Is it just us, or are consumers and competition raising the stakes for food plants?

Global investor groups are evaluating CPG giants’ carbon reduction efforts. Retail and foodservice market competition is forcing processors to develop better and more new products at a faster pace. Add to that the increasingly difficult to predict cost of doing business, which — particularly in the case of energy — is only expected to rise.

How do senior operations executives handle these and other challenges? Refrigerated & Frozen Foods went straight to the source. Operations executives from four refrigerated and frozen food processors gave us their opinions on the changing face of the industry: Chris Celeslie, vice president of operations at Little Lady Foods, an Elk Grove, Ill., co-packer of frozen pizzas, sandwiches and other products; David Cowperthwait, senior vice president of manufacturing at McCain Foods USA, a Lisle, Ill.-based processor of frozen potato, snack and pizza products; David Konst, senior vice president of operations at Rich Products Corp., a Buffalo, N.Y.-based processor of frozen bakery foods, seafood, snacks, non-dairy products, barbecue meats and Italian entrees; and Dan Milovanovic, senior vice president of North American operations at OSI Group, an Aurora, Ill.-based giant with operations in prepared beef, pork and poultry products as well as prepared entrees.

Refrigerated & Frozen Foods: What were a few of your group’s biggest successes last year?  What are you proud of?

Chris Celeslie, Little Lady Foods: Our operational goals for 2008 were to (1) increase overall manufacturing capacity within the existing facility footprints through improved run rates, efficiency and reduced downtime; (2) increase line flexibility to maximize line capacity without building new lines; and (3) enhance our food safety and employee safety programs. Looking back, I’m proud to say that manufacturing capacity has been increased by nearly 50 percent within the same facilities, our focus on food and employee safety are at new levels, and our two largest lines now have multi-process and packaging capabilities.

David Cowperthwait, McCain Foods USA: One of our biggest accomplishments — the one that we are most proud of — involves an improvement in employee safety. We have focused significant resources in this area because it is important to us — as well as our employees — that they work in a safe and productive environment. Year over year, we have seen employee injuries and illnesses decrease by as much as 25 percent to 50 percent. More importantly, our employees understand that their safety is a major priority for us. We think this is a major accomplishment.

Last year ended very differently than it started and I can say that we achieved many of our goals. We focused on (1) building capabilities with our people and the organization, (2) improving the health and wellness of our employees, (3) upgrading the quality of our products and (4) taking costs out of our operating structure. We achieved this despite constant adjustments for the marketplace dynamics in front of us. We are very pleased with what we accomplished.

Dave Konst, Rich Products Corp.: We’re very proud of our success around associate safety. We were well below the industry benchmark for lost-time incidents by more than 60 percent in 2008 and are working to improve on our success in ’09. Associate safety and product safety are our most basic table stakes as an operations organization and will always be a primary focus for us. 

We also continue to enjoy strong engagement scores across our North American plant network. We believe there is a direct relationship between associate engagement and the overall performance of our company. According to the results of our company’s latest enterprise-wide engagement survey, more than 60 percent of our manufacturing-based associates were considered to be “strongly engaged” in their jobs and in Rich’s.

This score places us in the “best employer” category for manufacturing companies according to Hewitt, our survey partners.  We also saw a reduction in the number of calls to our help lines and in our first-time quality holds — two additional key indicators that the associates working at our sites are highly engaged and focused on delivering results for our customers.

Dan Milovanovic, OSI Group: Last year was an exciting year within OSI as we evolved to a more structured “Operations Business Process Team” approach to managing our new product commercialization. While we have always relied on our employees working together to provide our customers with innovative and cost effective new product solutions, in 2008, we created a more defined Process Team approach — ensuring that all functional disciplines work more closely together. The results are exciting. We’ve reduced our new product commercialization cycle times while delivering more innovative solutions to our customers.

R&FF: What were your biggest challenges last year? How did you respond?

Celeslie: As an innovative custom food manufacturer, I’d say the keys to our success are operational flexibility, speed to market and scalability. As manufacturing improvements began to create capacity last year, new opportunities with new and existing customers began to steadily increase. One of our largest [operations] focus areas was to maintain service levels and margins while still meeting our customization goals.

