The personal attention Anthony Mongiello's employees devote to hand-stretching fresh mozzarella provides what he calls the Formaggio difference.
In a sector where many competitors have chosen to automate the cheese-making process, Hurleyville, N.Y.-based Formaggio Italian Cheese Specialties can command a higher price for its products because of its emphasis on quality. "What hand creates, machines cannot do," says Mongiello, who has been making fresh mozzarella for 21 years. "Compared to a machine-made product, it's a different animal."
Still, Mongiello has added Modified Atmosphere Packaging equipment to extend the product's shelf life, and he has computerized back-office operations. So he understands the financial premise behind automating processes. "All businesses are very competitive businesses. The cheaper we can make the product, the more competitive in the marketplace we could be," he says.
Food manufacturers and retailers have been on the cutting edge of automation trends, and experts predict they will continue to look for ways to automate routine tasks amid intense competition and slow profit growth. "The majority are using some form of automation," says Tom Stretar, senior manager at enVista, an Indianapolis-area supply chain consulting and IT services firm. And some manufacturing plants are fully automated, using only a handful of employees to monitor systems.
A December 2012 ARC Advisory Group report forecasts spending on automation in the food and beverage industry will hit $7 billion by 2016, with most investments focused on reducing energy consumption and overall costs, while ensuring product safety. Automation can impact performance, providing companies with an advantage over less-automated competitors.
In a retail environment where customers continue to demand personal attention, many stores are weighing the benefits of self-checkouts, kiosks and other customer-facing automated systems.
"Doing more with less" has become standard operating procedure, and thanks to new technology, companies are finding they can operate with fewer workers than previously imagined. The recession accelerated the trend, as low interest rates and tax incentives for capital expenditures encouraged companies to invest in automation instead of adding workers. But even as the economy picks up, many experts predict companies will prefer to add labor-saving equipment instead of incurring the additional overhead associated with new hires.
Ernst & Young
"I believe consumer products manufacturers have a completely new level of focus on cost efficiency. Even if we get back to where growth is booming, people will invest in [automation]. They will hold their earnings," says Gregg Clark, head of consumer products and retail for Ernst & Young's Americas Advisory Service. The cost benefits of new technology extend beyond labor savings to providing better service to retailers, carbon credits for environmental improvements and reductions in water usage, he says.
But most automation impacts workers in some fashion. "Labor management is becoming a very popular subject right now," Stretar says. "The focus has been, improve the process through software or changes to how the business does things inside the building." He recommends companies set goals for worker performance in tandem with new process improvements. The result should be a greater capacity to serve additional store locations.
"They want to be able to do the same amount they're doing in an eight-hour shift in six hours so they can deliver to more stores," says Tim Talarico, senior director at enVista. "They're not chopping heads; they just want to be more efficient with what they have."
Still, over time many companies have reduced the size of their work force through automation. As a result, it can be a delicate topic for management to broach with workers, particularly in companies with organized labor.
A Balancing Act
"It's a balancing act," says Gregg Clark, head of consumer products and retail for Ernst & Young's Americas Advisory Service. "How fast do you move with the technology without compromising relations with the workforce?"
The primary goal of technology investment is to improve efficiencies by automating business processes, according to a 2010 McKinsey & Co. survey of IT executives. Yet many technology projects "take years to complete and frequently fail to deliver the promised results," McKinsey said. Generally, the problem stems from poor implementation because they require workers to learn new work practices.
As part of a $70 million investment in its juice factories, Sunny Delight plans to replace forklifts with automated vehicles, shifting some drivers to the position of supervisor while transferring others to different areas of the company, The Wall Street Journal reported. But all told, the renovations are expected to result in a 30 percent reduction in Sunny Delight's factory headcount.
Retailers are finding savings by adding robotics to warehouse systems. Many are eliminating the manual process of replenishment and picking, allowing them to move product to more stores in less time. That results in cost savings as well as fewer out-of-stocks, Talarico says.
"Labor is typically 60 percent of total distribution center costs. When you can offset labor with mechanics and still meet your customer need, that's where grocers are looking for savings," says Tom Stretar, senior manager at enVista in Minneapolis.
Automated pallet trucks for grocery distribution centers also are becoming more common, says Talarico of enVista. "At the Krogers of the world, [robots] take product off of the truck and put it into a piece of equipment that will palletize it," he says. Many retailers use small, automated guided vehicles to move pallets of product through the facility, reducing the number of manned forklifts required.
Giant Eagle uses robotic pallet trucks to handle inbound freight delivered to its Crafton, Pa., center, and move it to a drop zone managed by a computerized warehouse management system, according to Seegrid Corp., which supplied the retailer with robotics technology.
While many of the improvements naturally require fewer workers, most companies are redeploying people. "The goal isn't to eliminate jobs. It's to reassign jobs throughout the facility. When the equipment goes down in an automated environment, you need someone to refer back to the manual," Talarico says.
While many automation projects pay for themselves in 18 months to 24 months, companies need to consider the cost of redirecting misplaced workers when they calculate the savings. "You're going to look at what the individual did without and with the automation," Talarico said. "If you can increase capacity to do twice that amount, you can assess savings based on this rate."
When companies add palletizers and automated routing machines to their warehouses, operators might need to move the goods from one area to the palletizer and then wait for the palletizer to complete the task, resulting in idle time for the workers. "While the pallet is sitting there, the human is standing there," Stretar says. "You've got to redirect that person to take full advantage of the labor savings that are possible."
What's more, while technology can make many tasks more efficient, the transition isn't always seamless. Companies need to factor in the time and cost of training workers on how to use the automated approach. Lack of compliance, with employees reverting to a more comfortable way of completing the task, can derail automation.
At Nature's Best, a wholesaler and distributor of natural food products, enVista helped the company reduce labor costs by consolidating a four-building distribution center into one new distribution center. Under the old system, products were touched by humans 18 times before reaching the customer because of the layout and flow design. EnVista recommended the food company incorporate radio-frequency and voice-based technology in the new facility, largely eliminating the paper-based system the company had relied on. Nature's Best cut its labor costs by more than one-third and more than doubled its productivity in the new facility, EnVista reported. While eliminating most of its temporary workers, Nature's Best retained 97 percent of its full-time employees and trained them on the new systems.
The spread of mobile technology is encouraging retailers to create digital solutions for services previously managed exclusively by people. Apps now can help shoppers find the product they're looking for on store shelves, while pay-by-phone technology exists allowing consumers to skirt long checkout lanes.
Safeway's Just for U expanded loyalty program uses digital technology to deliver personalized offers in an organized fashion to shoppers based on their purchase history. By automating the process, the company is differentiating itself from other retailers and encouraging consumers to become loyal customers.
Mobile technology also is migrating to the manufacturing floor, where shop-floor managers have iPads to monitor operations. "They're taking it to the next level to do predictive analytics around the manufacturing process," Clark says. With more information at their fingertips, companies can predict changes to the manufacturing process earlier than ever, avoiding problems down the road.
Formaggio Italian Cheese Specialties.
But Mongiello of Formaggio is among those who say not everything should be automated. "My whole feeling about fresh mozzarella is people expect it's made a certain way," Mongiello says, explaining that machine production tends to knock the butterfat out of the cheese. "People who automate it turn it into a commodity–and that's very hurtful to me."