Food and Beverage Lavango

The pandemic changed the annual cycle of industrial companies, reduced operating costs and increased demand for automation

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The pandemic has significantly affected many business sectors around the world. Manufacturers of equipment for the food industry claim that increased food sales have prompted food manufacturers and processors to speed up the search for production optimisation and efficiency solutions. Meanwhile, the suppliers of equipment for this sector have experienced a balanced cycle for the second year in a row.
According to Eurostat, trading in food products grew by 3.9% in 2020 compared to the previous year.

“The pandemic has significantly changed our yearly cycle. In 2020, following the stagnation throughout Europe in March and April, and the temporary suspension of investment plans by the food industry, we only had 10 months to meet our production targets for the year. However, this year the whole food industry market is running full speed ahead. We feel that the tone being set by the food industry for its equipment suppliers is to supply as much in 12 months as we would normally supply in a period of 14 months. In view of the planned projects and the abundance of upcoming inquiries, we expect to grow by more than 30% this year. This is largely due to the impact of the pandemic on the food industry,” said Jevgenij Sakovskij, representative of Lavango, a manufacturer of food industry equipment who participated in the Hannover Messe exhibition this year, and CEO of one of the group’s companies.

The group has been manufacturing conveyors, screw systems, lifting mechanisms, robotic packaging and other equipment for the food industry for more than 13 years. The Lithuanian capital company, which has two production units in Europe, supplies its solutions to twenty markets in Europe and Asia. Exports account for 90% of Lavango’s turnover. The group’s customers include multinational corporations such as Unilever, Mars and Viciunai Group. It is the world’s largest producer of surimi products, as well as many others.
Last year, the turnover of the Lavango Group grew by 7%.

Robotisation and automation have taken on a new meaning in the face of Covid-19

“We have been observing the rapid robotisation and automation of companies in the food industry for several years. Businesses are constantly looking for new solutions to streamline their production processes, shorten the production cycle and reduce the number of employees involved in production. In the face of Covid-19, the need to reduce the number of employees working in production has taken on another meaning: with smaller teams, the risk of virus outbreaks is significantly lower, which can disrupt a company’s processes for at least a couple of weeks. We have been hearing similar fears and other new arguments in relation to production automation from our customers for several years, but this is definitely something new. I never heard these arguments in the past,” said Sakovskij.

In practice, it is estimated that automation in the food industry can reduce the number of employees involved in production by up to 60%, while robotisation can reduce this number by up to 90%.
In response to the current market changes, Lavango is doubling its production capacity. This year, the construction of another 2,000 sq. metre factory began in Lithuania.

Challenge – to install equipment in a factory in another country during the pandemic

“Since the inception of the group, in order to keep the production process for our equipment as short as possible, we stated that it would be essential for the suppliers of the main raw materials on which our production depends, namely sheet metal and other components, to be in the same jurisdiction as our production unit and that they could ensure a supply of materials within 24 hours of placing an order. As a result, at the beginning of the pandemic, when there were queues of trucks crossing the state borders, we had virtually no problems with our supply chain.

This also allowed our production to proceed at the usual pace. The delivery of our products was not disturbed either – our main production unit is located near the port of Klaipėda, therefore, our products travelling anywhere from Germany to Iceland reached the sea at the time which was agreed upon. Thus, we did not experience any problems due to logistical disruptions. On the other hand, I could not say the same about issues related to installing equipment in our factory,” the company’s representative disclosed. In order to ensure the maximum efficiency of the equipment and to provide a warranty, the installation work of the manufactured equipment is performed by the group’s own employees.

Sakovskij said that there was a stage when their employees arrived at certain factories for installation work and were not allowed to enter. “We faced this issue in Spain, when we needed to install equipment in one large factory during the peak of the first wave of the pandemic. We had only a few cases like this, and they occurred in March and April. Nevertheless, more news came out later about how we could adapt our business operations to the current situation. There was also more available information about the changes in the legal regulations of each country with regards to crisis management; therefore, the food industry companies also had to learn to live with these issues. Finally, by coordinating the self-isolation conditions of our incoming team with other circumstances, the equipment installation process went relatively smoothly,” he explained.

According to the executive, all of the group’s other challenges were typical – stricter planning of production shifts, separation of flows, regular health checks, safety measures for employees and employee education. “I am very glad that our team had the opportunity to get vaccinated this week, so we will soon be able to forget the past period and shift into a higher gear, so that we will manage to implement the plans we now have,” said the CEO of Lavango.

Working remotely has significantly helped reduce costs

Last year, the group noticed that working remotely could significantly optimise performance of its operations. The company representative estimates that the administrative costs in the company have fallen by almost a third during this period. “These costs are mainly related to office maintenance, customer services and sales processes. Both ourselves and our customers have learned to gain each other’s trust by communicating remotely and also to reach agreements and make deals worth millions of euros online.

In the past, it seemed that this couldn’t happen without an in-person handshake,” said the CEO of Lavango.
Today, the group operates production units and representative offices in Lithuania, Belarus, Denmark and Iceland, as well as in Norway, Sweden and Russia. Despite the fact that the whole team has reoriented toward working with customers remotely, the group does not plan to abandon its representative offices in foreign countries in the near future.

The Lavango executives believe that being closer to customers helps in gaining a significant competitive advantage. “We are usually connected to our customers by a continuous partnership, where we look for ways to optimise their production process year after year. Therefore, we understand that by becoming close and by carefully observing their processes, and by analysing the possible alternatives with their team, we gain a significant advantage.

By understanding our partners better, we can offer more targeted solutions, so our competencies become even more trustworthy. This involvement and our efforts to work together to make the customer’s operations more efficient means that our customers value us and keep coming back,” said Jevgenij Sakovskij. However, the CEO makes no secret of the fact that the company intends to abandon some of its previous management practices, after learning the lessons provided by the pandemic with regards to saving costs.

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