Navigating Rising Material Costs in Manufacturing

As expenses rise for raw materials, packaging, and associated logistics, we’ve seen food and beverage manufacturing clients forced to pivot their operations to maintain their competitive positioning. There are a number of options that companies can consider to ensure that the impact on their bottom line is minimized without affecting product quality.

Bearing in mind that tackling rising material costs isn't a one-size-fits-all matter; manufacturers should take a multi-pronged approach that zeroes in on production precision, tightening inventory control, and smartly passing on costs where necessary. All of these actions are aimed at sustaining quality and profitability in a competitive market.

In our work with food and beverage manufacturers, we have realized that there are some challenges that are especially unique to their industry, and we have been able to help them hone and apply new processes to alleviate the pressures felt by external challenges. Some of these methods include:

1. Process Optimization: While at the outset this may not seem like a significant change, by examining production lines for areas of waste – such as excess product giveaway or inefficient use of ingredients – the Isaac team has streamlined operations to ensure that the output aligns precisely with what the customer expects, while minimizing wastage costs.
2. Inventory Precision: Implementing a just-in-time inventory strategy not only reduces the risk of product loss but also decreases storage costs. Matching production closely with demand ensures that resources are allocated efficiently, contributing to a healthier bottom line.
3. Cost Allocation: Get into the nitty-gritty of product costs. By actively monitoring yields and incoming costs, manufacturers can adapt pricing models to reflect real-time expenses, and have the data to know when and how to share rising costs with customers.

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A Case Study in Cost Efficiency

Recently, Isaac worked with a bakery facing inflated flour and dairy prices. After a thorough diagnostic of their entire production flow – from raw ingredient intake to the final product leaving the bakery – the Isaac team created a detailed plan that identified several opportunities for improvement. Working closely with the client team, we implemented process improvements to achieve efficiencies and cost savings. For example, the Isaac team found that some losses were the result of residual product in the mixing hopper and excess flour compared to the ideal recipe. We trialed different mixer settings for fill rate, water addition and batch size to maximize the yield from each batch and minimize losses.

Other improvements included recalibrating the filling machines for precision cream filling and ensuring each pastry met but did not exceed the required specifications. Filling machines have a range of accuracy and can vary in their fill volume/weight between batches. To improve this, we put in a short interval control process designed specifically for the client’s run conditions and line setup, ran trials to better understand the machine settings and recalibrated it to optimize the outputs. After fine-tuning the process, training and troubleshooting guides were developed with the new information to improve the consistency and skill of operators.

By leveraging these strategic improvements and tailored solutions, the Isaac team was able to increase the bakery's operational efficiency and helped diminish the impact of rising ingredient costs in a challenging economic environment.

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The Path Forward

In the same vein as addressing labor shortages, overcoming material cost inflation is about smart, informed, and timely adaptations to how manufacturers operate. They should be dissecting every stage of the production process to remove any inefficiencies and optimize every aspect – from procurement and storage to production and distribution.

The manufacturing sector must continue to evolve, leveraging technology, data analytics, and lean principles to navigate rising costs, and turn these challenges into opportunities for growth and innovation.

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Isaac is a consulting firm that helps organizations save money and achieve their operational goals. Our approach is designed to deliver tangible, long-lasting results through providing actionable insights that produce results in a matter of a few months.

If you are interested in learning more about the types of problems we tackle with our clients, get in touch with us.?We’ve completed hundreds of projects with our unique approached tailored to the specific needs of our clients.

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