THE STRATEGIC PLANNING GUIDE FOR FOOD PROCESSORS

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HOW TO INCREASE PROFITS BY PLANNING FOR the future

The Strategic Planning Guide for Food Processing Plants

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The Strategic Planning Guide for Food Processors How to increase profits by planning for the future

© 2015 Published by Stellar

Stellar 2900 Hartley Road Jacksonville, FL 32257

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The Strategic Planning Guide for Food Processing Plants

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The day-to-day of running a food processing business is challenging—just keeping up can be a struggle. You have your hands full, juggling demands ranging from managing personnel and meeting consumers’ changing demands to lowering costs and complying with rising government regulations.

You probably haven’t had time to step back and take look at the big picture: the future of your business. What do you want your food processing company to look like in three years? How about five? Or even longer? You may have a general idea, but not the specifics—or what it’s going to take to get there.

Are you taking a deep dive into your food manufacturing strategy, analyzing your processes, assets, profit margins and supply chain? How about your manufacturing capacity, material handling and labor? Do you have a thorough understanding of how to optimize your business and plan for its future?

You can get those answers by developing a strategic plan: a formal roadmap that defines the future of your business—and everything it’s going to take to get there. A strategic plan is the best way to remain competitive in food processing today, equipping your business with the knowledge, tools and strategies to evolve and adjust to changing market and economic conditions, including customer demand.

WHY DOES YOUR FOOD COMPANY NEED A STRATEGIC PLAN? Failing to plan is p lanning to fail— especially when it comes to your business. There’s no wrong time to develop a strategic plan. Whether you’re embarking on a greenfield project or thinking about a facility expansion, a strategic plan can benefit your business at any time.

IF YOU’RE NOT LOOKING FORWARD, you’ re already moving backward

INTRODUCTION

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The food manufacturing space is not only incredibly competitive, it’s ever-changing—just like consumers’ taste buds. Meeting preferences for tastes, specialty ingredients and preparations (such as non-GMO, Kosher and gluten-free) have resulted in a multitude of SKUs for food processors. These can drag down profits, drive up production costs and decrease throughput. This is yet another area a strategic plan can help you get control of, by understanding the bits and pieces of what’s best for your bottom line.

Government regulations, such as the Food Safety Modernization Act, are changing the industry as we know it, as well. These regulations are affecting the way food processors conduct business, hitting everything from record keeping and reporting to auditing.

YOU HAVE TO SPEND MONEY TO MAKE MONEY A strategic plan can secure the future success of your business. If you don’t want to spend the capital and internal resources it takes to develop that plan, then you’ll be bypassed by a competitor who does.

6 WAYS YOUR FOOD COMPANY WILL BENEFIT FROM A STRATEGIC PLAN

1: CLEARLY DEFINED MISSION AND VISION — Developing a strategic plan requires a company and its leaders examine, or in some cases, establish, a corporate mission and vision. Every operational, sales and marketing aspect of the business will support this mission and vision.

2: OBJECTIVE VIEW — Embarking on the strategic planning process forces your organization and its leaders to take a clear, objective look at organizational structure, processes and future growth plans.

3: COST MANAGEMENT — Your strategic plan should address future growth objectives, which will aid in space planning and maximizing the use of available square footage. All of these factors contribute to more effective cost management and budget planning.

4: COMPETITIVE ADVANTAGES — A company with clearly defined goals and a production optimization plan will be more successful in meeting its business objectives and obtaining market share.

5: ADAPTABILITY — Food processors are adding product lines, incorporating more packaging options, adjusting ingredients and expanding product mix, all of which affect people and processes. A strategic plan accounts for operational changes and adjustments and determines appropriate courses of action.

6: IMPROVED COMMUNICATION — A strategic plan that effectively conveys corporate goals can lead to improved communication and cohesiveness among employees. All personnel will have a clear understanding of the company’s direction and their role, which can lead to a more motivated and stable workforce.

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HOW FAR SHOULD YOU LOOK INTO THE FUTURE?

When planning, strive to look at least three to five years ahead.

