Food Packaging Case Study: Carton & Case Count Reductions
Imagine you’ve been tasked with leading a high-profile capital project that will impact multiple lines at every site in your manufacturing network. Marketing is driving R&D to change package formats to meet the demands of key retail customers, Planning is projecting growth, and it’s up to you to figure out how to meet both the format and volume requirements within the financial constraints of the project.
This is an exciting opportunity, but it’s a major challenge. You start by considering your existing assets. Can they be retrofitted? Do you have OEM support? What is the current utilization of assets and how will that be impacted by this new format?
You may need to consider new equipment alternatives. Where does the plant have whitespace? Can existing lines be replaced? How much space will new equipment need in old plants where equipment, people, and materials are already stacked on top of each other?
Before you get started, Planning revises growth projections down and you lose 10% of your budget. Then someone mentions that central palletizing is at full capacity. You take a deep breath, realizing this is going to be a long project – and the perfect time to consider a preliminary engineering assessment.
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 introduced the project risks associated with minor packaging changes and how a preliminary engineering assessment can be leveraged to mitigate risks and save capital budget.
Part 2 detailed the benefits of preliminary engineering and the steps of an assessment.
Part 3, below, is a case study of how a preliminary engineering assessment by Matrix Technologies helped a large food manufacturer deal with the complex challenge described above while reducing the preliminary capital cost estimates by 50%.
The Client’s Challenge
A large food and beverage manufacturing company in the snack food market needed to update its successful but outdated Point of Sale (POS) packaging. Marketing required the current double face cartons be reduced to a single face, with pack counts and pallet heights also to be reduced by half.
The products impacted by the packaging change were run on several legacy packaging legs at two different sites. There was a strong desire to replace the aging, unsupported equipment with the latest state-of-the-art equipment. Also, since the case size was being cut in half, there were significant concerns about how central case sorting and palletizing would react to a doubling of the case traffic.
When the cost of the new equipment, combined with the required major infrastructure changes, resulted in capital cost estimates more than double the budget for project feasibility, the manufacturer knew a more detailed analysis would be required.
Understand the Existing Production Process
The food and beverage engineering team at Matrix began by gathering available production data for the existing equipment. Automated data gathering was only happening in the central palletizing area, but no production information could be reported for the individual packaging legs.
To put hard numbers to the capabilities of each line, Matrix conducted time studies coordinated with the production schedule to observe the widest possible range of package formats. In addition to the individual packaging legs, constraints in product delivery and central case sorting and palletizing were studied. These time studies were important to the development of current state equipment utilization models.
Matrix then developed future state utilization models to understand the impact of the packaging change across the manufacturing network.
How to Approach Modeling a Production System
Deciding how to model a food and beverage manufacturing production system is a critical step that requires many important decisions, including model type, timescale, input data type, as well as the number and diversity of options under consideration. Perhaps the most important decision is the output data format required to facilitate decision-making.
Static spreadsheet models and discrete event simulations (DES) are two common types of models:
- Static spreadsheets, developed per application, are appropriate for high level “mass-balance” applications and for long timescales typically measured in shifts, weeks, or periods.
- DES, which utilizes specialized software, is appropriate when discrete products have highly complex interactions between each other and multiple systems, and typically have timescales measured in seconds or minutes. DES is particularly useful for analyzing buffer capacities and bottlenecks influenced by the downtime interactions of multiple systems.
How to Validate a Production Model Against Historical Data
Another important step when developing a production model is validating the model against historical data. Historical data often is more granular than Planning’s projections for the future. For instance, historical data might include tonnes per shift, while Operations planning can only provide a rough projection of tonnes per period.
By rolling the actual historical data up into tonnes per period and inputting it into the model, you can compare the average utilization output from the model to the actual utilization found in the historical production data. Not only is this critical to assuring the model is working as intended, but it’s crucial to gaining buy-in from project stakeholders. There will always be assumptions and the model output will never be perfect. The challenge is to identify the simplest model that will yield results accurate enough to make a decision and take action.
Modeling the Future State
Modeling must begin with the end in mind: Make a decision and take action. But what does that decision-making process look like for a capital project?
This manufacturer had a clear idea of where they wanted to invest in new equipment and where they wanted to only invest in retrofits. With project cost estimating happening in parallel, process modeling was intended to confirm Operations’ requirement that the plan would not exceed 80% equipment utilization during seasonal peaks. However, as they quickly discovered, the project was challenged on both cost and equipment utilization.
The models included two sites with over 100 SKUs and were validated against historical production, seasonal peak demand, and projected future growth data. Using these models, strategies were developed to shift production volumes between sites, update existing equipment, purchase new equipment, and expand plant facilities.
Fortunately, the manufacturer had the foresight to hold off on ordering long lead time equipment until the initial scope assumptions were validated. The assessment showed that the equipment strategy would not meet Operations’ utilization limits and the true magnitude of investment required throughout the entire downstream process would have never achieved a favorable IRR.
An Iterative Process
A preliminary engineering assessment creates a communication loop that diagnoses challenges, generates and evaluates solutions, and delivers a well-honed scope, schedule, and budget.
In this project, the manufacturer’s Packaging Design and Marketing teams used the initial preliminary engineering results to collaborate on a revised carton design, incorporating recommendations for slightly larger carton and case counts that could better utilize the existing equipment infrastructure.
Matrix engineers updated the process model to reflect the new packaging specifications and analyzed 20 new scenarios reflecting varying levels of equipment investment and demand load balancing across the sites in the network.
In conjunction with slight adjustments to the timing of inventory builds to meet peak demands, the new carton allowed existing equipment to be retrofitted with only modest investment in new equipment, while avoiding major investment in downstream systems.
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, while still satisfying Planning’s volume projections and Operations’ utilization limits.
Realizing Value with Preliminary Engineering Assessments
Packaging changes are often viewed as low risk, particularly when the package size is reduced but stays within the size capability of the equipment, and when production volumes remain constant.
However, the details of production rates and the complete process design associated with making “just a minor format change…” can create serious challenges for the project team. A preliminary engineering assessment by food and beverage engineering experts can remove these obstacles and create a path to success.
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 Packaging Services, contact Brandon Grodi, PE.
© Matrix Technologies, Inc.
Tags: Brandon Grodi, PE / Food & Beverage Engineering / Food and Beverage Manufacturing / Industrial Automation Engineering / Manufacturing Operations Management / Packaging Process Improvement / Pre-Engineering Consulting Services / Preliminary Engineering Assessments / Estimating / Planning
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