Who ate all the pies?
the savoury pastry sector is fast paced andhighly competitive. Who’s in the lead?
the market players
summary of category challenges
sector characteristics
the benchmark
Chasing the benchmark
InsIder InsIght
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savoury pastries – the top players*
*source, ‘the grocer’ december 2016
samworth Brothers – ginsters, tamar Foods, Walker & son, dickinson & MorrisAddo Food group – Wall’s, Pork Farms own brandPeter’s Food service – heinz, seriously tasty, Peter’s own brandhiggidy PiesPukka PiesBell’sholland’s Pies (2 sisters Food group)Vale of MowbrayPieministerCharlie Bigham’sWright’s Piesdicksonsgregg’s
Lewis Pie and Pasty CoWelsh Pantrynewly Weds Foodsthe Brampton Pie CoJasat Piesthe real Pie Cogoddard’s PiesMidland Chilled FoodsPArs FoodsPeakhouse Foodssouth england PastriesCalder MillerfieldWest Cornwall Pasty CoeAtgenius FoodsWarren’s Bakery
Category challengesThe trend for healthier eating, e.g. lesssalt, fat, etc – so what?
This means product reformulation, technicallymore demanding manufacturing processes,new ingredients and products, and potentialdecline in traditional product lines.
Evolving BRC criteria – so what?
More complex production processes andhigher technical requirements, e.g. lessforgiving on pastry recycling.
The trend for smaller, speciality batchese.g. gluten free – so what?
More complex planning, lower OEE (morechangeovers, clean downs), lower yields,complex supply chain, all giving higher unitcost to manufacture, higher %cos.
The need to innovate, trial new products – so what?
As above. Also impacts on more establishedlonger run products (interrupting long runsand using up capacity less efficiently).
The rise of the niche players – so what?
These smaller players are picking off thejuiciest, higher margin premium demand, andexpanding their ranges and their reach, plusregional local players are expanding theirgeographical sales.
Supermarket buying power – so what?
This challenge hasn’t gone away! However,the available larger contracts are now justbeing passed around to the lowest bidder – arace to the bottom, simply to keep the lightson.
Rising input costs – so what?
These tend to be out of sync with deals agreedwith customers – so the manufacturer takesthe pain.
A key driver for growth in this sector is theinnovation, new product development, smallerbatch, niche product trends. This is reinforcedby consumer buying trends, and technicalcriteria changes.
this drives more changeovers, morecomplexity not less. There are of course some big retailer contracts,but these unfortunately cannot really bedescribed as both “big and juicy”. In fact,these contracts are increasingly seen aspoisoned chalices, defined by customersinterested primarily in exploring how anymargin can be given back, whilst the threat tomove the volume elsewhere, sometimes by a‘race to the bottom’ tender process, is alwayspresent.
Even so, retail customers are also pushing forflexibility, and innovation – they are chasingsales just as much as the next, and have nogreat desire to go to six different suppliers forthe range they want in order to do so.
Sticking heads in the sand and hoping it will allgo away is foolhardy, yet this is exactly whatestablished sector players are hoping for bynot just trying to fight complexity, but inpursuing commercial and operationalstrategies which pull in the diametricallyopposite direction!
sector characteristics
!Poor productivity is presented as aproblem of too complex a productportfolio.
Poor service or excessive waste ispresented as a problem of poorforecasting.
Poor efficiency is presented as aproblem of poor equipment, or IT.
Poor sales are presented as aproblem of product, or of price.
Poor margin is presented as aproblem of rising input costs, orcustomer inflexibility.
These are the average characteristics of thesector, and reflect the typical manner in whichthese characteristics are presented by thosewho manage in the sector.
This is why the smaller niche players aregetting bigger, and stealing market share.
to see if there’s truth in howaverage (poor) sectorperformance is presented weneed to look deeper...
Are any of the abovereasons for poorperformance actuallytrue?