3 YEAR

S 5 YEAR

S 10 YEAR

S

WHAT’S INVOLVED IN A STRATEGIC PLAN? An effective strategic plan includes the following key elements:

THE BUSINESS PLAN 6

THE MANUFACTURING ANALYSIS 8

THE MANUFACTURING PLAN 11

THE MASTER PLAN 13

THE PARTNER 15

THE BEST STRATEGIC PLANS ADDRESS:

Operational Efficiency

GainsIncreased Capacity

Labor Reduction

Sales & Marketing

Goals

Improved Safety

Yield Improvements

1

2

3

4

5

Warehouse & Inventory Efficiencies

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THE BUSINESS PLAN

The first step in strategic planning involves the development of a business plan, where you define and analyze aspects of your business against your company’s business objectives. Your business plan defines where your business is going, and how you want it to grow.

Food processing companies develop business plans at different life-cycle stages, especially when preparing to launch a new product line, invest in a facility expansion or identify new growth opportunities.

Because your business plan drives every other process in the strategic plan, it’s important to invest time and resources into getting it right. While larger companies may establish internal teams to develop their business plan, smaller and mid-size businesses often outsource this process.

However, no matter who is developing the business plan, ideally functional leaders within these key areas of your company will participate in the process to align company goals:

⊲ Manufacturing and supply chain

⊲ Engineering and maintenance

⊲ Marketing

⊲ Sales

⊲ Finance

⊲ Logistics

⊲ Human resources

⊲ Executive team

FIGURING OUT WHO YOU ARE − and where you want to be

1:

MARKETING

EXECUTIVETEAM

SALES

HUMANRESOURCES

FINANCELOGISTICS

MANUFACTURING &SUPPLY CHAIN

ENGINEERING &MAINTENANCE

KEY LEADERSHIP AREAS

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COMPANY DESCRIPTION — The first element of your business plan is defining the identity of your company: who it is and what you want it to be.

Answer these questions:

⊲ What is the nature of your business, and how will your product serve the market’s needs?

⊲ Who are your target customers?

⊲ What sets your company apart from other food processing companies in the marketplace offering similar products?

PRODUCT MIX — Detail each product your company will manufacture and its contribution to meeting sales goals. In other words, understand which products are profitable—and which are not. Each individual SKU will fill a unique customer desire and have its own price and profit margin, in addition to competitive advantages, such as ingredients, packaging or price.

Answer these questions:

⊲ What similar products are available and what market share do they own?

⊲ Are there product lines the company may add in the future?

⊲ What products are profitable?

⊲ What products are not profitable?

⊲ What are your products’ profit margins?

⊲ For each product, what is the cost of equipment utilization, labor, materials, etc.?

INDUSTRY ANALYSIS — Address both the specific market segment you’ll serve and your customers’ wants/needs. This analysis should involve your company’s sales and marketing departments: the individuals who understand where the customer base is headed and how customer preferences are shifting from one product to another.

Answer these questions:

⊲ Is the market expanding or well saturated?

⊲ Who are the current market leaders and what is their brand strategy?

⊲ What profit margins are typical in the industry?

⊲ Are there seasonal or geographic limitations or opportunities?

MARKETING AND SALES — Determine your sales goals and develop your marketing strategy to meet those goals.

Answer these questions:

⊲ Is this a new market you’re hoping to penetrate or are there existing product lines in the market?

⊲ Could your product target an entirely new demographic, and if so, how will you reach it?

⊲ How will you meet your sales goals? Will it be through organic growth, a business acquisition or a vertical growth strategy?

⊲ What channels of distribution will you use to meet these sales goals?

4 ITEMS YOUR BUSINESS PLAN SHOULD ADDRESS

2

define & analyze

1 3

4

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You understand where you want your business to be in the future, but what are your current production capabilities? After developing your business plan, the next step of the strategic planning process is to conduct a manufacturing analysis. The manufacturing analysis will let your team get into the nitty gritty of your current processes.

A thorough, seasoned understanding of food manufacturing and the marketplace is key to developing an accurate manufacturing analysis. It often helps to enlist an outside consultant so you can tap into an objective perspective on your company’s current processes and capabilities. Turn toward those with expertise in your segment, as they can provide case studies and past experience with similar food companies for a more informed analysis.

A manufacturing analysis requires an in-depth understanding of processes related to manufacturing such as your:

⊲ Physical facility

⊲ Materials

⊲ Equipment

⊲ Personnel

⊲ Storage

⊲ Logistics

KEY GOALS FOR YOUR MANUFACTURING PLAN:

⊲ Review the current-state manufacturing equipment utilization and bottlenecks

⊲ Forecast the effect of projected growth on the utilization of existing equipment and systems

⊲ Develop courses of action to effectively support projected growth

THE MANUFACTURING ANALYSIS

ANALYZING WHAT YOU’RE capable of

2:

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3 ELEMENTS OF A THOROUGH MANUFACTURING ANALYSIS Your manufacturing analysis is the sum of three overarching analyses of your processes:

1 SITUATION ANALYSIS — This involves a detailed review of your facility’s physical space and plant layout. Your strategic planning team should analyze workflow among both process equipment and personnel. Seek to answer the questions within each area below.

