Food Manufacturing Cost Reduction: Fewer Bites Out of Your Bottom Line

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Food Manufacturing Cost Reduction: Fewer Bites Out of Your Bottom Line

Declining food industry margins are making strategies for manufacturing cost reduction more critical than ever.

Food manufacturers need to understand where to cut costs, reduce waste and improve efficiencies — all ways to save money they can then reinvest in their businesses.

By turning to new technologies like the Internet of Things (IoT) and collaborative robots, industry leaders are innovating in ways that could bring tax savings that can be applied still further back into their operations.

You should follow these three steps in your own search for food manufacturing cost reduction.

1. The Internet of Things and Other Tech

Use the IoT to reduce costs throughout your supply chain. IoT devices monitor equipment remotely, extend the life of your equipment and alert you to potential failures.

The IoT offers greater visibility downstream by collaborating with distributors and retailers through the cloud. This visibility lets you cut costs associated with backlogs and excess inventory. Here are some examples of manufacturers making good use of it.

  • Food manufacturer SugarCreek uses temperature sensors, real-time location services and analytics cameras to increase productivity and detect irregularities and foreign materials in products, according to Food Industry Executive.
  • The Barilla Group, an Italian food company, released technology that allows consumers to scan a QR code to learn details about its pasta, according to Cisco. This tells buyers everything from where Barilla grew the wheat to how and when the company processed, labeled and transported the product.

2. The Future of Food: Co-bots, Packaging

Don’t forget about robotics and automation. Collaborative robots, also called “co-bots,” start around $30,000 and take over tedious tasks — allowing human workers to focus on creative, higher-value jobs.

These robots are perfect for pick-and-place tasks, such as taking food products from a line and packaging. Get more value out of your current workforce and cut staffing costs with them.

For instance, snack manufacturer Axium noted in Food Quality & Safety that using a co-bot to erect shipping cases has proven faster and safer than having humans do it.

Create innovative packaging to reduce manufacturing and distribution costs, like these:

  • Some manufacturers use kelp or tomato peels to replace plastic packaging.
  • Nestlé Waters and Danone, the world’s largest bottled water companies, announced a joint venture in March 2017 to make wooden water bottles.
  • Ecovative, a New York-based biomaterials company, is making mushroom-based packaging.

3. A Taste for Tax Credits

If you’ve taken the first and second steps, you probably have taken the third, as well — and might not be fully aware of it. Many manufacturers don’t know they can save big on taxes through R&D Tax Credits. This is the greatest (and easiest) means of achieving manufacturing cost reduction.

By researching and developing improvements to your business, you are eligible for a dollar-for-dollar tax credit for those qualified expenses.

That frees up more capital you can apply to additional manufacturing cost reductions.

Qualified research expenses are those related to creating new products or improving existing ones. Typical R&D expenses in the food industry include:

  • Developing new recipes
  • Improving product formulations to extend shelf life
  • Enhancing processing strategies
  • Developing new packaging designs

Summary

Developments in technology have changed the food industry, and they will continue to do so.

Due to a decline in margins, it’s more important than ever for food manufacturers to go beyond the basics and develop a firm understanding of technological advancements and tax incentives for innovation.

By seeing this as an opportunity to improve operations and cut costs, you can keep reinvesting into your business, using the non-stop evolution of technology to stay ahead of the game.

 

FURTHER READING: More on Valuable Tax Credits and Incentives

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