sector characteristics – detailhigher cost in overhead, material and•direct labourMore difficult to incorporate trials•and required changeoversCan’t see the real opportunity to•optimise margins
Complacency in operations (“we’re•ok”) when in reality the competitionhas moved on – and the customer willsee thatPlus, higher costs than should be•
1. Planning
Plan is out of date almost immediately as it’s printed •Hard to keep up with changes to the plan•Changes not always communicated•Set run order or plan not followed by production•Not completed 100% as planned•Not followed due to supply issues•Not followed due to mechanical failure•Reliant upon one individual to make the plan•Standards have not been independently challenged•
2. Labour cost
Lines do not start when the shift starts•Target hours and cost per run not known by staff•It takes longer than two minutes to know who is on shift,•and where they are supposed to beThere is an unplanned labour variance (loss or gain versus•standard)
higher cost•Less flexible•Cannot cope with increased•complexitydelays to output•
higher cost•Less flexible•Cannot cope with increased•complexityProduct costing (and margin)•assumptions are wrong
higher cost•Less flexible•Cannot cope with increased•complexityno real idea where the priorities are,•and liable to raising capital forequipment that isn’t needed
3. supply to line
Inconsistent material•Lines stop due to waiting for materials•There is no schedule for prep areas•Material is not recycled (especially pastry)•Production is out of synchronisation with stores supply•
4. Waste
There is unplanned material variance•There is waste material on the floor•The effluent bill is high, or not even part of any review•
5. downtime
There are a large amount of unrecorded stops•There is a ‘black hole’ of unaccounted for ‘lost’ time •Actual line capacity and bottlenecks not defined•Operators cede start up/set up and/or changeover activity•to engineersThere are many planned maintenance jobs which are•behind schedule. It is difficult to get enough time on theequipment
higher cost•Less flexible•Cannot cope with increased•complexitydelays to output•
Inconsistent output•higher cost•Less flexible•Cannot cope with increased•complexitydelays to output•Variable and unpredictable cost•
higher cost•Less flexible•Cannot cope with increased•complexitydelays to output•Antagonistic relationship between•operations and commercial (whoserequirements pull in oppositedirections)
6. Changeovers
Even simple ones take 10 minutes or more•Planning try to avoid them•Commercial need more of them•
7. Process control
There is material in baskets waiting to be reworked•The giveaway is greater than 2.5%•By the time quality variance is found it is too late to affect•results for the runShort runs do not make the margin predicted•
8. nPd and trials
Trail runs do not replicate the actual conditions of general•manufactureNew products never seem to make the margins•Trials always knock operational performance•Operational performance is knocked by complexity, so•there is an effort to simplify the product portfolioTrials often seem to be done in haste, and are not always•planned
higher cost•disengagement and lack of•sustained improvementWhole organisation dragged•down a level or more
Poor decisions•Complacency•Lack of visibility of the real•issues
Poor productivity is presented as aproblem of complex productportfolio, poor service is presentedas a problem of poor forecasting,and poor margin is presented as aproblem of input costs:“performance paralysis”.
this is about more than mere operational cost control, especially if you are only using the same customeraudit-driven operational game plan as your competitor.
this is about the capture of better information, and using it in a better way than your competitor does.
9. supervision
Supervisors are not often found in the production area•Supervisors can be found to be doing the work of operators,•standing in, moving material around etc.Supervisors are largely good operators who have been promoted•Some good operators do not want to be Supervisors because the•pay differential isn’t worth it for the additional aggravation
10. reporting
It is difficult to tell if production is ‘on plan’ or not•It is difficult to tell if it is a good or bad day•Profitability of each run versus plan is not known•The exact number produced isn’t easy to know right away•Stock counts make the material variances bounce up and down•week to weekThe same problems tend to keep repeating•% Cost of Sales is used as a key measure, despite variation in•product mix; (actual) product profitability is not knownTop losses are not reviewed at least daily•
Is there a company out therethat is thinking differently?
the following description isof one major sector playerwho six months previouslyexhibited the 10 averagesector traits...
the benchmark
This was (therefore can be) achieved within asix month timeframe:
ROCE circa 30% (versus circa •18–22% norm)
Super-consistent product quality•
Best in class material yield •performance
Industry leading shop floor data•capture
Cloud-based factory reporting suite•
Run-by-run margin reporting•
Absorption of significant input cost•inflation
Becoming the benchmark must be the rationalambition of all players in the sector.
However, it is not uncommon to find some orindeed all of the 10 sector traits in an averagefood manufacturer, not just those makingsavoury pastries. Why?
People?
“We haven’t enough resource/the skills/the rightpeople in place.”
Kit?
“Our freezers are old/we need engineers/we’vegot a big Capex project/we’re installing a newplanning system.”
Complexity?
“Runs too short/NPD no good/changeovers toolong/bad forecasts.”
Already doing something?
“Customer driven lean audit/we have a CIteam/new manager coming in.”
this is exactly what the benchmark companysaid to us – but with one importantdistinction. they also said...
Chasing the benchmark
the sector benchmark
“We’d likeyoursupport”
Each production process area has a schedule with anagreed run order, quantity and run criteria (includingrates, crew etc). The schedule also shows andaccounts for changeovers and planned maintenance.
The schedule is based on observed,challenged and agreed standards, andthe correct number of man hours isallocated and actually brought in tomatch the schedule. It takes 15minutes to produce the schedule, sothe planner has become more involvedin continuous improvement activity.
The lines all start exactly on time, and thecorrect, planned quantities are produced.
The lines are all set up correctly for each product byoperators. Changeovers have all been optimised (viaSMED). There are 30% MORE product varietieseach week, but 10% FEWER changeovers.
Supervisors have in-area live performance informationfor each line and each area, with data pulled directlyfrom machines covering weights, throughput andprogress versus plan. The supervisors remain in area,supervising, and ALL lost time is reported andaccounted for.
The line leaders and supervisors can track theactual cost of any losses as they happen; theyknow exactly what each run should cost, and canaccount for any and all differences.
Each process feeds the next inharmony, including materialsupply, with no waiting.
Any process variance (to plan, to targetweight, to crewing) is identified andacted upon immediately.
The shop floor data capture allowstracking of the whole process,front to back, so that action canbe taken to impact performanceon the same run, rather than atthe end of the shift.
People in operations are able to reviewlosses as they happen and prioritise actionsto make improvements – they do not have torely on finance to produce variance reports aweek later.
Material variance has hit revised, tighterstandard and been sustained.
Labour variance has hit revised, tighterstandard and been sustained.
In addition to financial savings alreadymade, a CI culture and process exists withthe team working their way throughquantified financial targets.
Applied Acumen Limited.
experts in pie production.
Food for thought.
Thwaites BarnHaggs FarmFollifootHarrogate HG3 1EQ
Registered in England N°4936732
www.appliedacumen.com