SITE CONSIDERATIONS

⊲ What utilities serve your plant’s site?

⊲ What are the zoning requirements?

⊲ What are local emissions requirements?

PHYSICAL BUILDING AND STRUCTURE

⊲ How will your building structure work with the necessary sanitation and food safety requirements? Consider sanitary design and hygienic zoning staff issues.

⊲ Is expansion or renovation possible?

⊲ Is your building leased or newly built? If you’re leasing, how will the lease impact your future operations? Keep involved with bringing your leased facility back to its original state (stripping building pieces, etc.)

UTILITY/PROCESS SYSTEMS

⊲ What are your utility requirements for your plant’s processes?

⊲ What is the existing condition of the utility infrastructure?

⊲ Do you have enough gas, electricity and water service?

A large food client wanted to meet Safe Quality Food program standards to show customers its dedication to food safety. This involved spending

several million to rip down walls, remove roof insulation and bring the physical structure and quality of its building to meet those standards.

For example, one of our food manufacturing clients was offered a great deal on a site from the state to build a new facility; however, upon looking

at the utility requirements, the client realized this site would require bringing in a six-mile-long water line—a no-go.

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CAPACITY

⊲ Will you need to upgrade your existing equipment? When?

⊲ Should you refurbish or replace older equipment to increase capacity?

⊲ Will you need additional equipment? When? Remember, this is more than just determining when your equipment will be outdated, it’s about ensuring it will be able to handle future manufacturing capacity, as well.

⊲ What capacity do current production lines have?

MATERIAL HANDLING

⊲ How will you handle material transfers within the facility?

⊲ How do ingredients and raw materials flow to production lines?

⊲ How does finished product move to shipping or storage?

STORAGE AND DISTRIBUTION

⊲ How will you receive raw materials and ingredients?

⊲ Will your storage be at the facility or will you store product offsite?

⊲ How will you distribute finished product?

2 CURRENT-STATE VS. FUTURE-STATE ANALYSIS — Examine the gaps between where your facility is now and where you want your facility and/or operations to be in the future. Consider everything from your situation analysis, including personnel, building size and equipment.

3 RELATIONSHIP ANALYSIS, FACTORY FLOW AND EQUIPMENT LAYOUT — Analyze your current food processing company’s workflow, production process lines and layout. Are there ways you could optimize these elements?

For example, if one process line can only produce 100 pounds of product per hour, but you’re projecting to produce 500 pounds of product in

three years, you’ll need to optimize the line or add another. It’s important to plan to spend capital to meet growth for your new projections.

For example, if production lines within your food plant can produce 100 pounds of product per hour, per day — will it be able to sustain the growth path for the next two years? If not,

you need to plan to spend capital to upgrade that line to meet that projection.

One food manufacturer had a timeline detailing when it needed

to implement new equipment based on its growth projections.

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Your manufacturing plan is a clear set of actions driven by gaps and discoveries from your manufacturing analysis. The manufacturing plan defines what your manufacturing will look like in the future, whether it’s multiple facilities, renovations or even consolidating operations or products. It’s all about what’s going to be most profitable for your food manufacturing business.

The goal is to ensure the appropriate technology is in place and to optimize current production practices to meet your sales goals. The process of developing the manufacturing plan will help identify where constraints exist and highlight areas to improve production efficiency.

DETERMINING WHAT IT WILL TAKE TO MOVE FROM point A to point B

THE MANUFACTURING PLAN3:

A B

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1STEP

DETERMINE KEY ASSUMPTIONS FOR:

⊲ Sales forecast

⊲ Volumes

⊲ Key growth areas

⊲ Supply chain strategy/needs

⊲ Project phasing and implementation

2STEP

DEVELOP QUANTIFIABLE GOALS IN THESE KEY AREAS:

⊲ Operations

⊲ Process/packaging capabilities

⊲ Levels of automation

⊲ Product mix

⊲ Warehouse logistics

⊲ Utilities

⊲ Overall facility support services

3STEP

PERFORM A SKILL ASSESSMENT FOR YOUR COMPANY’S:

⊲ Operations

⊲ Maintenance

⊲ Quality assurance

⊲ Technology gaps

4STEP

CONDUCT LEAN EXERCISES/ CONTINUOUS IMPROVEMENT TO DETERMINE IMPACTS ON:

⊲ Labor costs

⊲ Quality

⊲ Flexibility

⊲ Rework/scrap/waste

⊲ Work in progress (WIP)

4 STEPS IN DEVELOPING A MANUFACTURING PLAN

production efficiency

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Details and data from your business plan, manufacturing analysis and plan form the foundation of your master plan: a comprehensive three-to-five-year roadmap that determines your facility’s physical and site requirements based on your growth projections. Your master plan packages your analysis and findings together, providing a visual for what your business will look like in the future, whether it’s an expansion, greenfield or development of adjacent property.

At this stage, your strategic planning team should have a thorough understanding of every aspect of your food manufacturing business’ operations to form a realistic master plan. If done right, your master plan can help you make better engineering and operational decisions to allow you to manage capital expenditures more efficiently. To ensure a successful master plan, keep these key items in mind during the process:

⊲ Accurate cost data

⊲ Optimization of process and packaging lines

⊲ Information regarding current facilities and process equipment assets

⊲ Analysis of ALL details, from culture and production methods to staffing and food safety

⊲ Data and numbers to support decisions, return on investment (ROI)

⊲ Project costs, timing and efficiencies

3 STAGES OF MASTER PLANNING It’s best to take a staged approach with master planning, guiding the process with realistic, attainable benchmarks and milestones. There are three main phases involved in the master planning process, beginning with an analysis of your plant’s here and now—its current site.

THE MASTER PLAN

PULLING IT ALL together

4:

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STAGE 1: SITUATION ANALYSIS

First, you will gather data about your plant’s current physical location and structure prior to beginning any design. Your team will review the existing site and document all aspects of the land and facility including:

⊲ Planning and zoning – local regulations, parking requirements, setbacks, easements and height restrictions

⊲ Traffic – auto and truck parking and traffic flows

⊲ Utility capacity – current and future availability and rates

⊲ Process equipment layout and flows

⊲ Sanitation and wastewater requirements

⊲ Material handling systems, storage and delivery of raw materials

⊲ Finished product storage and distribution

⊲ Operations – space needs, adjacencies, organization, security and employee requirements

⊲ Process – changes and additions to equipment, personnel, functions, schedules or other minor adaptations

⊲ Utility – inefficiencies of source, delivery or utility utilization

⊲ Sanitation – environmental considerations for improved quality control

⊲ Product – product quality, mix and movement both within and outside of the facility for distribution

⊲ Facility – modifications or renovations to the current operating environments, including storage requirements

⊲ Required investment – determine the capital requirements to achieve the goals and ensure a proper ROI

⊲ Establishing concepts for both site and building expansion

⊲ Identifying the best use of the existing land

⊲ Minimizing infrastructure and utility distribution costs

⊲ Determining a specific list of needs and/or program requirements for each master plan component

⊲ Evaluating strategies to determine plan viability

⊲ Developing a plan to address site issues including transportation needs, site security, vehicular traffic, storm water management, wastewater treatment and utility systems

⊲ Recommending a comprehensive plan and sequence for implementation

STAGE 2: DEVELOPMENT OF GOALS AND OBJECTIVES

Your team will use the information obtained in the situation analysis and in the business plan to guide the development of the master plan. Goals and objectives as they relate to the existing and future requirements will be defined for the following areas:

STAGE 3: COURSES OF ACTION

Based on the goals and objectives set forth for your facility’s functional areas, you will determine logical and feasible steps your company should consider in its site development. The conclusions in this stage generally include:

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THE PARTNER5:

Creating a strategic plan requires a precious resource you don’t have: time. You’re busy turning the wheels of your business today, not greasing them for tomorrow. Many businesses approach their strategic plan as a deadline-free notch on their internal to-do list, constantly put off.

However, a strategic plan is extremely time sensitive—in fact, it’s urgent. Each new day that passes means you’re one step closer to the future: something you should be planning, and sowing the ground for, today. How can you develop a two-year plan, or even a five-year plan, before you realize you’re already there—and didn’t optimize your business?

Partnering with a consultant to support your efforts is often a key element to developing a strong strategic plan. Engaging a trusted third party with proven food industry knowledge and experience can help introduce new perspectives and feedback necessary for success.

