In this episode of the Troubleshooting Innovation podcast, you’ll learn how commercial bakeries can achieve a smooth handoff from R&D to operations. Featuring Dave Van Laar, industry expert and consultant, and Joanie Spencer, Commercial Baking editor-in-chief.

Sponsored by Reading Bakery Systems.

Joanie Spencer: In this episode, we will be discussing how to scale up from the lab to the line, and we’ll talk about some tips on achieving a smooth handoff from R&D to operations. In the last episode, we touched on how R&D, marketing and operations all need to play nice together in the sandbox in order to streamline innovation from concept to store shelves. Today, let’s talk about some of those first steps in achieving that smooth handoff.

Dave Van Laar: Sounds good. Where do you want to go with it?

Spencer: Let’s talk about speed to market first because consumer demand has really changed the speed to market concept. It’s shortened exponentially in the past few years and especially in the past 12 months. So how is that changing the way a product moves through the development process and gets to operations?

Van Laar: Well, let’s think about overall traditional sales marketing companies for cookies. We developed a product. We went in and sold it to a chain. We waited until we could get the shelf space. We put it on the trucks, the trucks delivered it, and we tried to get pull through advertising and push it through the stores. That whole process, if we were fortunate, took months to do. Today, you and I can make a brownie and have it in someone’s house tomorrow. There’s no question that disruptive is the key for what’s happening. We can also use that as branded companies because the iconic brands are also what continue to drive the business.

Spencer: Is it changing what branded companies are looking for when they are looking for a co-manufacturer or how they’re changing their internal operations?

Van Laar: I believe so. They’re looking for much quicker response than we’ve been able to even do in the past. We know consumer trends more quickly now. We know what the consumers are buying almost immediately, and they’re telling us, with their dollars, what they really want. Before, that whole game we went through was a guessing game. We tried to stay ahead of the consumer. We tried to stay ahead of the trends. We tried to help produce those trends, make products that fit. Go back to fat-free, for instance. The clamor was there for fat-free 25 years ago when we were going through all the fats and oils issues. So, we all got into the fat-free business. Well, the trouble is, it didn’t taste good, and nobody bought it. So, we moved on. We’ll get a quicker reaction to those things now. It does allow for a lot easier entry for new products.

Spencer: Do you think that this impacts the need or opportunity or even interest for branded companies to do more self-manufacturing?

Van Laar: I still believe that major companies are going to produce their own iconic brands and be as efficient as they possibly can. Oreos will always sell all; Oreos will always be out there, they’ll be made on huge lines with very few people, and Mondelez will continue to make that efficient. When it comes down to a brand that’s doing less than a million dollars a year, it is the realm of the contract manufacturer to get that to market.

Spencer: Let’s go back to what you said about this continuing need for new product innovation. To streamline the whole process and to really get it going quickly and smoothly in operations, who needs to be at the table in those initial discussions? Traditionally, it’s gone from marketing to R&D to operations. Have you seen any scenarios where operations is getting involved in the conversation sooner? Or is R&D driving the innovation more than they used to?

Van Laar: When I’m involved, I’m in the process at the beginning. I believe that needs to happen everywhere. When you’re looking at product innovation or product ideation, certainly that’s marketing, sales, R&D. If they are marketing research departments, they’re still involved. They’re trying to pick up the trends with senior management. So that group is getting together and coming up with different types of products. I was always fortunate with the major branded companies to be part of that process also, so I could see what they were thinking about to help guide them toward something we could do. That’s going to happen in that realm, no matter what, but when we go to the plant, and when we go to market, everybody needs to be involved. I believe this team needs to be assembled as soon as possible, as soon as there’s a decision to make, to get to market.

That’s the quality control. We need to establish shelf life. We have to establish quality parameters; engineering needs to get involved. Will our equipment do this? Does it even exist today? That’s happened pretty regularly too; the product was designed and there was no equipment available to make it. What’s the CapEx going to be? Who’s our vendor going to be? Engineering needs to be involved with all that, because when you look at their lead times, they’re looking at a 12 to 18 months.

