For many growing food companies that process their own products, deciding when and how to expand processing capacity are among the most critical decisions they will ever make. Wait too long and risk missing growth opportunities or causing service issues with current customers. Move too quickly and without adequate planning and put the entire company at risk. Keep the following strategies in mind as you make these decisions:
Understand that it is much more a physical move.
Many companies focus almost exclusively on the facility and equipment elements of a physical expansion. A successful capacity expansion project also has financial, organizational, strategy, sales, IT and human resources components to it. It is the most difficult project a small to mid-size food company can undertake and involves every aspect of the business, often at a time when the operation is already over-extended.
Optimize your current processing capacity first.
A typical expansion project will take 12 to 18 months from the start to full operation. It is critical to have enough current capacity to sustain the growth strategy during that period. Improving efficiency, extending production times and outsourcing some production operations to free up space are all potential strategies to utilize during the pre-planning period.
Rationalize your SKUs.
Many companies fall into the trap of thinking they need to expand to service new business when their current facility is operating.
near full capacity. The reality is most companies expand capacity to continue to process their WORST PERFORMING SKUs. Consider postponing expansion until you’ve taken a hard look at current customers and product lines and have eliminated the lowest performers.
Manage the expansion as you would any other critical project.
Planning and executing an expansion involves a variety of considerations including:
- Strategic site location
- Marketing/product strategy
- Production line/equipment lay out
- Upgraded IT requirements
- Logistics/Supply Chain
- Strong local workforce
- Availability of economic development funds
- Facility design
- New facility staffing
- Regulatory and quality management
- Operating plan during the move
Larger companies have experienced staff to manage these tasks and other facilities to manage contingencies. However, for a smaller company, with minimal internal resources, embarking on a major expansion for the first time without strong project management can be fatal.
New Food Strategies’ team of experts has project managed numerous successful capacity expansions at all types of food companies. We specialize in working alongside your team at all stages of the expansion to ensure achievement of strategic objectives with a minimal disruption to your current operation.
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