small changes that resulted in increased profitability for our food and flavors manufacturing clients can be found here.
#2 – Eliminate Product Introduction Mishaps
Team members responsible for ensuring regulatory compliance are often not the same individuals in charge of getting products to market. Under this scenario, food and flavors manufacturers can too easily develop a product only to discover it contains an unapproved ingredient, violates a concentration limit or doesn’t align with the tastes of a specific geographic market.
To prevent this from occurring, food and flavors manufacturers can look to both technology and human resources for solutions. Specifically, consider:
- Employing technology capable of tracking regulatory requirements.
- Implementing a cross-functional team approach.
The former is an improvement every food and flavors manufacturer should undertake at some point – and the sooner the better. The latter, on the other hand, is a culture change and will require more effort. However, the work it takes to successfully make the shift to cross-functional teams is squarely on the shoulders of leadership and requires little disruption to actual manufacturing processes.
#3 – Don’t Switch Suppliers
Transparency in the supply chain is paramount for food and flavors manufacturers in order to reduce risk. But equally important is simply price and customer service – a factor that also influences a manufacturer’s profitability.
Too often we see manufacturers seek replacement suppliers, when a simple renegotiation with an existing supplier can not only reduce cost of goods and improve service, but also dramatically improve the relationship, and thus further reduce supply chain risk.
Not only is this approach save the manufacturer the expense of the search itself, but it also saves time and therefore has a more immediate positive impact on profit margins.
#4 – Automate Parts Replacement
While only a small percentage of food and flavors manufacturers currently automate the monitoring of parts and components to aid in replacement decisions, the reality is that using technology over visual assessment, or the “replace when it breaks” approach, has a serious impact on profitability.
What these manufacturers are neglecting to consider is the true length and negative outcomes of the downtime that will most definitely be experienced when either observation proves faulty or the part does break.
#5 – Profit from Waste
For food and flavors manufacturers, one of the most interesting ways of increasing profitability and also revenue might be found in their own waste.
Those manufacturers able to develop revenue-enhancing new products by utilizing waste streams, or increase profitability by selling those streams, have the opportunity to make a positive contribution to their own bottom lines, as well as to solving one of the industry’s most serious challenges.
As a recent study on production of flavor compounds from olive mill waste by Rhizopus oryzae andCandida tropicalis states:
“The food and agricultural industries produce annually million tons of waste, resulting from production and consumption of food, peels, pulps, aqueous residues and others, many of which raise serious disposal issues and, consequently, considerable costs to various industries. Therefore, using agro-wastes is the most popular aspect in biotechnological processes for production of high value-added products in terms of the reducing production cost.”
If a manufacture is able to reduce costs and/or bolster revenue through the “garbage” an existing product line is already producing, it may be well worth investigating.
Helping manufacturers in a wide range of industries solve their toughest challenges in a way that increases efficiency, productivity and profitability and reduces risk is our strength. If you’re a manufacturer seeking a partner you can count on to help you achieve significantly improved results, contact Jim Solich at jsolich@jims26.sg-host.com
