13 The economics of Dehydration The food manufacturing industry, in general, has always been a highly competitive business but no branch of it is more so than dehydration Profitability hinges on so many factors, some of which are outside the manufacturer's control One of the main hazards in this context is that of climate. Total solids in raw materials are the key to a viable operation, and, if these are low, due to wet growing conditions, the plant throughput is going to be seriously reduced, often with disastrous effects on costs. The evaporative capacity of the dryers, in these circumstances, will be strained to the limit, with perhaps a 20 percent reduction in weight of end-product, after additional labour, fuel and overhead costs have been thrown in to what is inevitably a losing battle Studies have been made of weather statistics in the UK, over the period from planting to early maturity of potatoes and root vegetables, and total solids appear to be affected by the amount of rainfall and hours of sunshine in this period, ie, from early May to late September Given low rainfall, and a good record of hours of sunshine in these months, the total solids in these vegetables are usually high and subsequent deterioration of weather conditions in the later part of the year, whilst the crop is still in the ground, does not appear to materially affect the balance of moisture content and solids characteristics
13 The Economics of Dehydration The food manufacturing industry, in general, has always been a highly competitive business but no branch of it is more so than dehydration. Profitability hinges on so many factors, some of which are outside the manufacturer’s control. One of the main hazards in this context is that of climate. Total solids in raw materials are the key to a viable operation, and, if these are low, due to wet growing conditions, the plant throughput is going to be seriously reduced, often with disastrous effects on costs. The evaporative capacity of the dryers, in these circumstances, will be strained to the limit, with perhaps a 20 percent reduction in weight of end-product, after additional labour, fuel and overhead costs have been thrown in to what is inevitably a losing battle. Studies have been made of weather statistics in the UK, over the period from planting to early maturity of potatoes and root vegetables, and total solids appear to be affected by the amount of rainfall and hours of sunshine in this period, ie, from early May to late September. Given low rainfall, and a good record of hours of sunshine in these months, the total solids in these vegetables are usually high and subsequent deterioration of weather conditions in the later part of the year, whilst the crop is still in the ground, does not appear to materially affect the balance of moisture content and solids characteristics. 252
Where a wide variety of vegetables is being handled, great care has to be exercised in dovetailing the cropping programme, so that there is no hiatus at any time of the year, which would create costly downtime' for the plant. The calling off of tonnage against contract purchases must also be done at a rate of intake which will give the factory a safe margin of stock level if bad weather interferes with harvesting or lifting of crops With potatoes and root vegetables n silos, a yard stock to keep the plant running for up to four days is a workable and wise precaution, provided that the silos are equipped to giv adequate protection against the weather Where controlled temperature and humidity storage is available,a much larger buffer stock is possible but the cost of operating this, including weight loss and rot wastage, must be taken into account. Onions for example can lose 15-20 percent in weight, even in ideal conditions From the factors outside the control of the processor, we can now turn to the absolute essentials, which are controllable, for conducting a viable dehydration business HOURS OF OPERATION It is essential that the plant be operational 24hr per day, six days per week. Eight, or sometimes twelve, hours of the seventh day are required for plant cleaning and maintenance, and four hours are needed to heat up the plant for the ensuing week. In effect, therefore, dehydration becomes a seven day operation The mechanical and electrical maintenance at the weekend is vital to the profitability, because downtime, arising from any breakdown, is extremely costly. This could amount, with a medium size plant, to perhaps USS700-1000 per hour, according the level of production at the time LENGTH OF SEASON Any length of shutdown in the year is a cost factor, which must be carefully considered and budgeted for during the months of actual production. This again, is an insupportable burden if the period of shutdown is long Normally, it should be possible to process vegetables for about 10-11 months in the year, limiting the shutdown period to 5-8 weeks. Basic wages and salaries, and all standing charges, will have to be covered, in this period, by a weekly contribution in the costing system whilst the factory is in operation, just as, in the same way, annual and statutory holidays are provided A major plant overhaul is always undertaken annually and it is essential to have an ample number of fitters and electricians available for a concerted and sustained effort over this period
