Increase Operational Productivity with Advanced Use of Automation, Data and Labor Best Practices

[MUSIC] Welcome to the Food for Thought Podcast. I'm Andy Hanna-Sek, senior editor of Food Processing magazine. Food and beverage plants are constantly chasing improved productivity and efficiency. And Bill Rehmi, CEO for TVM Consulting, joins the Food for Thought Podcast to discuss strategies to help them reach those goals. I hope you enjoy the episode. [MUSIC] Welcome everybody to the latest episode of our Food for Thought Podcast. Thanks so much for joining us yet again. We're going to jump in, lots to hit on. So let's start with the big issue that has been around. It's not gone away over the years and even with a lot of the automation and food and beverage manufacturing. Labor shortages are still a big issue. And what are you seeing out there when it comes to labor shortages and food and beverage? And what do you expect? We're here in October, moving into 2025. Where do you see the industry turning to deal with these labor shortages overall? It's a great question and it's a great place to start. Starting with our people is always the most important. But I actually saw a job report this morning, actually, unemployment claims. And it remained pretty flat, excluding the areas impacted by the hurricane. And I think I think we're going to continue to see this through 2025 because there just aren't as many people coming into the manufacturing workforce. And so I think companies that, especially in food and beverage are going to have to really focus on retention. How do they keep their people? How do they keep them engaged? And when they do hire new people, really, how do you onboard them, bring them into your culture and make them part of the organization? How do you get them up to speed, skilled up faster? And how do you pull them in? And I think the other part of that is also looking at your culture. What is the culture of your organization? And is it one that the people want to stay with? Is it one that is inviting, pulls people in, makes them feel like they're part of something? Or do they, are they just checking the box and punching the clock and they do their time at the home? And I think if you're the latter, you're at a much bigger risk of not hanging on to people because they're not engaged. So when we were preparing for this discussion, there was a little bit of talk and notes about executives of some of these facilities or these companies moving plants, moving operations to cities that maybe have a larger talent pool. That seems like, you know, I'm not sure about the rest of the manufacturing world per say, but it seems like it would be a pretty significant challenge in food and beverage. Now that said, I come from the meat and poultry industry where we've watched the beef production industry and the beef processing industry slowly but surely moving things further west, right? As the great plains, the old great plains, beef industry is kind of slid a little bit. You've seen companies move things out further west toward the mountains and out to the Pacific Northwest at times. But it hasn't been like a gold rush type of exodus, obviously. Talk a little bit about if that's any kind of option for food and beverage manufacturing or if there's challenges there that simply can't be overcome. Well, I think it's something you need to be very thoughtful about when you think about relocating plants, especially in food and beverage because there is. So it's such a capital intensive business. There's so much machinery and automation. And just picking up and moving it or establishing a greenfield site with new equipment, it's just hard to do and there's a lot of risk around it and it takes a lot of time to get it up to rate and be affecting. And given that you're banking on the labor force being better where you're going, given the lead time that it takes to move a plant or set up a plant, some of the demographics and dynamics of the location could change and you won't get everything you thought of. I think, much like we've seen, I think with the off-shoring and chasing labor arbitrage, that may not be a good play. Right? It's something you really want to think about. It probably is better to think about it. Am I minimizing my overall cost to serve? Am I simplifying my logistics and ability to fulfill customer needs? Really ahead of labor. Unless you're just such in a dire labor situation that you just, you've absolutely run out of labor pool, which, you know, that you've got other levers you can pull still to attract labor. How does food and beverage process and compare when it comes to automation nowadays in the facilities has the industry caught up overall? Or is there still a lot of work to do when you compare it to other manufacturing industries out there? I think it has caught up and I think in some places it's passed what we see in other industries, especially the heavy industries. You think of having industrial large-scale equipment, aerospace, I think food and bad as well ahead, food and bad, to me, is more like the packaging and paper industry in terms of where it is with automation and what's possible. But again, with automation, the one of the bigger challenges you face is maintaining it and keeping it running and being effective with it and really utilizing your capital dollars effectively and not not overspending on it versus the results that