Back to Energy & Operating Cost Savings Resources
Intentionally overfilling pet food product is one of the most
manageable costs in the pet food industry today.
Overfilling is a common strategy used to adhere to strict
regulatory requirements that require labeling to “accurately
reflect the actual contents of the package.”
| In today's hypercompetitive pet food market, minimizing overfill cost is critical to maintaining a sustainable competitive advantage. |
But in an environment of heightened competition, shrinking margins, and escalating input costs, minimizing excess product can translate into material cost savings.
In an automated packaging environment, minimizing overfill requires a three step approach: collecting packaging data, analyzing the data, and using the analysis to recalibrate the process.
Three Step Approach
The first step in this process is data integration with packaging
filler machines. Seamless data collection can be a
daunting task when dealing with the varying communication
standards on numerous pieces of packaging equipment.
Communication standards can range from OPC via
ethernet, Serial communication via ethernet serial servers,
Parsons PENET using ethernet and direct TCP/IP ethernet
communication.
The second step, data analysis, is a twofold process: real-time monitoring and historical trending observations. Packaging operators can view statistical variations in real time at the point of packaging and make re-calibration decisions on the fly.
Additionally, historical packaging reporting can be viewed at a shift, day, week, or month level. Both real time and historical data analysis have the same goal, utilizing the data to make packaging re-calibration decisions to increase the efficiency of the process.
The desired outcome of this three step approach is to
decrease package variability and the targeted overfill ratio.
The chart below illustrates this concept. It shows two
packaging runs for a 20kg dry dog food bag. Before the
three stage approach was implemented, the targeted overfill
percent needed to be at .03% because there was no
real-time monitoring or control. This resulted in higher variability.
Packaging variability decreased when data collection,
analysis, and re-calibration were implemented. The
target was subsequently lowered to a .01% overfill ratio
while still maintaining regulatory compliance and meeting
customer expectations of fairness in product packaging.
Unlike many Statistical Process Control software packages which simply monitor variation, this approach allows for rule based control for real-time process adjustments. Automated process re-calibration instructions can be sent to the filler equipment or packaging can be stopped when packaging variation falls outside of user defined rules.
Justifying the Investment
Now more than ever, process improvements need to be
cost justified before the purchasing decision is ever made.
Investments should not be made if cost savings cannot be
measured up front.
Continuing with the above example (Figure 1), again
assume that your average overfill amount is currently
0.3% (or 0.3kg on a 10kg bag). If annual production is
100,000,000 kilograms of pet food, the resulting annual
overfill “loss” is 300,000kg.
Using input costs of $0.50 per
kg, the total overfill loss is $150,000 on an annual basis.
Making the process improvements and moving to a 0.1%
overfill percentage, the overage shrinks to 100,000lb or
$50,000 in overfill, a savings of $100,000. The table below
lists some assumptions to quantify yearly cost savings.
While calculating yearly cost saving is a useful metric, the true economic value to a company should be measured in terms of the net present value of the yearly savings. In the example below, five years of cost savings are discounted to present value. This is calculated as follows:
Net Present Value = Sum (Fn/ [(l + i)n])
Assumptions:
F = Annual Cost Savings
i = Cost of capital /Discount Rate (assumption 10.0%)
n = Time period (Year 1 - Year 5)
The Bottom Line
In today's hypercompetitive pet food market, minimizing
overfill cost is critical to maintaining a sustainable competitive
advantage. Implementing a data collection, data
analysis, and process re-calibration approach on your
packaging lines can have a significant impact on your
company's bottom line.
Additional Information
For additional information on Packaging Overfill Costs, contact Stephen Dekker at
605-988-0833 x123 or stephen.dekker@interstates.com.
Back to Energy & Operating Cost Savings Resources