Besides price and product mix, the total cost of ownership (TCO) of equipment and efficient backroom processes can help retailers and grocers maximize their returns on investment.
Jason Wiley, marketing manager of Mettler Toledo tells Food News International more.
FNI: What best practices can retailers learn from food manufacturers in keeping their (i) processes tight and (ii) businesses competitive?
Wiley: Tough competition and ever-rising manufacturing and raw material costs mean that producers have the greatest opportunity to increase profitability by improving production efficiency.
This is true for both food manufacturers and grocery backrooms.
Many manufacturers optimize their production lines based on lean principles and the basics of this apply well in the backroom.
Lean production is aimed at customizing the technical set-up to the particular process (neither undersizing nor oversizing) and eliminating unnecessary steps in the process.
These methods provide a step-by-step approach to making workplaces more orderly, more efficient, cleaner and safer.
As a result, work processes are completed faster, more smoothly and more intuitively.
The process steps of a food manufacturer (for example, a meat processor) and the grocery backroom workflows are nearly identical.
Both facilities receive raw materials which move from receiving to inventory management and then into storage of some type.
Raw materials must be logged and traced throughout the production process.
Skilled production planning is needed for both because of the factor of variable customer demands, especially as the product moves into the production phase.
In both applications the ‘goods’ are cut and/or prepared, packaged and labeled.
A quality check or control occurs before the product moves to the distribution or sale stage.
Manufacturers consider their processes first and foremost when purchasing new equipment and often rely on the TCO to calculate costs.
However, operational uptime is also an important success factor for any production facility. Interruptions to production create inefficiency and added cost.
Any unplanned downtime causes disruption in the supply chain.
In order to minimize downtime, manufacturers, and retailers alike, can monitor and document their production lines and seize every opportunity to improve the operational uptime.
FNI: What are the areas that retailers face in terms of backroom inefficiencies?
Wiley: The meat department has a significant impact on a customer’s shopping experience and whether or not a customer returns to become a loyal shopper.
But the meat department is also one of the most cost-intensive areas in grocery stores.
All investment decisions must be based on a careful analysis of the TCO throughout the entire lifespan of the equipment.
Three critical areas to be considered are process analysis, TCO, and operational uptime.
For process analysis, it is about identifying needs.
As critical equipment, wrapping machines play a role in determining backroom processes.
Therefore, supermarket and department managers should check whether a system is suitable for the specific workflows in their backroom.
An undersized system, such as hand-wrapping in a backroom with high customer demand, results in empty space in the meat case and, consequently, lost sales.
Conversely, having automated equipment that produces more than the shopper demands should also be avoided.
Wrapping machines with a very high throughput rate will never achieve their full performance potential in the backroom.
Hence, they are unnecessarily expensive and can take up valuable space.
The pace consumers demand determines the requirements for production in the backroom.
When it comes to TCO, there must be long-term calculations.
When analyzed over a period of time, the purchase price of capital goods, such as backroom wrapping machines, only accounts for a small portion of the total costs.
Calculating the TCO helps to estimate the future costs.
Running costs for trays and film material, for employee/operator training, and maintenance play a significant role in determining the TCO for packaging and labeling equipment in the backroom
On operational uptime, be mindful about protecting the investment.
As a mission-critical component, a backroom wrapping machine must have a very high operational uptime.
Ease of operation and serviceability, excellent labeling and packaging quality, as well as flexibility in terms of positioning and label application contribute to the quality of your backroom wrapping solution. Mechanical problems during a production phase can have a drastic impact on a whole day’s profitability. A tailored maintenance agreement can prevent the occurrence of such worst-case scenarios.
FNI: How can businesses improve in these areas?
Wiley: In the past, grocery retailers and backroom managers have primarily focused on the purchase price, the packaging quality, and the maximum speed of the wrapping machine as criteria for their investment decision.
As a result, systems were often chosen which later, in daily use, proved to be too big, overcomplicated the workflow or did not deliver the expected return on investment in the long run.
Rather than focusing purely on the purchase price of the equipment, the TCO calculation entails a comprehensive estimate of all costs including the long-term costs and savings potential.
The backroom of a grocery store is an area where production peaks, staff breaks and shift changes must be managed.
Training new employees, regular cleaning of equipment, service maintenance and repairs must be taken into full consideration in order to optimize work processes.
The close analysis of the backroom processes, the calculation of the TCO, and the consideration of the operation uptime are the three essential pillars for a sound investment decision in the backroom.
Higher efficiency in the meat backroom requires rethinking the role of the backroom and seeing it as a small manufacturing facility.
It means asking what is the best backroom weighing, labeling, wrapping and packaging solution for a store if we want to turn the backroom into a high-volume production center.
Simply put, the solution is one that simultaneously offers the highest possible operational uptime and the lowest cost prepackaging unit throughout its entire lifespan.
The solution that does not waste any space at the expense of valuable sales floor and it does not invest in excess capability.
The solution optimized in terms of the workload, availability and price-performance ration of the equipment.
The close analysis of the backroom processes, the calculation of the TCO, and the consideration of the operational uptime are the three essential pillars for a sound investment decision in the backroom.
Retailers who base their sourcing and equipment decisions on these decisive factors are on the best path toward purchasing the most reliable and most efficient solution in the long term.