Cowperthwait: Clearly a major concern has been the state of the economy and fluctuations that have occurred in every sector of the industry. The cost of commodities such as oil, wheat, corn and potatoes were up and this impacted other areas of the business and the industry. We worked aggressively to mitigate these costs, where we could, and to take operating costs out, where we could, to reduce the impact to the marketplace. 

Konst: Obviously the volatility of commodities and the global recession have had a major effect on all businesses across the world.  However, we’ve been very deliberate in viewing these economic conditions as an opportunity to strengthen our position in the marketplace.   

As a result, we’re gaining new customers that have been placed in difficult positions because their suppliers have begun to exit product categories that are not critical to their businesses. From an operations perspective, this has put pressure on our existing capacity but our plant associates have responded to the challenge in a big way, working overtime and going the extra mile to ensure we continue to meet the needs of our current customer base — while helping our new customers become whole after they were abandoned by previous suppliers.  

Our success all starts with the Rich family. They have had the wisdom to encourage our management team to take a much more long-term outlook to ensure our business remains strong in the face of this economic downturn. As a result, we have the ability to pursue the right strategies and risks in these extraordinary times. 

Milovanovic: One of last year’s key challenges was to redefine our manufacturing strategies in response to these unprecedented economic times. Across the industry, we’ve seen greater focus on providing consumers with enhanced value. We addressed this challenge by implementing a series of initiatives to reduce our costs while continuing to deliver the quality our customers require. One critical aspect of our efforts involved greater focus internally on our core processes ensuring best-in-class performance.

David Cowperthwait

R&FF: What were a few of your goals going into the 2009 fiscal or calendar year?

Celeslie: Our operational goals for 2009 are to enhance our food and employee safety programs, invest in innovation and operational flexibility, successfully customize and launch new products to fill remaining capacity, and prepare the operation for the next level of expansion and growth.

Konst: For us it’s very simple. Our No. 1 goal is to ensure our Rich Promise and “One Case at a Time” philosophy. That means producing quality products and then filling our customers’ orders so that they receive the right amount of product at the right time. We continue to see steady performance improvements across our supply chain. 

We also work to ensure that we focus on activities that our customers value. It starts with long-term planning of our overall cost structure to enforce and leverage new processes, behaviors and performance requirements that we’ve identified as critical to our customers’ successes during the next three years. Some of our initiatives involve Lean Manufacturing, maintenance best practices, flexibility and sustainability.

Milovanovic: In 2009, OSI operations will continue its relentless pursuit of continuous improvement. Our quest is centered on best-in-class performance, having the systems and processes in place to ensure the food safety, quality and cost effectiveness that differentiates us in meeting customer needs. Our internal OSI Advantage Key Performance Indicator (KPI) Reporting System provides us with KPI measures on operating performance, cost and quality across our global facilities providing the framework to dynamically benchmark results and drive best practice sharing.

Through this unique system, we are able to truly lever the ideas and insights of our employees at 42 facilities around the world to improve our processing efficiencies.  Earlier this year, we incorporated several sustainability measures into the system and we look forward to seeing improved energy usage and waste reduction as a result.

Dan Milovanovic

R&FF: We’ve seen a prolonged stretch of record energy, fuel and/or input costs … and now a recession. Are capital projects on track or are they on hold? In what ways does the economy impact what you do?

Celeslie: Our capital investment continues to be as strong, although there is some shifting to areas that are more about maximizing the return on existing assets and enhancing the flexibility of the operations. In the past we may have been more bullish and more strongly considered building a new line for new products. Today, we look at how to add assets to existing operations with limited capacity so we can create new possibilities and new capacity.

Cowperthwait: Our deployment of capital has been very consistent over the last five years. It supports our short-term business needs and our long-term strategy. We are on track versus our agenda.

Konst: As I mentioned earlier, we take a much longer term approach at Rich’s than many other companies. Therefore we view the current economy as an opportunity to deliver even greater value and reinforce our promise to be our customers’ trusted first choice, especially at a time when other competitors may be struggling to meet customer demands. As a result, we’ve been able to strengthen relationships with many of our current customers and create new relationships with other companies.