Where a wide variety of vegetables is being handled, great care has to be exercised in dovetailing the cropping programme, so that there is no hiatus at any time of the year, which would create costly 'downtime' for the plant. The calling off of tonnage against contract purchases must also be done at a rate of intake which will give the factory a safe margin of stock level if bad weather interferes with harvesting or lifting of crops. With potatoes and root vegetables in silos, a yard stock to keep the plant running for up to four days is a workable and wise precaution, provided that the silos are equipped to give adequate protection against the weather. Where controlled temperature and humidity storage is available, a much larger buffer stock is possible but the cost of operating this, including weight loss and rot wastage, must be taken into account. Onions for example can lose 15-20 percent in weight, even in ideal conditions. From the factors outside the control of the processor, we can now turn to the absolute essentials, which are controllable, for conducting a viable dehydration business. HOURS OF OPERATION It is essential that the plant be operational 24hr per day, six days per week. Eight, or sometimes twelve, hours of the seventh day are required for plant cleaning and maintenance, and four hours are needed to heat up the plant for the ensuing week. In effect, therefore, dehydration becomes a seven day operation. The mechanical and electrical maintenance at the weekend is vital to the profitability, because downtime, arising from any breakdown, is extremely costly. This could amount, with a medium size plant, to perhaps US$700-1000 per hour, according the level of production at the time. LENGTH OF SEASON Any length of shutdown in the year is a cost factor, which must be carefully considered and budgeted for during the months of actual production. This, again, is an insupportable burden if the period of shutdown is long. Normally, it should be possible to process vegetables for about 10-11 months in the year, limiting the shutdown period to 5-8 weeks. Basic wages and salaries, and all standing charges, will have to be covered, in this period, by a weekly contribution in the costing system whilst the factory is in operation, just as, in the same way, annual and statutory holidays are provided for. A major plant overhaul is always undertaken annually and it is essential to have an ample number of fitters and electricians available for a concerted and sustained effort over this period. 253
RANGE OF PRODUCTS This should always be as wide as the limitations of the plant and premises will allow. Without a broad-based programme, the dehydrator can never hope to produce economically. It is almost impossible to specialise, as it is in some parts of the food industry For example, it is not a viable proposition to specialise only in potato dehydration, although the raw material may be available nearly all the year round unless there is diversification into a large volume of potato-based value- added products, snack and impulse foods. In the context of our industry, potato is a low priced product, and equally there is a low profit margin on whatever form the dehydrated potato takes The large potato processors in America solve this problem by diversification in the format of processing. Usually, they buy the potato crop as lifted and grade it in their plants. The largest tubers are sometimes foil wrapped and sold as 'bakers' through the retail chain stores. These are bought by the American housewife for baking in their jackets They next grade out a top premium grade potato of medium size for prepacking-again selling to the chain stores. The third grade, perhaps not quite bright enough in external appearance to fetch the prepack premium, is livered to the frozen French Fries line, or to potato crisp production plant for the manufacture of flakes and granules. The exterior imperfections in the raw material, at this stage, are of little consequence in this process, which has built-in facilities for removing them By intensive diversification of processes and outlets, therefore, it is possible to specialise with potatoes but, where only dehydration is concerned, such specialisation is impossible for purely economic reasons. A rotation of vegetables is required, therefore, to keep the plant operational for 10-11 months of the year, and it is possible that, in some locations, this range may extend to ten different varieties. It is important, however, in the interests of costs, that the production run on any one variety should be unbroken for at least 3-4 weeks. Broken runs, or production runs terminating midweek, are expensive in the context of lost time in cleaning down and running off dryers before another product can be processed. It is impossible to clean down a complete production line properly in less than eight hours, and if this has to be done midweek, the loss of profitability will be obvIous STAFF DEPLOYMENT Economy in manual operations is essential and, wherever the capital cost of a machine, which displaces hand labour, can be seen to be recoverable within a me- say one to two seasons- then that machine should be
