Commercialization is the complex series of tasks involved in moving a product from concept to profitable manufacture. Recently, Leon Levine and I provided a chapter on the topic for a forthcoming text, An Integrated Approach to New Food Product Development, edited by Howard R. Moskowitz, I. Sam Saguy, and Tim Straus. It is to be published soon by Taylor & Francis, Boca Raton, Fla.
In spite of its critical importance, there are relatively few references on the broader topic of product development and almost none on commercialization. This column is a condensed version of our chapter.
Figure 1 (see page 76) shows most of the steps involved in moving a product to manufacturing. As can be seen, there are many skills required, which means that commercialization is almost always a team effort. Further, many of these skills are not routinely a part of the typical food science educational experience, which means that commercialization is an interdisciplinary effort. Activities such as the common, senior-level student product development projects give a sense of the challenge, but the teams formed for such projects rarely involve students from engineering, marketing, or the other disciplines that are routinely involved in real life. Learning how to lead a commercialization effort and how to make a valuable contribution to the team is probably best achieved by participation in multiple teams with increasing levels of responsibility.
Do We Need a New Facility?
The options for manufacturing are to build a new facility, expand an existing facility, or use a comanufacturer.
Before assuming that a new facility is needed, it is important to be assured that existing facilities that might be appropriate are fully utilized. Many food plants operate five days a week with two shifts, using the third shift for cleaning and sanitation. Other types of manufacturing and, increasingly, other food companies, approach 24/7 operation, that is, round the clock every day—or nearly so. Thirteen days of operation, with the fourteenth used for maintenance, is not uncommon.
Many food products are seasonal because of the limited availability of raw materials, meaning that the equipment may be idle much of the time. Companies are increasingly addressing this issue by obtaining raw materials from other places, such as the opposite hemisphere; using partially processed raw materials, such as bulk aseptically stored fruits and vegetables; and using controlled atmosphere storage to extend the season for root crops, apples, and some other materials.
A new facility may be justified for several reasons: new technology may not fit in existing facilities; existing facilities may be at capacity (or may not exist); and/or logistics may dictate a new location close to markets or raw materials.
New technology often requires a new facility simply because it occupies more space than is otherwise available. A good example is the automation of almost any task on a food processing line.
New technology may also dictate a different layout than the machine it replaces. For instance, a bakery that converts from batch ovens to a conveyor oven would need a radically different arrangement. A facility to irradiate foods needs a highly specialized design with shielding and conveyors that are unique compared to any other facility in the food industry. A hydrostatic retort for continuous processing of canned food requires a very different layout than a comparable battery of batch retorts.
High capacity and highly automated food processes may not be appropriate for every situation. Developing countries need good jobs as much as they need anything, and labor is usually relatively inexpensive. Sophisticated equipment needs skilled maintenance and support, which is not evenly distributed around the world. Older technology is often robust, and used equipment is frequently available, lowering the capital cost.
Facility location is critical and may be dictated by sources of raw materials, by distance to new or existing markets or by distance to new or existing distribution centers. The relative bulk density of raw materials and products and the shelf life of products often determine whether a product should be manufactured close to markets or can be made farther away. For example, frozen and dehydrated potato products are commonly made near potato-growing areas, whereas potato chip snacks are made closer to markets. Products that have frequent, store-door deliveries are made close to market. Examples are soft drinks, refrigerated dairy products, most salty snacks, and bread.
The five normal phases of a facility project are: 1) feasibility study; 2) preliminary design; 3) detailed design; 4) construction; and 5) commissioning.
• A feasibility study is intended to confirm the economic attractiveness of a proposed project. The feasibility study requires sufficient scope description and design so that costs can be estimated within about 30%, which is reflected in the contingency allowance. Normally, the proposed selling price, anticipated volumes, and unit variable costs are known from the product definition. The key remaining question is what investment is required to manufacture the product in the desired volume and location?
Conducting a credible feasibility study usually requires some outside assistance in the form of architects, engineers, consultants, and people with construction experience. The company needs to assign a team led by an executive with authority to commit the firm. Typically, members of the team include staff members from research, engineering, and operations. Staff from marketing, finance, human resources, information technology, and logistics may be involved in the study at times; they must be kept informed and their viewpoints considered.
• Preliminary design should be performed only after the feasibility study confirms the desirability of investing in a new, expanded, or converted facility. This phase adds detail to the design started in the previous phase. More of the work is performed by outside resources, such as an architect/engineering firm (A/E).
A preliminary design takes longer and costs more than does the associated feasibility study. A specific site should be identified because site-related factors are some of the larger causes of uncertainty in cost estimates. The scope description prepared in the feasibility study is expanded in this phase, but the basic assumptions should not be changed.
• Detailed design is the phase in which construction documents—drawings and specifications—are prepared. Naturally, it involves more people, typically engineers for each discipline, and costs more than preliminary design.
During detailed design, one of the critical functions is the resolution of potential interferences. Interferences occur when two disciplines try to use the same physical space in the plant for some purpose. One of the major responsibilities of the project manager is to identify and resolve potential interferences quickly. It is much less expensive to resolve these on paper than to do so during construction. A useful strategy is to pre-assign chases or designated paths and areas in the plant for various purposes. A good practice is to have most utility piping outside a process area with only vertical drops to use points.
• Construction is normally the responsibility of a general contractor (GC) or construction manager (CM), but the owner is ultimately responsible for safety, costs, and quality. A general contractor may perform some tasks himself, but primarily hires subcontractors in the various trades and disciplines. He makes a profit by marking up the costs of labor and materials from the subcontractors. The more complete the scope definition and the design documents, the fewer changes there should be.
Sometimes owners are the source of changes, but they should be aware of the consequences, which almost always are to increase the cost of a project. If an owner wants more transparency and control, then the owner can engage a construction manager, who normally charges a lower fee or profit margin than a general contractor does, because the construction manager assumes much less cost risk.
• Commissioning begins when construction is complete and consists of operating the process with realistic raw materials, but with no expectation of high yields. The objective is to find and correct deficiencies in the process and equipment, fine tune conveyors, and train operators. The objective of identifying a commissioning phase is to budget time and money for these essential tasks.
Equipment Design, Selection, and Scale-Up
Food companies rarely design processing equipment. Rather, they or their consultants usually select equipment from existing lines offered by numerous vendors. The key documents in selecting equipment are process flow sheets, material and energy balances, and a process description.
When evaluating processing equipment vendors, it is important to confirm that they observe industry standards. Cost, quality of components and fabrication, service capability, and delivery time are other factors that affect the choice of one vendor over another.
The final stages in commercialization are demonstration in a pilot plant and plant trials. Plant trials are expensive and should only be performed when there is a high probability of success.
It should be obvious that commercialization is a complex exercise involving people from a wide range of disciplines and requiring excellent communication and cooperation.
by J. Peter Clark,
Contributing Editor, Consultant to the Process Industries, Oak Park, Ill.