That said, we take added precautions to ensure any investment we make will drive our business forward. Yet, I don’t see any change in our overall “customer-back-in approach.” In other words, we don’t invest capital in a new manufacturing capability and then go looking for business to fill capacity. All of our major capital projects begin with what our customers are demanding from us.

Milovanovic: At OSI, we always have taken a very disciplined approach to our capital investments and that has served us well. Being privately held, we will continue to invest in the manufacturing infrastructure necessary to best meet the needs of our customers.

David Konst

R&FF: In what areas of operations are you continuing to invest? In what areas of operations are you trimming back?

Celeslie: We continue to invest in areas of flexibility and innovation. We want to take existing manufacturing lines and operations — areas that are specific or limited to one or two product types — and transform them to have multiple process and packaging capabilities. We also continue to invest in our human assets through enhancements to our employee programs and welfare areas. We also invest in training efforts to support a highly flexible, quality-focused workforce.

Cowperthwait: We continuously invest in a variety of the functions, processes and procedures of our business. First, and foremost, this means investing in our people. We regard our work in safety and in developing a lean culture as “crucial.” Moreover, the growth and ongoing development of our employees is paramount since this is the fuel that keeps us going.

We also will continue to invest in the quality and consumer-based design of our products to ensure that we have products that will win in the marketplace. We will continue to invest in tools, technology, equipment and facilities to ensure long-term success and find ways to remove some of the costs of our operations, while still being able to support new products and business investments.

Konst: Product and associate safety enhancements are always core investment areas. After that, it’s all based on customer requirements. We’re installing new production lines and enhancing many other lines across our manufacturing network and across all product categories to meet the growing demands from our customers. 

We invest the remaining capital we have in any given fiscal year into equipment, processes and technologies designed to help production associates rapidly identify and eliminate root cause issues that keep our lines from running efficiently for our customers. 

At the end of the day, it’s my job as the operations leader to leverage our capital resources so that associates at our sites have the capabilities, tools, information and leadership support they need to be safe and effective in their jobs.

Milovanovic: Over the last several years, we have made significant investments in equipment design to ensure the food safety of our operations. Additionally, we are investing in new processing technologies that improve our first-pass quality and operating efficiency. Through better preventative maintenance and equipment design, we have reduced our spare parts and overall maintenance spending.

R&FF: Let’s talk about the executive team decision making. In what ways is it different today than three or five years ago?

Celeslie: We are becoming more focused on business and market strategy and growth, employee development and accountability. We also focus on how best to implement processes and programs that support a high level of growth. Our more tactical decisions and events now are being managed by the departmental leaders who are in a better place to make the right decision and execute it most efficiently and effectively. 

Cowperthwait: We have to make decisions quickly and decisively and we need to take advantage of more broad inputs into our decisions. The marketplace is changing fast and we sometimes cannot adapt our strategy to it fast enough. Our decision making has to start with the customer and this feedback impacts our entire business — beginning with sales, marketing and supply chain and ending with our suppliers. Our decisions are more complex and thus we need to work much more cross functionally so we’re sure we have different perspectives and ideas.

Konst: The biggest difference I see involves the duration of any one decision. Given the rapid rate of change, growing global and competitive forces and proliferation of new technologies — a decision we make as a leadership team becomes obsolete much faster than ever before. You have to be very flexible in order to constantly adjust to market changes if you want to succeed.  

As an example, we’ve made strategically informed and well thought-out decisions on where to add capacity across our global network — only to completely change our tactical direction based on such game-changing factors as unforeseen fluctuations in currency, major increases or decreases in energy costs or new customer requirements.  

The other difference I see is that we’re much more collaborative as an executive team. Given the factors I just mentioned, it’s not prudent to make decisions in a functional vacuum. We’re taking a much more holistic view of our business, which has resulted in more informed leaders working together to make better decisions across our enterprise. 

 Milovanovic: The OSI North American Leadership Team — of which I am a part — has experienced functional leaders in place and we work well together in managing our business. One difference I have seen involves the accelerating pace of change across many aspects of our business. Communication is critical between all of us to ensure that we evolve our thinking to address the dynamic business environment of today.

One good example of our rapid decision making occurred recently when we had to quickly redefine our manufacturing strategy to address a customer’s new product design requirements. Working together as a cross-functional team, we provided an innovative solution within a very short timeframe.