RANGE OF PRODUCTS This should always be as wide as the limitations of the plant and premises will allow. Without a broad-based programme, the dehydrator can never hope to produce economically. It is almost impossible to specialise, as it is in some other parts of the food industry. For example, it is not a viable proposition to specialise only in potato dehydration, although the raw material may be available nearly all the year round unless there is diversification into a large volume of potato-based valueadded products, snack and impulse foods. In the context of our industry, potato is a low priced product, and equally there is a low profit margin on whatever form the dehydrated potato takes. The large potato processors in America solve this problem by diversification in the format of processing. Usually, they buy the potato crop ‘as lifted’ and grade it in their plants. The largest tubers are sometimes foil wrapped and sold as ’bakers’ through the retail chain stores. These are bought by the American housewife for baking in their jackets. They next grade out a top premium grade potato of medium size for prepacking - again selling to the chain stores. The third grade, perhaps not quite bright enough in external appearance to fetch the prepack premium, is diverted to the frozen French Fries line, or to potato crisp production. Eventually, the culls from the foregoing grades go to the dehydration plant for the manufacture of flakes and granules. The exterior imperfections in the raw material, at this stage, are of little consequence in this process, which has built-in facilities for removing them. By intensive diversification of processes and outlets, therefore, it is possible to specialise with potatoes but, where only dehydration is concerned, such specialisation is impossible for purely economic reasons. A rotation of vegetables is required, therefore, to keep the plant operational for 10-11 months of the year, and it is possible that, in some locations, this range may extend to ten different varieties. It is important, however, in the interests of costs, that the production run on any one variety should be unbroken for at least 3-4 weeks. Broken runs, or production runs terminating midweek, are expensive in the context of lost time in cleaning down and running off dryers before another product can be processed. It is impossible to clean down a complete production line properly in less than eight hours, and if this has to be done midweek, the loss of profitability will be obvious. STAFF DEPLOYMENT Economy in manual operations is essential and, wherever the capital cost of a machine, which displaces hand labour, can be seen to be recoverable within a reasonable time - say one to two seasons - then that machine should be 254
installed, provided the staff have the requisite skills to operate and maintain such machines Areas in which automation is becoming more and more essential are those of raw vegetable preparation, and dry material sorting and selection. Electronic equipment is rapidly providing the answer to many these problems, and a realistic capital plant investment policy must be adopted by the dehydrator to ensure he keeps abreast of all this development BY-PRODUCTS AND THEIR OUTLETS It is inevitable that there will be some quantity of downgraded product and by-products arising from the plant in the course of a season, and it is important to find satisfactory outlets for these at an economic price Some dried vegetables, which are downgraded for reasons of colour, texture or general substandard appearance, usually find ready acceptance in owder form, as this tends to present a more homogeneous product. A Turbo mill is, therefore, a necessary adjunct to the drying plant, for the purpose of dealing with such material. Reject materials from sorting machines and selection belts usually finds outlets in compounding mills for animal foods Wet vegetable waste should also be disposed of to the best advantage, and this can be converted to animal food if it can be dried cheaply by any waste heat from the plant. A resourceful plant engineer should be able to solve this problem without any great expense on plant or operating cost. By-products and substandard material must at all times be taken into ne initial stock at low cost- any writing down of the value being done immediately quality control has designated the product as under pecification. The carrying forward of such stocks che end of an accounting period, perhaps arising months later, can create severe financial embarrassment when the ultimate stock evaluation comes to be made. Salvage operations are always expensive, therefore it is important to have ready outlets at hand and to dispose of substandard material as it is discovered COSTING basic factory cost for each product. The standard cost system is undoubted A comprehensive weekly costing system should be established to arrive at best for the dehydrator, and on the evaluated factory cost, the selling cost can be calculated, and the ability to maintain the factory standard cost will be a measure of the plants efficiency. Any profit or loss against standard is brought forward into a reconciliation account and balances set against the company's annual financial accounts
installed, provided the staff have the requisite skills to operate and maintain such machines. Areas in which automation is becoming more and more essential are those of raw vegetable preparation, and dry material sorting and selection. Electronic equipment is rapidly providing the answer to many of these problems, and a realistic capital plant investment policy must be adopted by the dehydrator to ensure he keeps abreast of all this development. BY-PRODUCTS AND THEIR OUTLETS It is inevitable that there will be some quantity of downgraded product and by-products arising from the plant in the course of a season, and it is important to find satisfactory outlets for these at an economic price. Some dried vegetables, which are downgraded for reasons of colour, texture or general substandard appearance, usually find ready acceptance in powder form, as this tends to present a more homogeneous product. A Turbo mill is, therefore, a necessary adjunct to the drying plant, for the purpose of dealing with such material. Reject materials from sorting machines and selection belts usually finds outlets in