In this BreweryPro podcast, we look at data from the packaging line.

In this episode, we speak with James Magee, CEO of manufacturing software company OFS about a report the company released recently, the Craft Brewers Benchmark study that found that craft brewers can only run their packaging line for 12 minutes before it stops.

It also found that most craft brewers spend 46% of their time on the packaging line doing things other than filling cans and bottles of beer.

We wanted to find out more about the data, where it come from and how OFS says it can help measure and reduce inefficiency.

If you want to find out more about how the software is used in-brewery, you can register for the upcoming webinar featuring Greg Stones, Supply Chain Manager of Tribe Breweries, designed for brewers who want to know what a good day on their packaging line looks like and – most importantly – how they can sustainably and repeatedly improve their bottom line.

We also discuss a recent podcast we had with Chris Kelly from East Coast Canning that you might find interesting.

Matt Kirkegaard: Hi, I’m Brews News editor Matt Kirkegaard, and welcome to this Brewery Pro podcast looking at data in the brewing industry. We get a lot of media releases at Brews News and a lot of them are of more interest to the people that send them than they are to our readers. As a result, they tend to get filed without being published.

We recently received one that sounded interesting, but left us a little incredulous, about a report that was an analysis of production of millions of litres of beer claiming some pretty interesting insights for craft brewers, noting that the company would like to discuss with us on behalf of our subscribers, viewers, and listeners. Again, there’s nothing new in companies wanting to reach our audience.

However, as we dug a little more into the claims around data collection as regards waste and efficiency, it was pretty interesting, and it passed our test of being potentially valuable to our professional brewing audience. So today, I’m digging into it with James Magee, CEO from manufacturing software company, OFS, which released the craft brewing benchmark report asking the question, what does a good day look like in brewing?

James, welcome to this Brewery Pro podcast.

James Magee: Matt, thanks very much for having me.

MK: There’s a bit of a bar to clear before we even discuss something, but I’m fascinated by one of the premises of your report, and it’s up the start of the report and you pose the question, “it’s strange that so many brewers rely on the purchase of new equipment to grow capacity rather than investing in getting more out of people and machinery already in place.”

At Brews News we are constantly reporting on breweries scaling their businesses with significant expansions chasing lower unit costs. Are you suggesting through your report that they’re doing it wrong?

JM: Not necessarily that they’re doing it wrong, but perhaps that there’s some extra thought that might go into getting a better benchmark on where their current performance is at, Matt, before racing off and buying the next bit of shiny packaging equipment or upgrading their existing assets just because they have a sense that they’re struggling to keep up with demand. The drivers behind that struggle may be that they’re not yielding the best possible outcomes from their existing capital equipment.

MK: What sort of waste because I presume that we’re talking about waste. Just to give a very quick insight into OFS, you have software that measures, and we’ll come to exactly what OEE means, but you look at overall equipment efficiency.

JM: That’s exactly right, Matt. Our specialty resides specifically in the packaging area of manufacturing operations, obviously craft brewing is a really strong segment of ours. We narrow in on the three core elements that make up the efficiency of that packaging operation, which is this industry term called OEE, which the report we published goes into the details of what’s comprised in that, and we try and bust a bit of the jargon that’s associated with some of these manufacturing acronyms.

The theory there is that the efficiency of the packaging operation boils down to three core metrics. The first one is time, essentially how much of the allocated time that you’ve got to be producing product are you actually producing product?

The second one is speed, so you may have a filler that’s plated speed might be 9,000 cans or bottles per hour, and how are you performing against that particular metric?

And the third one is one you just touched on there, which is waste. The number of units that pass [inaudible] filling operation versus the number of products that may end up in a slab or a pallet.

So that’s the metric of the measurement method, and really what we’re challenging brewers to think about it how they’re performing in each of those core elements, and I guess the report came out with some surprising findings that’s perhaps counter to some of the messaging that we hear when we first turn up and start talking to brewers about this topic.

MK: When I first saw the report and you were talking about millions of litres of beer, I did think maybe this was an analysis of big breweries. I know you’re not really willing to talk to us about your client base, but the report does have a testimonial from Stomping Ground, so I’m presuming they’re one of the breweries, and you also have one from Tribe, or you’ll be speaking to Tribe in a couple of weeks for a webinar, so I’m presuming they’re the sorts of breweries that are among the data set that you’ve captured?

JM: Exactly, Matt. We’ve actually put a specific focus on the smaller end of town rather than the big multinationals, all of which use OFS as well, but we tried to keep this quite specific to the smaller brewers who tend to be, who may overlook this as a key element to their business. I suppose there’s really a beautiful craft, pardon the pun, about making craft beer, and often the love of beer sometimes comes before the business side. We really think there’s a huge opportunity potentially on the table before it really franks that in their opinion.

