No Time to Panic: Part 2, Smart Responses from Food Industry Leaders

In my last post, I cited two examples of course corrections that
food producers were making to preserve their margins and their
brand leadership.  The existing long-help processes or
behavior norms, also known as, “the sacred cows” are
most often never deviated from.  So, congrats to those leaders
of companies who dare to challenge the “sacred cows” in
response to today’s economy. I mean, isn’t this why the
big bucks are being paid?? 

The hallmark of sophisticated management is not  process
adherence or staying with “norms” any more than being a
skipper in the America’s Cup is about knowing how to tie a
Bowson’s knot or leaving the sails in a text book
configuration, (that steady state behavior pattern does not win the
race).  Neither is it about erratic and ill-considered
tactical responses to every ripple.

It is about calm, measured leadership–no panic, yet a clear
analysis of the situation and the appropriate response– making
clear, unequivocal and timely course corrections. This also means
having existing and new processes and ways of doing things fall
into line quickly with these corrections. A lag in the commitment
of the crew to fall into line and follow this lead leads to
failure, coming second, third, or indeed falling to the back of the
race. 

Strength in leadership becomes apparent in tough times or rough
seas (to continue the analogy), not when times are good and the sea
is calm.

Any managers in businesses who are not either instructing or being
instructed to  look again at their sacred cows, or to
challenge long held “norms” should start to be worried
about their own leadership attitude and should consider a
“change” agenda before they are asked to. Expenditure,
efficiencies, profitability, Capital expenditure and customer
retention will come under scrutiny, and changes will be
demanded–rightly so, a course correction is needed and the crew
needs to “get on board.”

One of the single biggest areas for margin improvement and one that
demands a fresh look and the re-examination of long held
assumptions and “sacred cows” is the plant network, the
effectiveness of which is increasingly the single biggest
constraint or opportunity within the supply slain for margin
protection and strategic capital preservation. 

Food plant managers tend to hold steadfastly to the notion that
their efficiency or OEE number tell an accurate story of their
performance and opportunity to improve. This creates a
“performance ceiling mentality” leading to locally
negotiated improvement targets which are barely impactful to the
enterprise as a whole.
A key issue here is the assumption that the record keeping and
dashboards in use are generating a meaningful reflection  of
where performance enhancements are available. Gartner has recently
identified significant shortcomings in a pure focus on equipment
when it is clear that this overlooks a major opportunity for
improvement which is in the people and processes which in turn can
impact profitability.

Instead, opportunities for significant margin improvement lie in
the abilities of the rank-and-file workers of the plant. 
There is insurmountable evidence that lost opportunity in this area
is costing 2-5% points on the margin of every case of product for
many food producers. However, food corporations who do seize this
opportunity are now increasing margins, raising performance and
increasing cases-per-man-hour in weeks, with no capital expenditure
on plant and equipment. They accomplish these improvements by
adjusting their factory metrics to focus on employee action. New
software designed to make workers more productive, to create
transparency of performance losses and allow localized worker
intervention (Toyota style), rather than relying on engineering-led
“retrospective analysis” are bucking the trend and
achieving uplifts in performance in double digits in under six
months. 

Now is exactly the time to challenge accepted traditions of factory
management behavior, and the nature of improvement!  It is
time capitalize on the urgency felt in today’s market, to
drive change, and to raise profitability from the workforce. Just
as Kellogg’s is ramping up its advertising for Corn Flakes to
appeal to consumers’ penny-pinching, and just as
Hershey’s reformulates it chocolates to eke out higher
margins, all food companies must challenge their deeply held
traditions if they are to survive today’s profound market
changes.