Whizzing Away Profits
March 1, 2006
Whizzing Away Profits
Dan Malovany, editor
So, you’re paying your chief engineer $100,000 a year to protect that $10 million investment in your bakery. Smart move. Then, you tell him he can only spend $15 to $20 an hour to hire mechanics who may or may not have a clue about how to properly maintain your big investment. If that’s the case, the sound that you’re hearing is tens, if not hundreds, of thousands of dollars of profit being flushed down the toilet on an annual basis.
That’s what I heard at the American Society of Baking and BEMA meeting in March. First, at the Engineering Skills Assessment Workshop, about 50 bakers and suppliers openly discussed how difficult and frustrating it is to find qualified mechanics and then retain them.
Part of the challenge, they said, is low pay, but it also involves lousy schedules, such as working the graveyard shift and weekends to boot. Another issue involves tough work environments, such as keeping the lines up and running in an operation that’s working 24 hours a day, six days a week.
Often, if they’re qualified mechanics and good workers, they hang around for a while, get some training and experience, and then leave for a better position where they can work something closer to a banker’s hours. If they’re not qualified, your engineer only finds out after extended downtime, lengthy changeovers and wasted product. Either way, it’s a vicious cycle that’s costing you big bucks.
But what is the price of efficiency, whether it’s due to poor maintenance or a piece of equipment that isn’t up to snuff? According Dermot O’Connor, director of engineering and environmental activities for Fort Worth, Texas-based Bimbo Bakeries, a minute of downtime here and there can easily add up on an annual basis.
Speaking at the BEMA/ASB’s Baking Industry Forum Symposium on Equipment Design, along with a panel of engineers from some of the nation’s top baking companies, O’Connor tallied the costs.
Take a “best case scenario” for downtime, which is about 30 minutes a day. If you have 15 employees making $18 an hour plus overtime, that half hour adds up to $202.50 per instance. Multiply that by 250 days a year and you’ve spent $50,625 to remake product, O’Connor explains.
In lost sales on a line that’s producing a product that costs 25 cents a piece at a speed of 120 units per minute, 30 minutes of downtime adds up to $900 per instance, or $225,000 in lost revenue over 250 days.
Let’s say you have a cripple or reject rate of just one unit for every 100 products produced. That’s costing you $432 a day or about $108,000 a year in waste. By the way, don’t forget the $24,300 it costs to remake the product and the additional $108,000 in lost sales. Total losses equal more than $200,000 annually.
But what if your line isn’t running as fast as it could? Let’s say it’s producing 99 pieces a minute instead of 100 pieces. That’s costing you $24,545 a year to remake product and another $90,000 in lost revenue. Suddenly, that $20 an hour seems like a bargain to keep your plant running as efficiently as possible.
To improve efficiencies, both bakers and suppliers suggest that their companies begin paying by performance. Such a system tends to reward those with high skills, and can weed out both the unskilled and the unmotivated during the interview process.
But how big of an issue is this? Well, about half of the people who attended the workshop volunteered to help develop online tests that eventually will help bakery engineers validate their mechanics’ skill levels on PLCs, servo motors and a couple dozen other maintenance issues. Thom Kuk, president of the American Society of Baking, is coordinating that effort, and says having a trained and motivated workforce can be the real difference, sustainable profitability or not.
“These companies need to look at engineers not as a cost center, but as an investment area that will pay big dividends in the long run,” he explains.
What’s that sound you hear? That’s the alarm going off in the bakery and the whirling sound of something hitting the fan.