Improving Food Production Cost Control Through Operational Excellence Implementation - A Case Study

1. Background

As 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:

2. The Set Up of operational excellence project

The 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 Principles

The 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: As all these aspects were being mapped out, numerous solutions were being created by the local staff. Involving them in all aspects of the project changed their perception of the work, making them more aware of the importance of operational excellence and production cost control. The final implementation of lean manufacturing principles was carried out by the staff themselves. The project team only set it in motion.

4. Second Area: Operations Management - Cost Control Via Continuous Improvement

The 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. This meant that the supervisory and managerial levels were blind. Operational excellence requires a complete understanding of the situation, something that was lacking here. The team started by educating the complete supervisory and management team in the principles of management system. This meant both theoretical knowledge and hands on exercises. In the next step, a set of new KPIs was developed, targeting information that was compulsory for the new lean manufacturing process and information that would be used to create manufacturing cost control. This information would later be reviewed daily by the management team. A new meeting structure with new agendas was then initiated. At the same time continuous improvement whiteboards were introduced together with performance and KPI visualisation boards. Finally a tool was developed that allowed to calculate the required resources based on the production plan. The logic was completely derived from food production process observations here and in other plants.

5. Third Area: Behavioural Change

The 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.

6. Challenges

One 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

Hard benefits

Soft benefits

8. FAQ

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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