Manufacturing operations
For owners and chief executives of food manufacturing and food processing companies, and for foodservice groups that run a production facility or a plant upstream of the format.
The margin on an SKU
begins to form in the plant.
Production capacity, yields and transformation cost decide what is left before the product ever meets the channel price.
The work covers the point where margin forms, with costs allocated on verified bases instead of on inherited criteria. The scope covers available capacity, transformation cost per SKU, and the constraints the channel imposes on the plant.
Who it is for
Companies producing for their own brand
Food manufacturers with their own plant, where industrial cost per SKU decides which products hold up against the channel price.
Companies producing for the customer’s brand
Private label and contract manufacturers, where a quotation is won or lost on transformation cost and on committed capacity.
Companies feeding a network of outlets
Groups with a central production facility serving the units, where upstream capacity sets the pace of openings.
The situations the engagement starts from
Some lines are saturated and others sit empty
The production mix formed by accretion, and the decision to invest in new capacity arrives before it is clear what the existing capacity returns.
Transformation cost per SKU is an average
The industrial account exists at plant level; below that level costs are allocated on criteria nobody has verified since.
Yields and waste are read after the fact
Variability across shifts, batches and lines is absorbed into the monthly figure, and the cause stays indistinguishable from the effect.
A quotation for a new customer is built on last year’s cost
Raw materials, energy and labor cost have moved, and the price offered rests on a cost that describes a year already closed.
Inventory grows and the stock actually needed stays an opinion
Stock levels rise to protect service, and the share that is genuinely required is not separated from the share that ties up cash.
The service level the channel demands reshapes the plant
Delivery frequencies, minimum batch sizes and the delivery windows of grocery retail impose constraints that the plant absorbs as unallocated cost.
What the work covers
The map of capacity and line utilization
How much capacity exists per line, how much of it is used, and how much is lost to changeovers, downtime and waiting.
The measurement is taken on the floor over enough shifts to tell the exception from the rule. In most cases the capacity recoverable from changeovers and waiting comes before any investment in a new line, and costs an order of magnitude less.
Transformation cost per SKU
Plant costs allocated on verified bases, so that the fully loaded cost of a product holds up against the channel price.
The allocation base changes the result more than any other choice: machine hours, labor hours or kilograms produced lead to very different costs per SKU. The criterion is stated, discussed with senior leadership and held steady. Management control and margin →
Yields, waste and variability
Causes isolated by line, shift and batch, with the effect of each one on margin quantified.
Causes are ranked by economic impact rather than by frequency: a rare loss on a high-value SKU weighs more than a daily defect on a minor one. Process digitalization →
Mix and sequencing
Which SKUs deserve capacity, in what order and in what batch sizes, holding industrial cost and channel terms together.
The production order is worth as much as the mix: sequences that cut changeovers free up capacity without touching the plant, and the economic batch size is calculated with the cost of the changeover and the cost of the stock on the same sheet. Business development →
Make or buy
The economic comparison between in-house production and outside supply, with capital and industrial risk in the calculation.
The comparison takes in the cost of the capital tied up, the rigidity the plant imposes when demand falls, and the dependence on a supplier when demand rises. The recommendation comes with the cost of the alternative set aside.
The service level toward the channel
What it costs to guarantee the frequency and the punctuality the retail customer requires, and how that reflects into price.
The cost to serve is attributed to the customer who requires it: minimum batch sizes, delivery windows and safety stock stop being a general plant cost and become a line in the negotiation.
What the company has to put in
An industrial engagement takes place largely inside the plant, and the point is written into the proposal.
Three things are needed. Access to production during real shifts, including the ones where the schedule breaks down. The data that exists — bills of materials, cycle times, yield and downtime records — in whatever form it is in. And some hours from the production manager and from whoever handles purchasing, because half the causes of variability sit upstream of the line.
Where data capture does not exist, building it enters the scope and is quantified before work begins: it is work that stays with the company after the engagement ends.
What the client is left with
- The capacity map by line, with the losses quantified
- Transformation cost per SKU on verified bases
- The analysis of the causes of variability, ranked by impact
- The criterion for production mix and sequencing
- The stock criterion by SKU, with the forecast that feeds it
- The make or buy economic comparison, where relevant
The experience the engagement rests on
The person who leads the engagement has carried responsibility for a plant from the inside, alongside responsibility for the P&L. As Managing Director of the manufacturing company of the EatHappy group, the Bologna plant grew from seven hundred to four thousand square metres while the commercial network extended across three countries: it is the situation in which upstream capacity and channel terms have to be decided together, because each one sets the limit of the other.
Among AC Retail Advisory engagements, at Salumificio Marsili the inventory forecast and the analysis of production KPIs, alongside the review of pricing and management control. In the founder’s track record, the work for Doppio Malto on purchasing and logistics during the launch phase of the format.
Who works on the engagement
The engagement is directed by Andrea Calistri, founder of AC Retail Advisory. Execution is assigned to the practitioner chosen for the scope, introduced to the client before work begins.
