Retailers squeeze out investment

By Rick Pendrous

- Last updated on GMT

Related tags Butt foods Manufacturing

Retailers squeeze out investment
The financial squeeze placed on manufacturers by their powerful retail customers is putting many productivity projects involving capital investment at risk, it has emerged.

While continuous improvement techniques, such as lean manufacturing, are helping to raise the game for both big and small food companies in the UK, where these require any significant investment on behalf of suppliers, they are not always going ahead, report some business leaders.

Geoff Eaton, former chief executive of chilled food company Uniq, which was last year sold to convenience food group Greencore, warned delegates at Food Manufacture's Business Leaders' Summit in January that any productivity improvements involving capital investment were likely to be put in jeopardy by the intense financial scrutiny placed by retailers on their suppliers' activities.

"As the retailers come under more pressure, they are doing less and less long-term thinking and more short-term, knee-jerk thinking and that has created an awful lot more cost and unpredictability on businesses and that puts any productivity programme under more pressure,"​ said Eaton.

Despite this, some companies including major players such as Weetabix and Coca-Cola Enterprises (CCE) and smaller firms, such as bakery Butt Foods and scampi manufacturer Whitby Seafoods have managed to reap big benefits by lean thinking. This needn't necessarily involve capital expenditure, according to Steve Roger, md of lean consultancy Lauras International.

Following an analysis of its operations with the help of Lauras, Whitby Seafoods released 30–40% of extra capacity on its production lines with no capital investment.

It's a similar picture elsewhere. Last year, Butt Foods employed lean consultancy Coriolis to improve its operational efficiency when it was faced with ingredients cost rises. It was able to minimise price rises to its customers.

"Our job as a smaller manufacturer is to be as close to the customer as possible,"​ said David Williams, md of Butt Foods. "We turned inwards to improve what we did and make sure our number one aim last year was best value in the market."

Being "customer focused"​ and "lowest cost"​ was a view echoed by Roman Manthey, group operations director for Coca-Cola Enterprises (CCE). In future, there would be even bigger opportunities for improvement focusing on the wider value chain, said Manthey. "That's where I believe the next step of the journey is,"​ he remarked.

However, for the bigger players such as CCE, productivity improvements are less of a discretionary spend. "I can't believe anyone is not working on productivity,"​ said Manthey, "focusing on operational and manufacturing opportunities that is our bread and butter in operations. If you don't do that you are not managing well."

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