you get. But I do think they've caught up. I think there's some good automation out there in the industry. I'm glad you mentioned maintaining it. So I think that's where food and bev and I'm sure you're aware, I'm sure you've seen, that's where food and bev is kind of struggling in many ways with implementing automation is that's where the automation isn't really solving the labor shortage problem because you need to have skilled workers to come in and maintain and upkeep and you know all of this maintain and upkeep these machines and the automation, the robots, everything. And we're seeing you know it's been a struggle to get a really good pool of that type of educated worker into the food and beverage plants. How does the industry compare when it comes to that? Are you seeing some of those you know highly skilled maintenance types gravitating to other manufacturing because maybe it's cooler or you know or more attractive in many ways shapes or forms or is the whole of manufacturing really struggling with getting those highly qualified maintenance types. I think food and bev is in much the similar places of other industries especially the heavy capital industries. You know everybody across the board has two challenges. One they historically don't maintain their equipment very well. More often than not what we see is the run to failure is their strategy and that's not really a good strategy especially in food and bev because equipment failures will just will really hamper your productivity. But when you think of maintaining and maintenance technicians and maintenance leaders there's a huge gap. There's a bigger gap in that I think than in the actual direct line factory workers because people are not going into it. There's a lot of retiring people going leaving the workforce. The other thing you've got going on and this is perhaps more relevant to food and bev is the automation is becoming increasingly complex. There is a significant amount more of software and system technology inside of that automation that now not only do your legacy maintenance folks not necessarily know how to deal with that as well but your newer folks aren't coming in with that expertise which is surprising. You're really struggling everybody is struggling to find good maintenance technicians and maintenance help. That could be if you will and it kills a lot of industry at this point. So you mentioned the legacy workforce and the new workers and whatnot and you know that's that's been something a topic that people have been speaking about in the food industry and food and bev for a while and that is the transfer of knowledge, the succession planning, the you know handing over the reins, whether it be at the plant level or the maintenance shop or even the executive level. Talk a little bit about where you've seen some successes when it comes to that transfer of knowledge or maybe it's something that you know you also see as another potential Achilles heel. I'm not aware of any really great examples of transfer of knowledge with the workforce transition. It is one that I think when people think succession planning, I'm not aware of any organizations that actually do succession planning down into the hourly ranks. They still treat those jobs as something different than leadership. And when in fact, you probably need to be applying some of the same approaches, especially in some of these key positions, because especially in maintenance, they're not just hourly workforce. They are really part of your technical team and technical workforce. And if you lose that capability, you're going to be in big trouble because the other thing that happens because in frequently systems and history or not is well documented, it's more tribal knowledge or village knowledge. And when they retire, they're taking it with them. Now there are some ways that you could perhaps start to leverage technology and AI to help you with that. But that's going to take some lift as well. But there's a huge risk of a lot of domain expertise going out the door. And then what about at the executive level? I was reading or speaking with someone recently that said, you know, it's almost like the food and beverage industry right now has been pretty stable at the CEO, President, executive level across the board. And every now and then there's a cycle where you kind of see churn through the executive level. If let's say that should start happening where these CEOs start shuffling around and things like that, what do you suggest or what best strategies do you suggest right now that companies should be embarking upon to prep in terms of the succession planning at the executive level? Well, I think with most succession planning, you've got to look at your bench strength and your gaps and you need to be comfortable with filling some of those gaps with new knowledge, new experience that can come from the outside higher. And I think you need a blend of outside hires and growth from within, right? You need to retain the domain expertise and the knowledge of the people already inside the company have, but bringing strategic leaders in in the right places can help create almost a force multiplier of getting people to think differently and perhaps think broader than what they have in the past, right? So because if you work inside of an industry for a very long time, you truly, you only know what you know and it's hard to be exposed