Food Packaging Changes – Part 2: Preliminary Engineering Assessments
Even a “minor format change” in food product packaging can have a major impact on a capital project’s cost and the final cost of goods.
Our three-part series on preliminary engineering methodology explains how preliminary engineering assessments help food manufacturers investigate alternative packaging specifications and project scopes before spending time and money on plans that will never achieve an acceptable internal rate of return (IRR).
Part 1 in our series explained the risks of minor packaging changes and shared an example of a preliminary engineering assessment by Matrix Technologies that helped a large food manufacturer reduces its capital project budget by 50%.
Part 2, below, details the benefits of preliminary engineering and the steps of an assessment.
Our next post, part 3, will share a preliminary engineering case study profiling a food manufacturing packaging project.
How Linear Project Flow Locks In Capital Costs
Capital projects often follow a linear flow that begins with a new package specification, a budget appropriated, and a race to get long-lead time equipment on order.
This approach to project execution has its place when the business risk tolerance is high due to high margins, available white space, low existing equipment utilization, low product SKU mix, and an equipment infrastructure with highly flexible modern machines. However, few projects have the luxury of one, much less all, of these conditions, which often leads to unanticipated challenges.
For example, the full scope of the project may not be completely understood and it may not be feasible to meet all the project requirements while remaining in budget. Changes such as carton and case count reductions mean that packages shrink while overall production levels remain constant. Thus, the number of units flowing through the entire system increases. An increase as small as 10% can create serious downstream bottlenecks and prevent the complete system from achieving the committed production rate.
Even if a project’s complete scope is understood and within budget, is it really the best alternative? Installing all new equipment drives up capital costs and delays time to market, while retrofitting existing equipment may bring partial or full capacity online quickly and at a fraction of the cost. Perhaps a combination of the new and retrofit provides the best return.
Understanding the intent of packaging specifications and considering possible alternatives that match this intent can save hundreds of thousands or even millions of dollars while providing a faster response to market demand.
How then can marketing and supply chain teams recognize these challenges early and collaborate on a packaging specification that will reduce costs while still meeting customer needs? The answer is a preliminary engineering assessment.
The Preliminary Engineering Assessment
Successful companies recognize that responding to customer demands is not just about speed, but also about promptly executing the right project for the business as a whole. The wrong scope with unexpected technical and financial challenges can stress already limited margins and engineering staff.
A preliminary engineering assessment of a capital project can help you identify the right project with the right scope that can be executed efficiently.
A preliminary engineering assessment creates a communication loop that diagnoses challenges, generates, and evaluates solutions, and delivers a well-honed scope, schedule, and budget.
Matrix Technologies has in-depth experience performing these assessments for food and beverage manufacturing projects. We begin by working closely with the manufacturer’s Capital Project Team to reach out to and engage stakeholders in Supply Chain Planning, Packaging R&D, and Operations. We use a multi-disciplinary team approach to quickly gather local stakeholder input and perform infrastructure assessments at multiple manufacturing sites simultaneously to keep projects on schedule.
The preliminary engineering assessment follows a methodology of assessing feasibility, options development, and scope refinement, to arrive at a definitive cost estimate. Each stage is designed to efficiently develop and communicate the scope across a large group of stakeholders to root out previously unknown requirements and limitations.
Early stages of the assessment develop only a few preliminary engineering deliverables with the purpose of identifying and communicating feasible options, with just enough information for the stakeholders to choose a single path forward. This is often the opportunity for leadership to revisit the parameters in the original project charter to better align the project with the needs of the business, prior to significant time and capital investments.
Later stages of the assessment incrementally introduce new engineering documentation and refine previously developed deliverables as the group of stakeholders is broadened and the discussion focused. Focus groups of stakeholders outside of the core project team often include safety, quality, maintenance, lean manufacturing, environmental and sustainability, production scheduling, logistics, commissioning and training leads, as well as potential vendors and contractors. As the investigation progresses and input is received from more stakeholders, the true scope, schedule and costs required to achieve a vertical startup are understood across the organization.
Since every organization is different, Matrix Technologies is able to tailor the preliminary engineering assessment process to each client’s unique schedule requirements and risk tolerance.
Early Collaboration Leads to Bottom-Line Results
Recently Matrix’s Packaging Services team worked closely with a client’s Supply Chain Planning group to assess the impact of a carton count reduction affecting multiple packaging legs at three manufacturing sites.
Using the preliminary engineering assessment method, Matrix assessed the existing equipment infrastructure and equipment utilization requirements of over 100 SKUs. Production models illustrating new and retrofitted equipment utilization and cost estimates were developed for the proposed packaging specification, as well as less capital-intensive alternatives to the specifications.
The assessment provided bottom-line results: The project was re-chartered with alternative packaging specifications, reducing capital project costs from initial projections of $15-$20MM to below $8MM.
Matrix Technologies is one of the largest independent process design, industrial automation engineering, and manufacturing operations management companies in North America. To discuss a project, or learn more about our food and beverage engineering services, including packaging services, contact Dave Travis, Project Engineer in the Engineering Services Division, (317) 347-7700 x143.
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