compounding mills for animal foods. Wet vegetable waste should also be disposed of to the best advantage, and this can be converted to animal food if it can be dried cheaply by any waste heat from the plant. A resourceful plant engineer should be able to solve this problem without any great expense on plant or operating cost. By-products and substandard material must at all times be taken into the initial stock at low cost - any writing down of the value being done immediately quality control has designated the product as ’underspecification’. The carrying forward of such stocks at full standard cost until the end of an accounting period, perhaps arising months later, can create severe financial embarrassment when the ultimate stock evaluation comes to be made. Salvage operations are always expensive, therefore it is important to have ready outlets at hand and to dispose of substandard material as it is discovered. COSTING A comprehensive weekly costing system should be established to arrive at a basic factory cost for each product. The standard cost system is undoubtedly best for the dehydrator, and, on the evaluated factory cost, the selling cost can be calculated, and the ability to maintain the factory standard cost will be a measure of the plant’s efficiency. Any profit or loss against standard is brought forward into a reconciliation account and balances set against the company’s annual financial accounts. 255
The weekly cost analysis usually takes the following form Raw materials Weekly usage is calculated by evaluating opening and closing stocks, and cost is calculated by establishing acost average each week. That is, each week's intake at a particular price level, is integrated with the carry-forward stock from the preceding week, costed at that weeks price level. Price fluctuatie are, therefore, taken into account immediately, and a true cost is established for each week's production Thecost average system should be applied to all materials used in roduction Additives and Process chemicals These comprise chemicals which remain in the end-product as a constituent, or chemicals used merely in the treatment of vegetables. Sugar, milk powder and glycerol monostearate would come into the former category, and caustic soda, sulphite and sodium carbonate would be designated as process chemicals in the latter category. Hourly usage is invariably logged in the Process Supervisor's records, therefore this is a simple costing calculation, which is also checked with opening and closing stocks Weekly records should be kept for metered fuels, such as gas, and weights of solid fuels and oil, and usage measured from these. a weekly cost average should be calculated, if there are any price fluctuations on fuel purchases Wages The total factory wages and salaries are computed from the payroll, and their apportionment to the various products made is either the function of the Cost Accountant or the Works manager Overheads An estimated weekly sum should be charged to cover rents, rates, depreciation, office administration and expenses, insurance, quality control and general factory expenses. As the actual accounts for these items are received, any excess or deficiency in the estimated weekly provision is corrected through a reconciliation account Maintenance An arbitrary estimated charge per kilo weight of finished product is brought into the weekly costing and, again, correction is applied as maintenance accounts are received. It is good policy to charge maintenance at a rate which
The weekly cost analysis usually takes the following form: Raw Materials Weekly usage is calculated by evaluating opening and closing stocks, and cost is calculated by establishing a ’cost average’ each week. That is, each week’s intake at a particular price level, is integrated with the carry-forward stock from the preceding week, costed at that week’s price level. Price fluctuations are, therefore, taken into account immediately, and a true cost is established for each week‘s production. The ’cost average‘ system should be applied to all materials used in production. Additives and Process Chemicals These comprise chemicals which remain in the end-product as a constituent, or chemicals used merely in the treatment of vegetables. Sugar, milk powder and glycerol monostearate would come into the former category, and caustic soda, sulphite and sodium carbonate would be designated as process chemicals in the latter category. Hourly usage is invariably logged in the Process Supervisor’s records, therefore this is a simple costing calculation, which is also checked with opening and closing stocks. Fuel Weekly records should be kept for metered fuels, such as gas, and weights of solid fuels and oil, and usage measured from these. A weekly cost average should be calculated, if there are any price fluctuations on fuel purchases. Wages The total factory wages and salaries are computed from the payroll, and their apportionment to the various products made is either the function of the Cost Accountant or the Works Manager. Overheads An estimated weekly sum should be charged to cover rents, rates, depreciation, office administration and expenses, insurance, quality control and general factory expenses. As the actual accounts for these items are received, any excess or deficiency in the estimated weekly provision is corrected through a reconciliation account. Maintenance An arbitrary estimated charge per kilo weight of finished product is brought into the weekly costing and, again, correction is applied as maintenance accounts are received. It is good policy to charge maintenance at a rate which 256