Royal thumbs up gets Bells ringing

Philip Callaghan, operations director, Bells of Lazonby

Before I joined Bells, I was running an HR department of 120 people at a bank - the sort of environment where instituting change is like trying to turn around a super tanker. So coming here was a bit of a culture shock: you're not driving a tanker, you're rowing a boat! Pull too hard on the oars and you can veer too far in the wrong direction! In a small company, individuals can have a huge influence; but they also carry a huge responsibility.

This is probably what makes this such a great place in which to work: I've had to get involved in every aspect of the business because there's not always someone else to deal with problems.

The challenge of working in any food manufacturing business is that you never know what you're going to face when you get into work in the morning: there might be five or six problems that need addressing, from a staffing issue to a packaging problem. It's just part of the job; there's always something new. Only the other week, for example, we saw a huge uplift in orders for our OK allergy-friendly bars from one major customer and couldn't work out why.

What had actually happened was that it had increased our listing from 150 to 500 stores - but this had somehow not been communicated. It was fantastic news of course, but we had to alter our production scheduling very quickly to deal with it. On other occasions, supermarket orders will suddenly drop way down for no discernible reason, and then you subsequently discover that they have been running down stock in the depot to clear space for something. Which means your next order could suddenly go through the roof because they are building up stock again.

The challenge for me is making sure we can deal with these day-to-day issues but also giving myself time to think strategically about where the business will be in five or 10 years' time.

This company has changed enormously in the last 10 years, and we will have to change that much again if we want to stay ahead of the game.

Bells was founded after the war by my father-in-law John Bell, and is now run by his son and my brother-in-law Michael Bell. Today, there are three strands to the company: the core Bells of Lazonby craft bakery business, which operates from the main factory here in Lazonby and makes branded cakes, swiss rolls, flapjacks, meringues and so on; OK Foods, our allergy-friendly brand for cakes, puddings, slices and bars, which is based at the dedicated gluten, wheat and dairy-free factory next door to the main plant here; and the organic Village Bakery bread and cakes brand, which we acquired in full in 2000.

There is still a bakery in Melmerby, where the business was founded, but today, it only manufactures for our restaurant in Melmerby. All other Village Bakery products are now produced here at Lazonby or under licence by Nicholas & Harris in Salisbury, which is obviously better positioned than we are geographically to supply supermarkets down south. We also have six shops, and do some of our own distribution, so it's quite a complicated business!

The decision to build a £1M, dedicated gluten-free factory in 2003 was a risk, but it's paid off: our turnover from special diet products (under the OK and Village Bakery brands, plus supermarket own-label) has gone from zero in 2003 to £3.5M on an annualised basis, suggesting that we entered the market at exactly the right time. We also picked up a Queen's Award for Enterprise this year, so we must be doing something right!

We don't, however, make gluten-free bread here. Beautiful though Lazonby is, from a logistical point of view, we're really in the middle of nowhere, and the distribution infrastructure into the leading supermarkets is just not geared up for receiving very small quantities of niche, short shelf-life products from here or anywhere else. You really need to offer the supermarkets 13 weeks of shelf-life, so that's what we concentrate on.

Education, education, education

Like all manufacturers, we are constantly trying to find ways to offset rising energy, raw materials and labour costs, and we've recently had the Carbon Trust and Envirowise in to see where we can make savings. We've also been working with the Manufacturing Institute to work on implementing lean manufacturing techniques and increasing the amount of measuring and monitoring we do in the business. This is actually very difficult when you are handling as many as 350SKUs (stock keeping units). We automate where we can with things like ultrasonic cake cutters, depositors and so on, but by its nature, this is a fairly labour intensive operation. This in turn means that we have to recruit and retain the right people and train them properly. We also have to spend more on wages because there is very low unemployment around here.

Because of the difficulty in finding good staff locally, we have also developed close links with local colleges and other educational establishments. Our training is likewise second to none, covering everything from lean manufacturing to NVQ levels one to three, and special training for supervisors.

We do recruit people from further afield so that we can bring in new thinking to the business, but we also want people to move up the ranks.

The Bell family owns the land surrounding the factory so there is plenty of scope for expansion in the future if we want to extend a facility or even build a new one. The warehouse space at the end of the gluten-free site could also be used for manufacturing, which would double our production capacity overnight. At the moment we're growing at 15% year-on-year, so we have to plan ahead.

We've been investing money back into the business constantly since it was launched. At the moment, we're researching ERP (enterprise resource planning) systems. Many of our systems are still quite paper-based, which is not ideal when you are handling a business with so many SKUs. Data is also being entered two or three times in some cases, which obviously isn't an efficient use of resources. It's all a question of priorities. We could spend money on a lot of things, but we want to invest our profits and cash flow rather than borrowings, so we have to balance the need to make longer-term investments that will drive up operational efficiency with something that might generate a more rapid return, such as a product extension or new range.

Having said that, you have to invest for the long and the short term. Above all, we're not complacent. You have to keep looking for the next big thing, because the last big thing will eventually get commoditised or go stale.

I can't tell you what this place will look like if you come back to visit in five years' time; the only thing I can absolutely guarantee is that it will have changed!

INTERVIEW BY ELAINE WATSON

FACTORY FACTS

Location:​ Edenholme Bakery, Lazonby, CA10 1BG. Tel: 01768 898 437

Products:​ cakes, bars, puddings, slices, flapjacks, sandwiches, meringues etc

Employees:​ 120 production staff across two sites (240 staff in whole business)

Turnover:​ free from turnover around £3.5M; whole business: £11M

Customers:​ supermarkets, delis, health food stores, airlines

Products:​ About 350 SKUs across two sites

PERSONAL

Name:​ Philip Callaghan

Age:​ 52

Career highlights:​ "Believe it or not, I enjoy every day because each day brings something different. The challenge of innovation and change in our business poses new problems but gives great satisfaction in finding solutions. Record sales weeks and healthy profit figures always provide the biggest highs."

Domestics:​ married to Jane (the founder's daughter) with three children

Outside work:​ enjoys five-a-side football, cricket and golf