For those brewers out there who do run packaging lines to, I suppose, leverage some of the thinking that the big guys have been implementing for many years, get access to the visibility of how they’re performing, and then set about trying to get better.

MK: Do we describe it as, what sort of return can brewers expect if they’re more efficient? Or what sort of loss are they facing on the basis of the report?

JM: Exactly. We try and bring things back to total opportunity or beers lost. I think, Matt, one of the most striking elements of this reports for us was the amount of time that we saw – and you’re right, we did analyse hundreds and hundreds of thousands of shift hours, or machine hours, and tens of millions of bottles and cans produced – but the report showed us that, on average, brewers are losing up to 45% of available time to activities other than actually filling bottles or cans, which is quite shocking to some. That’s getting close to half the time they’ve got packaging lines crewed to run, they’re not running. That could be as a result of changeovers or unplanned downtime or other activities, but that’s what we’re seeing over quite a large data set.

We’d like to try and bring that back down into, “What does that opportunity cost actually look like for you in terms of how many units you could have made in a particular day versus how many that you made?” And Matt, what we find is that most of these folks, when we roll in and we’ll often ask the question as to, “How would you go about telling me how many pallets or how many products you produced yesterday?”, and it’s usually, “Well I don’t really know, I’ll go ask someone.” Or I’ll call someone up and I’d ask them, and they might go out and say, “We made 20 pallets yesterday”, “Okay, but what about the day before?”, “Well I’d do the same thing”, and I said, “But what happened the day before? It came in at 18. Would you know the reasons you were two pallets short?” And that’s when it really starts to get pretty grey and vague, and we look at that and think, “wow, what’s the price of two pallets of your valuable product, day in and day out, to your business?” And quickly the clients are able to work their way back to a return.

MK: Are you able to put a dollar cost on any of this? Or is it just a metric other than dollars around the efficiency and relative efficiency?

JM: We tend to leave that element to our clients, who obviously have a very sound understanding of the cost of a litre of their product and at each stage of the process, mind you, whether that’s through the brewing process or through the value add on their packaging lines.

Interestingly, though, that is the space that we are pretty keen to get into, in terms of the conversion of what does a 1% efficiency gain actually mean to you on a profit basis? We’re actively seeking this data to bring those types of things into our product.

MK: Does it identify causes? OR does it just show relative efficiency and then if you notice a loss of efficiency, it’s up to the brewers to go and try and track back along the process to work out what’s causing that?

JM: Absolutely, there’s a really analytical aspect to our product, but only we’re capturing signals and information from the line itself. We’re also really vested and engaging with the folks who are standing on these packaging lines for maybe six or seven or eight hours per shift. What we’ve invested in is an interface that takes a combination of machine information and overlays that with the human element, because we think that nobody knows more about why this asset might be underperforming. It certainly, though, only stands to gain more than the folks that are spending eight hours a day using your capital equipment, and if it’s underperforming, we’ve got a really big way of making sure that those folks can contribute to the recourses as to what’s happening and then everything from SMS alerts, email alerts, and reporting based on where these silent killers to efficiency are taking place.

One of the other points that we raised in the report was that, on average, what we see as the biggest killer of time, what we classify as “unplanned downtime”, we’re seeing an average of 3 minutes and 12 seconds lost of unplanned downtime every 1000 beers produced, so it’s significant. The average running speed, not to get too caught up in the numbers, but the average running speed of the lines we analysed was around 9000 per hour, so that comes down to 151 cans per minute. If you multiply that out by the three minutes that’s being lost, we’re talking about 453 being lost every 1000 beers produced just due to unplanned downtime events. It’s significant, and we really think it’s something people need to invest in spending more time looking at.

MK: In dealing with brewers, again we talk about craft beer and craft industry, and a lot of brewers tend not to think of themselves as food manufacturers, for example, or the manufacturing process. How important, do you feel, packaging is to the overall production process of brewing?

JM: Massive. I second the comment that you’ve made, and I really do think that the brewing industry need to think of themselves more as manufacturers. I know a lot of time and effort goes into distribution and a lot of brewers that we do business with are also running restaurants and so on, so there’s a lot going on. But I think, at its core, that they should be thinking of themselves as manufacturers and thinking about trying to get the best tools and assets. Again, not only into the brewing process, but for those folks who are packaging their own beer, really to make sure that they’re optimising it.