to another way of thinking it. It's just outside of what you can, your purview, your lens, if you will. And so having that blend of people from the outside strategically, not wholesale can help that. But then in the same way, you need to take some of your people that are viewed as high potential or people that can be developed and moved on through the organization. How can we move them around and put them in very different roles, right? If you're an strong operations leader, maybe you need to go to a commercial role so you get a true view of the customer in the market and have a broader based view that even if you do end up back in more senior operations, you have a much better understanding of customer needs and market driven phenomenon, which you can now better translate into operational needs. The same is true for commercial, right? We benefit sometimes for being on the supply chain side of things so they can see what it takes to fulfill some of those market needs. It's almost like the family-owned company succession plan is a really good model to follow. You know, you hear the stories of say, fifth generation CEO or president, right, that has come up and they worked in all these different areas and worked their way up and all that stuff and those always seem to sound like pretty good success stories. Maybe some of these no longer family-owned companies should get back to that model. Yeah, I think they could. We actually have a long-term client that we know that is a privately held family-owned company that has grown dramatically over the, they've been in business 75 years and they're on their third generation family member as the CEO and they went one step further. In fact, he worked outside the business for a good part of his early career in a completely different industry and was exposed to a broader view of business and industry before he came back and then worked in different parts of the business before he ascended to CEO. And I think it's, I mean, aside from the fact that this gentleman is just really smart, and I think it's really helped his view of the business and he's been really successful the last few years that he's been running the company. I'm just overseen a lot of growth and they've done really well. So I think there's something to be had from that model. So let's slightly shift gears a little bit. We're putting in automation, we're putting in robotics, we're connecting all these machines to each other, making them talk to each other and collecting this data. It just seems like we're scratching the surface as an industry with all this data that's out there. What are you seeing from your perspective? You know, any that couldn't be more spot on. We see it all the time in organizations of all different sizes across industries. People do not effectively manage the just tremendous resource they have in their own data. It's not controlled. There's not someone who owns the quality of that data necessarily, if you will, who owns the processes, the generate that data so they know they get good data. Then they don't use it. We hear a lot about analytics and AI and generative AI today. But those things only work really well when you've got good data and in many cases lots of it. Well, companies have lots of data but we find they don't use it. In fact, recently I saw a study or a publication from Rockwell Automation that said companies with over 30 billion in revenue are only effectively using about 51% of their data, which is shocking. Right? That means there's just under half the data they just aren't using. And yet we spend more money to get more data. They also talked about companies less than 500 million, only use about 38% of their data effectively, which says they're leaving a lot on the table. So before we invest in getting more data, we need to think really hard about what do we have? Understand that. What's the quality of it? And what will it tell us? How can it help us run the business better? I think of the other side. What I often like to tell people is, look, when you go in and start working with the data, have in mind, what are you trying to solve? What business problem or operational problem are you trying to solve? Or what are you trying to create so that you can find the data that will help you do that, help you solve the problem you're working on, or give you some extra insight into, okay, here's something we didn't know. Now, how do we effectively use that to be better as a business? You sound like me as my basketball coach, in my basketball coach shoes with my eighth graders basketball team. We do free throw practice for 15 minutes every practice. And I'm always talking about, we got to get better at this because we're basically, when we shoot 33% on free throws, we're giving away 63% of the points we could have for low-hanging fruit freebies. So I hear you on the data. But what do you think is the primary cause there? There's generally not one thing or one cause of it all. You've got the complexity of IT organizations and how they think about the broader business system, the things that are around ERP systems, CRMs, the HR systems, if you will. The thing you've got these factory systems, and they tend to lie out there by themselves, and it's not surprising to see them more managed by the engineering or process engineering teams. And the IT people don't really understand what the data, and that's always understand