Our Managing Director recently released a white paper on uncertainty of costs in the food sector.
Controlling Costs in the Food Sector
An overview of labour and other costs putting pressure on food processors and manufacturers.
2016 has been a year of uncertainty, with margins for food producers squeezed by many factors; not least, spiralling labour, energy and logistics costs.
The New National Living Wage
The National Living Wage, brought into force on April 1st 2016, makes any worker aged 25 or above entitled to a minimum rate of £7.20 an hour. This was an immediate 50p / 7.46% rise on the National Minimum Wage.
This increase is not the last planned by the government. The Low Pay Commission will now give yearly recommendations on what the National Living Wage should be. Despite this supposedly just being a guideline, it is likely that the government will take the advice of the Commission, as they have on so many previous occasions.
The Government, of course, also has its own targets to meet regarding employee wages. Their objective is for total wage to reach 60% of median earnings by 2020. This would see the National Living Wage reaching £9.00 an hour in the same year. The following graph shows the drastic increase in wages forecast between 2016 & 2020.
Amid fears over the escalating cost of labour, is the unknown effect Britain's vote to leave the European Union will have on the Food Sector. Approximately 40% of workers are EU Nationals and a weaker sterling has increased raw material import costs in excess of 10%.
The future is uncertain, with several factors still in doubt since the decision was made on June 23rd of this year. When will article 50 be invoked? Prime Minster Theresa May has stated it will not be in 2016, but no official date has been released yet. Will that give a clearer picture or simply more challenges?
With the combined effects of the National Living Wage and Brexit, businesses have little choice but to find ways to reduce labour costs!
‘Working Smarter, Not Harder’
Productivity is key, which poses the question as to whether existing processes are ‘smart’ enough.
Dawsonrentals works with many blue-chip names in the sector, finding often simple solutions to supply chain issues. This frequently enables manufacturers to produce more from an existing facility.
The majority of modular cold store or blast freezer/chiller solutions supplied by Dawsonrentals are attached to a loading bay or linked directly to a building. It used to be thought that such units could only be attached to a loading bay. This is no longer true, and most are now linked close to the start of the production line, for storing the raw materials, or the end of the line for blasting finished goods. Both allow considerable reductions in the cost of handling product.
Equally, additional production facilities can be linked to a building to increase output without disrupting the process flow, or modules can be linked to allow internal factory changes and improved process efficiency.
Can YOU Benefit?
Whether it’s reducing labour costs, growing facilities on existing sites or becoming more efficient, a starting point is reviewing your own processes. A consultation with our expert development team costs nothing. We have over 25 years’ experience helping businesses of all sizes, and while we would not dream of telling you how to run your business, we could give you a more practical and economical perspective for your own investigations.
A fact-gathering visit and initial report costs nothing. It could turn out to be the most productive ‘investment’ you will ever make!
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