Again, for many of the smaller brewers we work with there’s casual labour force, there’s overtime, and a lot of that we’re seeing up to 45% of the opportunity comes through just not optimising time. Interesting thing, Matt, is that most of the conversations we have in the brewing space tend to be about yield, with good reason. People don’t want to see their beautiful amber ale going down the gurgler, I get it. But, again, another insight from our report showed that, at least on the packaging side, from a quality perspective – here I’m talking about beers that are filled that don’t make their way into a slab or onto a pallet – was about .3%. That means that for every 100 beers produced only .3% of those, or not even one beer, is being scrapped. Yet when it comes to waste – physical waste, that is – you can see it. It might be half-filled cans in the bin, it could be beer on the floor, it could be labels that are coming off a bottle or a can, so it’s very visible, and that’s one of the reasons we think people get fixated on waste.

Sure, we’ve got a definite war on waste, but really the one that’s probably less visible is that time element. And again, that’s probably one of the key takeaways from the report is don’t overlook your wasting of time with an outweighed focus on quality or waste, particularly when it comes to the packaging yield.

MK: I note your comment earlier on that you have made the report relevant to the craft end of the industry, but Tribe is one of the larger ones, Stomping Ground not huge but bigger than your average brew pub. Is this a product that a brew pub that maybe gets a mobile canner in once a fortnight or once a month is going to get benefit from? Is there a size that think really is the sweet spot for getting the maximum efficiency from the service you offer?

JM: We’re learning a lot ourselves. We’ve been doing this in the broader manufacturing industry for over 15 years. It’s been really the last 12-18 months that we’ve had a particularly strong level of interest from the craft brewing community, which has been fantastic, by the way. We’ve loved that it’s such an amazing space and the industry’s so dynamic and everybody seems to be looking out for each other and willing to help, which is testament to this podcast, Matt, I suppose.

We’ve learnt a lot about where we think that sweet spot is. We sort of think that if you’re an existing operation that’s getting up to around that 800,000 litres produced, that’s probably where you start to kick over into multiple shifts, multiple days running packing lines. At that point you’re investing in labour and you’re investing in packaging and it’s, for us, we’ve worked really hard to get an offering for that end of the market. Yes, we do also have in our portfolio very large multinational companies using this product, and how we do create an offer that’s valuable down to all segments.

You just mentioned two of our customers, Stomping Ground and Tribe, we also have – and you mentioned mobile canning – East Coast Canning…

MK: I spoke to Chris Kelly from East Coast a couple of weeks ago. I don’t want to do an ad for East Coast, but he’s one of those guys that I would speak to once a month because his insights are so interesting. I’m very interested that he uses the software as well.

JM: It’s a fascinating one. So many of your listeners who are using East Coast Canning, go and stick your head out in the truck, and you’ll see an OFS console sitting around, which was a pretty innovative one for us that it’s actually a mobile application, an ever-moving application of our product. We’re delighted to partner up with them.

We think that that’s, certainly brewers that are now in that million-dollar range, we think you’re definitely leaving opportunity on the table if you’re not doing something in this particular space to make sure you’re pumping your product out as efficiently as you can. And I think, just back to your point, Matt, on the capital investment side, we’ve seen companies such as Stomping Ground and so on, who are continuing to grow definitely invest in automation, and having this information, for me, is one of the greatest justifiers you can have when it comes to expansion.

You should be able to weigh up what you think you’re going to get back in terms of an efficiency increase from that equipment or, perhaps running at a slightly lower efficiency, but it’s like-for-like for now at those volumes, it doesn’t justify investing in something like a new packaging line or a robot palletiser or a new labeller or whatnot. All of those answers generally come out of the data that we’re capturing.

MK: I’m just interested in how it actually works, if we can talk about the product itself. It’s described as software but there’s a hardware component as well that is installed into the packaging line to capture this data.

JM: That’s exactly right. We try and keep it pretty simple from the outset. You mentioned Stomping Ground before, if I take Stomping Ground, that was up and running within a couple of hours on site there, so we’re really looking to take a signal off the filler there, so we might be at the exit conveyor there once we’ve got a filled can, the earliest point that we’ve got a filled can, and we’ll basically take a count. We’ll count every can that comes past, we get the context of the job that’s running and the crew that’s running and how fast that should be running. And, of course, the absence of a count is going to tell us the line’s not running. That’s the bottleneck for a packaging line. If the filler’s running, you’re producing, if the filler’s not running, something’s wrong.

We do have a small piece of hardware that goes out with our gear and then there’s an operator interface which can be anything from a tablet to a PC using an internet browser, you can choose what you like there, and it’s a big shiny dashboard. Again, drawing upon Stomping Ground, if you walked in there, you’d see it on a big 70” TV screen that deems across the factory as to how they’re running. We try and get everybody talking about efficiency, maybe, for the first time rather than being tucked away on a paper worksheet.

We let our customers try it for a month or so, and if they’re happy they can continue using it. Just like a gym membership, it’s month by month by month. If they’re not working out, then stop paying for it.