what that factory systems are doing, telling them where that data is going, and how it's managed. And the engineers are not really honed in on managing the data, right? And who owns the master data, who controls it, how do we store it, and ensure that the quality is good. And so you've got, it's almost an neglected role. So we don't set up infrastructure processes to really deal with that as well as we could before we get into, let's go analyze it. Or we need to get more. Let's go put more sensors on the equipment and find more data. Sometimes that gets done without even knowing, well, maybe you already have it in some fashion. You just don't know it. We found cases where there was one company where the engineer was collecting just massive volumes of machine data, but it was only on his local machine and workstations. [BLANK_AUDIO] And nobody even knew he had it. And so the first step to getting to some of the work was, well, let's get this data so it's, if you will, there's a term of democratizing. So it's out there and available and people know what we have. And we have data definitions to know how to use it. So you almost need not just regular old data analysts. You need data analysts who can be a bridge that understand the business and understand food and beverage processing to give some perspective to that data. Right. Exactly. That's exactly right. And someone who can control it who knows what the data means knows the context, right? I'd be remiss if I didn't ask and you know, you know, this, this podcast is going to air a week to a few days before the presidential election. So we have everything we spoke about with the labor shortages with, you know, mentioned, we mentioned capex and things like that, moving factories and stuff. Do you see a lot of food and beverage companies kind of in a holding pattern waiting for the for the election outcome? And if so, do you see things ramping up after the election or once we figure out who won? I think companies are in a holding pattern for multiple reasons today. Some of its economics and interest rate issues and what they think is going to happen with that. Some of it is still unraveling supply chain issues. There are still tend to linger, but I think the whole country is really in a little bit of a holding of, well, we're going to run in place until we kind of see where this lands and it may be January before, you know, even into first quarter before we start to get some view of obviously we'll know who won the election, but where are they really going to go, right? And what do we start to see unfolding to know how we're going to manage ourselves and what that's going to do to consumption? Is there anything on the technology side, whether it be something with regard to data or AI technology or generative AI or whatever it is that has you excited in 2025 to see advancement? There is. There is. And we're exploring some of this even on our own with the peroniouss, but I think what generative AI has done is opened our eyes to what's possible in many cases. And I think if we go back to the maintenance challenges and the challenge of retaining that domain expertise, building your own internal generative AI models around that where you can train the model on your historical maintenance practices, failure analysis, practices, methodologies and transfer that knowledge and capture it in a way that is now retrievable by more people is really has a lot. I think that has a ton of potential. I think there's really big upside for knowledge sharing and knowledge retention. It's done well. Not going to be easy. It takes a lot of work and you're going to have to it's going to take some time. So it's going to require patients in perseverance. But I think the payoff will be worth it because you can retain that because now you have it forever right and you can build on it. Is there anything else that you wanted to add that I didn't ask Bill? You know, I think the one thing that we as a firm see that applies clearly to food and beverage, but I think it applies to everyone is the fundamental principles of good operations management, good factory practices are never going to go away. And when you're looking at the business, you can't stray too far from. How do I really create? How do I manage the flow productivity, you know, pursuit of productivity, finding and eliminating not only food waste and waste the stuff that doesn't end up in the package going out the door and minimizing that. How do I drive overall affected, equipment effectiveness in the plant and how am I driving labor productivity and quality to go with that? Now, you don't think you, you know, there was an article on the Wall Street a couple weeks ago that, you know, people getting hurt, actually getting killed by not proper lockout tag out. So I think we've got to, you know, not take our eye off the ball with all this. What does a good factory look like and how do we execute that and stay close to those fundamental principles that will remain true? Because I think if you take your eye off that ball, you're going to, you're going to miss out, right? You're going to get in trouble. For everyone listening in today to our Food for Thought podcast, thanks for tuning into this episode. You can find more of our podcasts at Apple Podcasts, Spotify, Stitcher, and just about anywhere you can find podcasts. Stay tuned for more episodes in the future and have a great day.