Improving Food Production Cost Control Through Operational Excellence Implementation - A Case Study
1. BackgroundAs manufacturing costs have escalated over the past few years so have the cost control measures. It started with simple production cost cutting programs but as the low hanging fruits have been picked, more elaborate measures have been required. The food industry and more specifically the fried potato products manufacturing has been aware of this and has been constantly improving their technology to keep costs at bay. Unfortunately technical solutions alone are insufficient in decreasing food production cost.
A french fries manufacturer realised that to stay ahead of the competition, a new approach to operations management was necessary; one that would allow the whole organisation to focus on operational excellence and process cost control. A decision was therefore taken to change the whole organisation. The whole project lifespan would be years. However, the initial start-up phase was to take 6 months. A decision was also made to kick start the project with external help in in three areas:
- Improve production processes and reduce waste
- Implement a structured way of managing with a self-correction element and production cost control
- Apply the first phase of behavioural change program targeting staff and management
2. The Set Up of operational excellence projectThe project was supervised with a joint team of external consultants and internal staff. Local management and supervisors were informed that they should dedicate 40% of their working time to the project. The external help's goal was to firstly educate the internal team in the concepts of operational excellence, then to help with analysis of "as is" and the design of solutions. The approach used was parallel rather than sequential. Instead of focusing on single elements at a time, like lean production principles, all elements were run in parallel. With that in mind there were still task forces dedicated to certain areas. All solutions were discussed within the team and with local management at the pilot site. The local management was seen as the key to driving the change.
3. First Area: Improving Food Production Process - Cost Control with the Help of Lean Production PrinciplesThe first of the three cornerstones of the project was manufacturing process improvement. The team, jointly with local staff, started by creating a complete value stream flow of the whole production process. This took into account all process control points, waste generation locations, human touch points, and all other aspects that affect the throughput and waste generation. It resulted in the discovery of a number of shortcomings:
- No control of how much raw material is wasted during the manufacturing process, at what stage of the process and no cost control
- No continuous control of peeling and frying processes - creating waste or out of spec products
- No clear understanding of the high tech equipment maintenance and cleaning routines leading to excessive good raw material wastage
4. Second Area: Operations Management - Cost Control Via Continuous ImprovementThe second major area of work, done in parallel with lean production, dealt with operations management improvement. The early analysis of the management system pointed out to the fact that some of the most basic principles of good management systems were not present.
- There were no operational KPIs
- Performance for previous day shift was unknown
- Daily operational meetings did not focus on production process performance
- Daily manufacturing cost was not discussed or even understood
- Daily production issues and problems were not reviewed - complete lack of any continuous improvement mentality
- Planning was done once a week; however, there was no daily reconciliation or correction
- There was no tool to calculate resource requirements based on the targets
5. Third Area: Behavioural ChangeThe last main element of the project was to change the internal culture of the organisation. The ultimate goal was to make employees proud of their jobs but to get to that stage would take years. With that in mind, the program put in place was aimed to get the organisation on the path to the goal. Reaching the end was planned to be done by local management over a longer period of time.
- As a first step all informal leaders were identified so that a special coaching program could be designed for them
- At the same time, a series of training sessions were run with the aim of making everyone aware of their role within the business
- Then coaching session were run for a period of three months with all levels of employees but focusing on supervisors and managers with the aim to make operations and production cost control a priority.
- Finally, a performance and improvement idea recognition program was introduced with a larger monthly competition between the shifts for the number of proposed improvements
6. ChallengesOne of the challenges encountered early on in the project was the lack of understanding why an operational excellence program is necessary. The perception was that "if it ain't broke then don't fix it". Changing this and making people understand that continuous improvement is not the same as manufacturing cost reduction or cost control was difficult.
Similarly, people just did not want to take responsibility as to the goings-on within the plant. This indifferent attitude was altered only once the team started to become more visible on the production floor. It then also became clear that to change anything, the team had to invest more time with both the supervisors and informal leaders.
Convincing leadership that managing with numbers is more accurate than on a feeling-only basis got accepted when after a week of using operational KPIs, we achieved better results than for the past 15 weeks. Even then, the behaviour required continuous enforcement from the team.
7. Outcomes of the Project
- 10% increase in throughput
- 7% decrease in waste
- 15% decrease in out of spec
- Improved job satisfaction
- Flying through a "potential" client audit (major french fries buyer) who then became a client
Can similar operational excellence be implemented in other industries?Yes, it can, and it should!. It does require hard work with a dedicated team and the understanding that it will not happen overnight. However, once these changes have been put in place, the result is immediate.
Is operational excellence just another cost control measure?No. Cost cutting projects are aimed to only decrease the costs. They do not take into account process or management improvement and they definitely do not try to empower the employees to care for the business. Operational excellence projects are of a more holistic approach and are aimed at improving operations in both the short and the long term. They are also less stressful for the organisation and will usually be fondly remembered by all, whereas cost reduction will always have negative feelings associated with them. Decreased costs is an effect of the project but it is a sustainable decrease in costs. Please contact us to find out how we can help You.
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