Services have important role for entire food industry
May 5, 2010
by Morton Sosland
While comparisons are not readily available, it is likely that no manufacturing industry is more product-oriented than the one making food — both ingredients and finished consumer products. The food industry’s dependence on, and yes commitment to, product quality are easily understood in the context of companies making foods that provide the sustenance and well-being of nearly the entire global population. Successful food companies, regardless of the sales level at which they operate, are generally focused on maintaining and improving quality products along with innovations that will capture the favor of customers while assuring that the business grows and is profitable. Without suggesting this emphasis may be wrong, developments under way across the broad sweep of manufacturing do prompt questioning whether an industry like food is neglecting a business opportunity by also providing excellent services as well as superb products.
The mounting inclination of industrial enterprises that once paid single-minded attention to efficient manufacturing and product improvement to embrace what is now called ”industrial services” has garnered much recent attention. Within companies deemed progressive on this score, research reveals that more than half of their employees are often not engaged in manufacturing, but are providing services that take many different forms. These range all the way from providing direct help to customers with maintenance to working to improve the environment where a company’s plants may be located.
When it comes to supplying services as a business, three benefits are often cited in making comparisons with returns from manufacturing. By their very nature, services usually are considerably more profitable than running plants and turning out products. Here the efficiency of human capital plays a significant role. A second advantage is that services properly structured mainly avoid the destructive business cycles that have plagued many product manufacturers in the course of the recent recession. This is especially so for services that offer customers, whether for consumable products like most foods or for capital equipment like processing machinery, assurances on maintenance and continuing operations. No wonder then that it is producers of capital equipment, including a few of the leaders in machinery used to make food ingredients and products, that have shown the way in providing services that now represent as much as half of company revenues and in some cases a considerably larger share of profits.
The third benefit, which seems particularly appropriate for food manufacturers as well as suppliers to the industry, is how services solidify ties with customers. This explains why a few progressive companies seeking to build their business in food manufacturing have put the same or even more emphasis on services than on products or equipment. By recognizing problems their customers face, such as in how best to respond to fast-moving ingredient markets, these companies seek to build relationships that may be more enduring than those reliant on quality products alone.
The range of possibilities for valuable services both to and by food manufacturers is vast. It ranges from help for companies seeking to become more energy efficient and environmentally friendly to improved maintenance of computer-controlled equipment. It includes help with training people who will have responsibility for operating new equipment or using new ingredients. Showing companies the endless possibilities of modernization looms high on many agendas emerging from the recent recession. Perhaps the time will come when the success of a business is gauged not just by its ability to produce excellent products at minimal costs, but also by the way it has built relationships and expanded its revenue base by offering exciting new services. Numerous opportunities exist for doing this at the supplier level. Equally great opportunities are open to food product manufacturers in offering help to both food service and food retailers. It’s hard to imagine any sort of limits to what the food industry should be able to offer in the way of services as well as in products.