Over the past years there has been a clear trend of production facility consolidation triggered by the expansion of a few large global food producers. Production facilities that used to service the local market only are nowadays servicing multiple or even global markets, depending on a company’s supply chain network. Consequently the production volumes have risen substantially and alongside the pressure for storage logistics. Automation is often the only option to cope with the new environment. 

Real-case plan for production facility with integrated logistics center

A Bunch of Challenges for Food Producers:

• Production flexibility (more and smaller badges, shorter order times, etc.) often driven by sales promotions
• More changes in order patterns
• Short response times so seasonal variability
• Vendor managed inventory
• SKU growth
• Compiance with stricter FIFO rules

The challenges outlined above push producers to consider combined production and storage facilities, i.e. to have a warehouse for finished goods, raw materials, operating materials as well as commissioning accessoires (foils, labels, cardboard packaging, etc) on-site.

Expectations Towards Logistics Centers Integrated in Manufacturing Sites:

• Minimize process costs
• Avoid buffers at production machines to reduce products in transit, and therefore increase inventory transparency
• Increase storage capacity resulting in continuous production despite (seasonal) order fluctuation => demand can be satisfied by existing inventories
• Valuable production space reclaimed due to compact storage and conveying system (this often is the only possibility to keep a site operational)
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• Need-based, just-in-time delivery to ongoing production
• Reduction in material preparation time
• Faster throughput
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• Capability (partially) to perform picking orders at store level
• Enable buffering and provide picking accessories (foils etc.) at reloading site

Expectations might often not be fully met as there are certain disadvantages to combining production facility and storage.

What are the arguments for combining a production site with a logistic center? Here are the relevant pros and cons:

Pros 

• Lower space requirements
• Just-in-time material flow for supply and disposal (pull principle in production)
• Reduced staging area in production facility
• Optimized production through large badges that can be buffered efficiently thereafter
• Synchronisation of pre- and post-storage spaces
• Compliance with all FIFO rules
• Higher short-term readiness to deliver in view of shorter lead times
• Increased efficiency
• More transparency in supply chain

Cons

• Higher investment costs
• Limited application to specific loading devices
• Less flexibility to implement structural changes in production process
• Capacity for output and delivery peaks has always to be produced in advance

Upon close consideration of advantages and disadvantages it becomes apparent that based upon certain input parameters, a direct link between production and logistics is not only advantageous, but quite indispensable. The newly gained productivity and flexibility leads to an improved ability to adjust production volumes, thus improving the readiness to deliver products.

Conclusion

In the ever more globalized business environment, where geographical distance becomes ever less important, high productivity and flexibility are crucial to satisfy existing clients and acquire new ones. This is ultimately highly desirable for any producing company. Therefore, the trend of linking production and storage facilities in the food industry is expected to continue. To maximize the production and logistics processes, accurate planning considering all production-specific needs is essential.