This article was originally published in Inside FMCG Magazine.
There are six key tips to consider for companies looking to supply major food retailers. Wiley, who design build and maintain food manufacturing processes and facilities, frequently work with food processors to manage capital expansion projects to satisfy the needs of their key customers. Wiley’s Advisory Services Director, Andrew Newby takes us through his top 6 key areas to focus on.
To be in the best position possible when a major retailer wants you to increase supply volumes or develop and add a new product line, the manufacturer must respond by increasing production to meet that demand. Be sure to have completed a market development plan, your ‘how to go to market plan’. A project to meet these needs often requires significant capital expenditure, and to have your best foot forward you need to have completed extensive planning and research.
- Brand Protection
The biggest risk to the retailers is a serious food contamination issue. Their name and reputation is at risk and a breakdown from one processor can result in plummeting sales across the whole industry. This has led to increasingly stringent hygiene controls, particularly on staff hygiene entries, construction standards and process controls for food safety.
Hygiene controls are driving a trend to higher standards in staff entry design. These trends include higher quality entry design with wash stations, air showers and shoe change facilities. There is also a greater emphasis on ensuring production flows and staff movements are right, throughout various well defined hygiene zones.
- Know how to comply
Major retailers have become increasingly prescriptive of their standards. Their requirements have become a marathon read but fall short of telling exactly how to meet them. Auditors too will tell you what needs to be done or improved but often will not tell you how to do it.
Seek professional advice appropriate to the needs of the problem to decide how to remedy or comply. Each retailer has their own standards and the British Retail Consortium (BRC) is used by most as a basis. It is good insurance to build plants compliant with these standards.
- Be prepared to invest
Discussions with retailers may be along the lines that “if you produce that new product then we may be interested in buying from you”. Sounds good, except in the case where time is invested and possibly millions of dollars to produce a product they may buy. For unique products, partnering with a retailer will provide more certainty over the business.
Be prepared to spend a little to push ahead with planning the required project in order to meet their critical timeframe or launch date. Seek early advice on realistic timeframes, and capital project costs. The emphasis here is on being realistic. This is not the time to go in with the tightest of time and cost only to find out later that these were impossible to achieve.
There have been some long term contracts signed by retailers to underwrite large capital investment. It is worth trying to get a bankable contract to secure a project.
- Time is of the essence
If the product is for a launch date and promotion, then it must be ready for that once a year launch. The consequences of not meeting that date can be severe. Typically, these deadlines are very tight. A number of issues can present a very high risk to meeting a date commitment:
- Development approvals from council. If the project needs building works, changes to EPA license conditions, a change in use (eg convert warehouse to factory) or even modifications to internal layouts, then a development approval may be required. This can take months and often the exact duration is uncertain.
- Development approval conditions. If the project is subject to a development approval and project costs need to factor in the business case then, be wary. There can be costs associated with the project which are a trap for the inexperienced. Examples can be infrastructure charges, infrastructure upgrades, additional car parking, on-site environmental conditions (eg stormwater detention and treatment).
- External factors. There are examples where a project is delayed due to external factors such as electricity supply upgrades or inclement weather. Services/utilities upgrades are especially important if considering on-farm processing or converting a warehouse into an intensive production facility. Upgrades such as electricity supply can be very expensive and time consuming. Complete extensive due diligence to ensure no nasty surprises.
- Customer changes. Change is inevitable and the product is likely be subject to a high level of uncertainty, especially projected volumes by SKU. This will make planning difficult and feel like one step forward and two steps back at times. Ensure the project elements stay in sync, for example the building design/construction must stay in sync with the process equipment selection/line configuration. The consequences can be a lot of time and money wasted, or worst still, a completed facility that struggles to meet demand.
- Continuous improvement. Set up projects with a collaborative structure because late changes are a fact of life with project partners. The contracting methods used need to cater for continuous improvement throughout the project without onerous variation costs.
New product development (NPD) has been driving growth as retailers look for innovative products. You will need an NPD Plan which takes you through idea phases, marketing strategy, product development, trials and finally commercialisation.
This can mean the complex task of assessing global process technology to meet your customer’s needs, or evaluating a number of suppliers and being able to evaluate various options and commercial terms in your favour. This can be challenging if you do not have sufficient technical expertise in your organisation. Evaluate your options with expert advice to ensure the solution meets everyone’s needs, not just the ability to deliver.
- Future and flexibility
Don’t plan for today, plan for tomorrow. Research industry trends locally and internationally and plan for the future as much as possible. Flexibility is often the most important consideration for food manufacturers. Consider a masterplan which helps with future planning. Flexibility can come in many forms: room to grow, eliminate or limit internal restrictions (columns, low heights), serviceability, standardise or safety access.
Build as flexibly as practical in case the contract isn’t renewed in its current form. Packaging is the area that has seen the most change so be generous in the space allowed for these activities, just in case you have to quickly add another machine.
These six key tips will put companies looking to supply major food retailers in good stead.
Connect with Advisory Services Director, Andrew Newby, 07 3859 8874