R&FF: How do you get employees more engaged on the plant floor and/or involved with company goals?

Celeslie: We believe that strong decision making is a fundamental behavior that drives successful action. The keys are factual points of reference (measurement) and experience (communication). That’s why we communicate through town hall meetings, focus team meetings, training sessions, root cause analysis discussions and other means. Meanwhile, we measure what we do through key performance indicators, goal setting plans, performance matrix projects, etc. These efforts have made our actions more effective and our results more successful. Everyone is making better decisions, faster. 

Cowperthwait: Several years ago we started a process called, “McCain Competitive Edge.” This is based on Lean Sigma and uses many of the tools and processes associated with a “lean” culture and organization. Our goal is to have every employee understand how he or she contributes to our overall vision of “Building America's Best Food Company.” We also want to enable them to make a difference. Every employee has key performance measures that link their contribution to the business to them personally, and they are recognized and rewarded for it through incentives as well as annual performance reviews.

Konst: As I mentioned, we’re very proud of engagement scores across our sites. We take these bi-annual engagement surveys very seriously and have built associate survey participation rates into the performance metrics for all of our leaders across the company.  Part of each leader’s responsibility is then to create an engagement action team at their site. These teams are expected to use the results from the survey to identify strengths they should continue to reinforce — as well as areas that need improvement.  

I personally visit each of our facilities twice a year to get feedback from the local leadership teams on what’s going well and what could be going better, and to answer any questions they may have about our company. Many times during my visits I also get the opportunity to speak to our hourly associates in a town hall forum. Bill Gisel, our president and CEO, also visits plants on a regular basis to reinforce our company’s key messages and meet with associates at all levels.

Milovanovic: We have daily plant management meetings that provide functional leaders with timely updates as to overall facility performance and challenges. From these meetings, we now conduct weekly general employee updates on safety, quality and other KPI results. I believe it is important that our employees have a sense for how their respective plant processes are performing as their individual efforts clearly impact overall results. Additionally, we are utilizing more online training systems to validate and document employee understanding while contributing to overall employee personal development.

R&FF: Can you share a few examples of how your group is reducing energy costs? How are you responding to sustainability concerns?

Celeslie: We have a cross-functional “Green Team” following the latest developments with energy reduction and sustainability. These team members are charged with identifying which innovations are applicable to our operations and which can be implemented. Lately, we’ve focused on reducing electricity and gas through lighting improvements, enhancements to motor and temperature controls and converting some packaging from plastic to paper.

We have partnered with many of our customers’ sustainability teams to share ideas and practices. With that, we also are implementing other mutual initiatives.

Cowperthwait: We have very aggressive goals and timelines in both of these areas and we have commissioned work teams to improve our results. I’d note that by investing capital and improving practices we have been able to significantly reduce our energy usage over the last five years. Efforts to improve our sustainability are in place and starting to contribute as well.

Konst: I find the topic of sustainability interesting in that I feel like we’ve always been in this game, so to speak, we just never called it “sustainability.”  However, I do find that most organizations, including Rich’s, are much more proactive in looking for ways to make a positive impact on the environment. It’s not only good business; it’s simply the right thing to do. Today we’re much more efficient in being able to pull this information together in a structured format, especially as customers continue to become more interested in our environmental programs.  

Our long-term philosophy as an operations organization has been to continuously look for new ways to do what’s good for business and good for the environment. As a result, our plant associates are very engaged in exploring ways they can minimize the amount of waste, refurbish and repair equipment for longer life, and divert materials from the waste stream.

Here are just two examples. Associates in our Arlington, Tenn., facility began implementing a comprehensive recycling program that resulted in a 30 percent reduction in trash pulls. In California, associates at our Jon Donaire cakes facility replaced plastic ingredient storage containers with recyclable and reusable corrugated packaging. This resulted in more than $100,000 in annual savings and thousands of plastic pails removed from the waste stream. 

Milovanovic: We developed an OSI Sustainability Plan to reduce our environmental impact while supporting key supply chain sustainability initiatives. One part involves an environmental scorecard that focuses on continued improvement for each location. We use the scorecard process to measure energy consumption, water usage, solid waste generated and gas consumption related to the volume produced.

