How the pandemic challenges food process systems
The food industry is having to dig deep to adapt to the difficulties being presented by the COVID-19 virus. Philip B Farrelly, Partner, Farrelly & Mitchell explains the challenges involved and potential solutions worth considering.
Many of our clients, particularly those producing basic ingredients and household staples, have responded to the Covid-19 crisis by ramping up production to unprecedented levels to meet surging demand from retailers as consumers rush to supermarkets to stockpile food products.
In the process, they are learning valuable lessons about the strengths and limitations of their production facilities.
Dealing with customer demand fluctuations is nothing new to the food processing industry. The industry is adept at anticipating and responding to changing customer demand requirements.
Food manufacturers are long accustomed to adjusting product mixes and production volumes in advance of well understood and predictable seasonal drivers, such as public holidays, religious festivals, major sporting events or school vacations. They have also become skilled at responding quickly to less predictable drivers of demand such as weather events.
COVID-19: Unprecedented in suddenness, scale and duration
However, the demand surge currently being experienced by those producing basic ingredients and household staples as a result of the Covid-19 crisis is unprecedented in its suddenness, its scale and now its duration.
While food manufacturers stretch their plants to the limit in an effort to achieve maximum production, they are learning valuable lessons about their production facilities’ limitations. This is particularly true for those who have developed their plants organically, adding production lines and other facilities on an ad hoc basis over time as their business grew.
Those coronavirus-driven lessons are being absorbed by beverage, confectionery, bakery, dairy, snack and health food companies and encompass learnings in food safety and food quality.
Understandably, management is now focused on addressing immediate production demands – these lessons shouldn’t be forgotten once the crisis has passed. Storing these lessons for future action, once normality returns, can provide food manufacturers with an invaluable platform to enhance future production flexibility.
Speaking with our clients six such issues they are encountering include
As volumes are being ramped up, balancing employee welfare and throughput is becoming a real challenge in highly manual processes. Avoiding crowded packing rooms is a particular challenge. Post-crisis, re-thinking opportunities to increase automation within production processes are likely to be high on the agenda.
Unanticipated Production Bottlenecks
Most production facility managers will believe they can point directly to their capacity bottleneck. However, as production volumes are pushed beyond previous high watermarks, new unanticipated production bottlenecks are also being identified. In an effort to maximise production many retailers have been encouraging their suppliers to simplify product ranges and concentrate on the most popular SKUs. This is creating an unanticipated problem for many medium and smaller manufacturers, who prior to the crisis prided themselves on production line flexibility. With longer runtimes and less batches, they are now discovering the throughput limitations of key pieces of their equipment. Post-crisis, process designs should be reconsidered to eliminate these bottlenecks.
Upstream Supply Chain
Pre-Covid-19, geographic proximity of suppliers was typically considered a minor consideration when selecting suppliers. Today, reduced freight capacity, shortages of shipping containers and boarded crossing delays are just some of the new challenges businesses are facing when securing their raw material and packaging suppliers. Added to this, fears are emerging that some key commodity producers may move to restrict exports. Geographic proximity is likely to assume a greater weighting in post-Covid-19 supplier selection considerations.
Downstream Supply Chain
Many of our clients in the Middle East and North Africa have long understood the importance of directly controlling their downstream supply chain. Where outsourced distribution is the norm, food processors are now critically assessing how their distribution partners are performing. In some cases, particularly where outsourced distribution is less well evolved or distributors have failed to invest in technology, shortcomings in distribution platforms are becoming apparent. In the short term, many are attempting to implement practical solutions to maximise delivery capacities such as encouraging customers to order in quantities that fill a pallet or truck. Longer-term, distribution outsourcing decisions are likely to be re-evaluated.
Storage & Dispatch
For some processors sustained higher volume production coupled with less frequent dispatch have created a pinch point at finished goods storage and dispatched areas. While make-do solutions are being implemented at the moment, existing storage area reconfiguration, technologies used and the need for additional overflow are all topics to be revisited.
Food processors are long accustomed to operating to stringent hygienic standards. However, achieving safe social distances on manual processing lines can be a real challenge. Where space is a constraint, reduced throughput may be the only immediate safe option. Canteen facilities and labour accommodation arrangements pose additional challenges. It looks increasingly like food processors, like all other businesses, are going to have to build solutions for ensuring safe distancing into their processes and facilities for the foreseeable future.
Food manufacturers face myriad challenges in adapting to restrictions imposed by the coronavirus. Increasing automation, implementing new process designs, working out better upstream supply resilience, distribution processes, storage capability and employee welfare are all under the microscope. For a more in-depth approach to managing your food business through this crisis contact Farrelly & Mitchell.
As a Managing Partner for Farrelly & Mitchell, Philip has consulted with countless food and beverage agribusinesses around the world. His expertise includes commercial and technical due diligence, business valuation, feasability modelling, and more.
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