MK: I’m glad you said that about gym membership because I didn’t want to diminish the seriousness of it, but just hearing you describe the installation in Stomping Ground, there sounds like there is even an element of gamification to it, where you’ve got a metric and you can almost look at the targets that you’re hitting. “Can we do better today than we did yesterday?” sort of thing. Quite apart from the boring, for want of a better term, the boring numbers, it sounds like it can actually be a motivator for various crews to see who can be more efficient or more productive. Is that an element of it?

JM: 100% and element. Whether that’s green versus red hours where we’re above or behind target, very very visual. Because, Matt, this is a little bit contrary to what many others in the industry think about the future of manufacturing where we’re talking about machines replacing humans, we just don’t subscribe to that for 99% of the businesses that we’ve touched over a 15-year period.

I can assure you, that’s a lot of different manufacturers over a lot of different verticals. We believe there’s always going to be a role for the humble human being on a manufacturing floor. Will it evolve over time? Yes. Will technology continue to play a bigger and bigger part in that? Yes. But will the combination of capital equipment and the folks who are charged with running them be critical to manufacturing efficiency? We think so, for sure.

We’re all about making sure that your brewers and your packers get visibility, have a voice, contribute, because as I said to you a little while back there, Matt, we see it all the time. No one comes to work to work on a filler in your brewery that’s underperforming, that’s producing waste, that’s having issues, because it’s not an enjoyable place to work there’s a vested interest from your business from a profitability point of view, but from the folks who are running those lines, to have your filler, your labeller, your capper, your case packer all functioning the way it was intended to.

Really what we’re doing is reporting the truth and saying, “Hey mister or missus operator, every time something stops you from having a great hour or a great day, let us know. Let’s us know whether that’s a comment in the tool or whether that’s a piece of feedback through a digital form, let us know.” And then it’s over to the owners of these businesses to close that feedback loop, and that’s where – ultimately – what are we doing this for? We’re trying to help companies produce more beer in less time. The data’s great, but if you don’t have the engagement on either side, then your upside will be omitted.

MK: I just want to jump back to the start of that point, because this isn’t a product that was made for the brewing industry, but this is a product that’s been refined in other industries that are process and manufacturing and packaging that has been tailored to the brewing industry, is that correct?

JM: Yep.

MK: How similar is the production element of brewing to some of the other industries? Is that something that there is a learning that can go from any packaging line onto the craft brewing floor?

JM: A lot more than you might think, Matt. It really is very very similar, and I think that… it’s funny, one thing that I get enjoyment from in what I’ve done with this business over the years is, I just love spending time in factories and talking to people who are responsible for running them.

Everybody always thinks they’re doing something slightly different to everybody else, but I’d go further than saying not only is, at least the packaging operations within brewing similar to other beverage filling operations, you could also more broadly draw a ring around filling in general, whether that’s filling paint or filling cosmetics or filling bottled water or beer, there are so many similarities to the process.

Yes, there are nuances, for sure, but there is a heap that can be learnt. And again, that’s really one of the joys that we’ve had in the focus over the last 12 months in the craft brewing space, is using the folks in our business who work with all of these really large companies or other areas of the beverage space and bring those insights and expertise to our customers, to say, “Hey listen, we’ve looked at your data, we’ve seen some things here, we can actually spend a bit of time with you, Stomping Ground or Tribe or East Coast, and help make sense of some of this for you because we’ve been doing it for 15 years for other companies.” It’s not necessarily the software side of what we do, but it’s just part of the service we get in to make sure that everybody’s able to interpret that information and make some genuine changes and improvements to their operations.

MK: That’s pretty much what I wanted to ask about, the questions that I had an I anticipated would be asked. Any brewers who are interested who want to speak more and hear more from a brewer, you do have a webinar coming up fairly soon with yourself and Greg Stones, who’s the supply manager of Tribe Breweries, which is one of the data points in the report.

JM: We do, Matt. Next Thursday, the 17th of June, we’ve been lucky enough to have Greg come on board. It’s only half an hour, but Greg’s going to jump on. Our report spoke about what good looks like for craft brewers, and we spoke about the fact that, from a time perspective, for example, if you’re running more than 54.7% of the time, you’re in the “good” category, Greg’s going to jump on and say, “Hey guess what? When we first fired up OFS 18 months ago, we were at 38, so if you think 54 sounds ordinary, we were at 38.” They’re a fairly well-resourced, large brewer, and it’s only now, 12-18 months on, that they’re hitting that 54% numbers, and Greg’s going to come in and visually show what a 38% day looks like and what a 54% day looks like, and exactly how he’s helped their business have more days at 54 than 38.