As mentioned earlier, we now have incorporated these key measures into our OSI Advantage System. We actively participate with our supply chain partners to educate and verify practices in the areas of animal welfare, land use practices and their overall environmental impact as well.

R&FF: Let’s fast forward to 2014. What might be an operation’s biggest concern? How might your job look different?

Celeslie: In many ways, I think my concerns will be the same. Do I have the right people in the right place at the right time? Today’s concerns are a lot about managing substantial change in an undesirable direction. Tomorrow’s issues will most likely involve managing substantial change in a possibly undesirable direction. Successfully managing through change is one of the more difficult challenges for any operations team, let alone substantial change.

Having the best talent ready — and in the right place — is key. Today, most companies are trying to “manage out” the issues or inefficiencies within their operations that have been created by many years of strong growth. At the same time, they’re trying to keep up or right size and may have possibly ended up with some misalignment of talent and responsibility. 

Operation teams are adjusting their human talent, whether it is skill level or headcount, to a different place than many have experienced before. Having the best talent ready in the right place will be key when substantial change swings the other way. 

Cowperthwait: Our biggest challenges will be speed and flexibility relative to the marketplace, followed by making sure we keep building the capability of our people, thus allowing us to have outstanding retention rates.

Konst: I’m concerned about the ongoing globalization of business and the impact that it will have on our manufacturing network. At the same time, however, that’s exciting as it will present us with many new opportunities. 

I see the need for smaller, more flexible manufacturing capabilities to respond more timely to customer requests for limited-time offers. We’ll also need to geographically align our facilities more tightly around our customers’ strategies as we work even more closely with customers and suppliers to reduce total supply chain costs.

Certainly workforce diversity — in the form of more languages and new cultures — is another aspect that will need to be factored into future planning. We also have to figure out how to successfully transition to the next generation of associates once our baby boomers retire.  

 Milovanovic: Everyone in manufacturing is concerned about securing a trained workforce to support our operations. Additionally, we also must focus and understand the changing regulatory environment and the implications to our operations.

I also see my leadership role evolving to [where I am] incorporating greater focus on the total value chain to ensure we deliver the best-landed cost and quality to our customers.  Capitalizing on global raw material sourcing opportunities, exploring advanced manufacturing technologies and migrating to more integrated logistics with customers are likely to be prime focus areas for operations leaders of the future.

R&FF: Where do you go for inspiration? How do you continue to grow in your job?

Celeslie: I keep an eye on traditional points of inspiration, such as publications, trade shows, roundtables, etc. for the latest developments and potential breakthrough ideas. These information points are still effective ways to keep moving forward and stay inspired to change and make a difference.

Because we are still a business whose success is driven by having great people doing, and learning to do, great things, it’s important that I focus on activities that improve and develop the people skills and critical behaviors of our team members. Many of those skills can be learned and developed by paying attention and getting involved in everyday group interactions outside of our jobs. These include volunteer and community organizations, educational organizations, children’s sports, etc., where the pressures and goals are different and, therefore, my ability to observe and learn human interaction skills is less obstructed. 

Cowperthwait: We constantly benchmark what others are doing. This includes customers, competitors and companies within our industry and from totally different categories. We take the most significant lessons and see if we can bake them into our implementation of McCain Competitive Edge, a continuous improvement strategy that is based in Lean Sigma. Only about 5 percent of the companies that try to incorporate Lean Sigma actually do it well. We know that our challenge is to grow our capability in this arena.

Konst I regularly consult the Corporate Executive Board for best practices and industry benchmarks — and also to connect with my industry peers. Similar to most people in my position, I also read the Wall Street Journal as well as leadership books and articles.

However, I derive my greatest inspiration from the associates who work on the plant floor. They’re the folks on the front lines, working hard to support their families, while doing everything they can to drive success here at Rich’s. They take pride in their work and come to the plant each day wanting to make a positive difference. I owe it to them to constantly look for ways to help them be successful.

Milovanovic: OSI has 42 facilities in 17 countries around the globe. Through my regular interactions with the leaders of these manufacturing facilities, I find the ideas and the perspectives that have shaped me into the operations leader I am today. It truly is exciting to see how others are dealing with some of the same challenges. I also find it very helpful to work closely with our sales team in meeting with our customers and understanding their evolving needs.