FORMULATING THE FUTURE ALONGSIDE someone you trust

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6 ESSENTIAL QUALITIES TO LOOK FOR IN A STRATEGIC PLANNING CONSULTANT

1 FOOD INDUSTRY EXPERTISE — There are a multitude of big-name management consultants out there, but most are known for their skill in crunching numbers, not food-manufacturing knowhow. Whether you run a meat business or a bakery, your operations, equipment and processes are extremely unique. A partner who understands these pieces of your business is imperative to offering you properly informed analyses.

Even better, consultants with experience across multiple food sectors—from bakery, beef/pork, poultry, dairy, beverage, bakery, ready-to-eat, frozen and seafood—can be extremely valuable to your strategic plan development. They can leverage everything they’ve learned in multiple markets to develop a well-rounded strategy for you.

2 UNDERSTANDING OF ALL PLANT ASPECTS — Beyond food industry expertise, it’s crucial to partner with a firm who has an ever deeper understanding of your business: the ins and outs of a manufacturing plant. From the processing lines to the building envelope and design, a consultant who truly knows every nook and cranny of a facility is integral to a strategic plan, ensuring no stone is left unturned when planning for your future.

Consider the consultant who has not only operated facilities, but along with their plant experience, can actually design and build them. This consultant knows first-hand how timelines and budgets can impact your business and will provide you real-world scenarios and data for your planning.

3 INDUSTRY EXPERIENCE — Look for partners with in-house food processing experience: individuals who have worked in the food industry themselves. By working in the trenches, they understand your challenges, and won’t give you pie-in-the-sky solutions to your problems.

4 A STRONG NETWORK — While it’s important to work with a strategic-planning partner who can provide a comprehensive offering, strategic planning is wide-ranging, and no consultant will offer every single needed expertise under one roof. This is where extensive food industry experience is crucial, as your strategic-planning partner should have many partners of its own.

Because a strategic plan is the sum of many moving parts, a partner that can tap into resources and market knowledge to maximize your ROI for the future is invaluable. Look for a partner with seasoned experience, boasting a strong network of specialist expert partners within your industry.

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5 OBJECTIVITY — Every company has its own culture—and biases. While internal teams may be driven by their own prerogatives and agendas, having a third party come in offers a safe buffer. You can ensure your strategic plan—and future—is rooted in numbers and profits—not personal politics.

6 A SENSE OF URGENCY — Your team is busy doing what it takes to make money today, not devoting resources to drive the future. A strategic-planning consultant allows you to continue normal operations while moving you forward. Time is of the essence—the faster you develop a strategic plan, the faster you can follow it. Your consultant should be well versed in planning and scheduling, armed with a true understanding of efficient project management. They must have a sense of urgency, armed and ready to get your business where it needs to be—and fast.

time essence

A SOLID STRATEGIC PLANNING PARTNER SHOULD ADDRESS COST, CAPACITY AND MARGIN BY:

⊲ Balancing capital programs against ROI

⊲ Leveraging analytics and rational processes—NOT beliefs or opinions

⊲ Reinforcing directional decisions through third-party validation

is of the

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ABOUT STELLARStellar is a fully integrated design, engineering, construction and mechanical services firm that provides

the industry’s most comprehensive range of self-performed services. More than 600 Stellar employees

worldwide create food processing plants, refrigerated warehouses, distribution centers, commercial

buildings and military facilities. In addition to its Jacksonville, Florida, headquarters, Stellar operates

tactical support locations and offices throughout the United States and across the world.

GLOBAL POWERHOUSE IN FOOD PROCESSING Ranked one of the top food processing design-build firms in the world, Stellar’s experts are cross-trained

in all market segments, with experience in the bakery, beef/pork, poultry, dairy, beverage, bakery,

ready-to-eat, frozen and seafood sectors.

Stellar offers comprehensive upfront planning solutions, combined with the self-performing services clients

need to obtain their projected goals. Its team combines academic and operational backgrounds with

design, process engineering and construction expertise to provide insights that move businesses forward.

TO SCHEDULE A COMPLIMENTARY, NO-OBLIGATION STRATEGIC PLANNING CONSULTATION, CLICK HERE.

2900 Hartley Road Jacksonville, FL 32257

Phone: 904-260-2900 Toll-free: 800-488-2900 PSM: estrause@stellar.net

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