Operations certainly needs to think about commercialization and the plant. They need to assist engineering with the design, like: Where does it fit in my plant? How many people would it take to run? What kind of training do I need for this type of equipment? And what’s the expectation of the product and the equipment? If we’re going to bring new technology into a plant as a plant manager, I need to be ready to train people to do that.

Purchasing is often forgotten in this whole process also, but R&D loves exotic ingredients. And I’ve talked about that pretty regularly. You know, the Madagascar vanilla that’s available every other year. It’s a great product, but can we commercialize this? Purchasing needs to think about where they source it and also start to get pricing on it. I’ve found one piece that the big companies sometimes neglected was the finance piece. After the project was all put together, the numbers were all crunched, then they went to finance. They went to the CFO and said, “Here’s what we need to spend.”

After being burned couple of times, I learned that if I go to the CFO right away and say, “This is what they’re looking at doing,” he did not get blindsided in a meeting with the corporate staff saying something like, “Here’s a project for $20 million, please sign it.” We were also able to get pre-spending. A lot of these require larger companies. We wrote a project, but then we needed to spend before the project is approved, so that pre-spending can be approved by contact with the finance people. Nobody likes to be surprised. And I think everybody wants to be a part of that team. They want to help it be successful, but they’re not always given the opportunity.

When it comes to packaging engineering: How’s it going to go on the store shelf? Does it sit this way, does it sit that way? Is there a modified atmosphere packaging required? What type of barriers do we need? What modifications do we need? Do we need new equipment? Is this a Gable top? Is it resealable? Is it to show the product or to hide the product? And all the while, we have sales itching for that new product. They love to take new products to their buyers and show them how innovative we are, but then they need to get it into the stores. They also have to worry: If I put this new product in the market, will my salespeople lose focus on some of the other primary drivers? We don’t want them to lose focus on the real staples just because a new product is out there.

Lastly is logistics. Are there special handling characteristics? I was involved with a project that had pure chocolate in cookies. Sounds like a great idea. Even Pepperidge Farm had a summer type of product and a winter type of product. When you think about that, it’s great in the Northeast, but what about Florida? What about Arizona? What about California? You have to consider the distribution cycle. We’ve also had to consider how we shipped things. If we shifted across the Rocky Mountains, it was subject to a lower pressure and we had cartons and bags pop open going through there.

So that’s the list of the kind of people that are involved. I know some companies are saying, “Well, I don’t have all those people. I don’t have all those resources. I wish I did.” My comment to you is no, you don’t wish you had all those people. You need to have those resources. You need to have those functions. But if those are combined into maybe four or five people, it really helps you be more flexible. In a larger company where we’re talking about departments for packaging engineering, departments for QA. On a smaller operation, we’re talking about four or five people sitting around. So, they need to consider all these functions, but they are a lot more nimble because they make the decision right there at the table and they move forward.

Spencer: So it’s more schools of thought than it is actual individuals.

Van Laar: Absolutely. It’s the function; the function needs to happen.

Spencer: Okay. You know, I was visiting with a baker not too long ago; he was the CEO of the bakery. He was telling me how his director of operations was really good at doing his homework before he came to him with that request for the investment. He would have the conversations and then say, “Okay, here’s the scenario of what will happen if we do invest in this equipment. Here’s what will happen if we don’t.” That seemed to make things run a lot more smoothly. They also had someone who was more or less a centrifuge to keep all of those schools of thought at the table and focused on the same goal. So what are your thoughts on who that centrifuge needs to be to keep everybody aligned on what the goal is?

Van Laar: Please don’t tell me who those people are, because I’d probably go after them and have them work with me. Those are the type of people we need, obviously. Nobody likes surprises, and the biggest thing I’ve seen through the 40+ years of this, that catches everybody, is the surprises. You know, I forgot this, I forgot that piece. And if a CEO has a person like that running the interference for them, it’s crucial. There is a simple thing, Joanie, like project justification, just to figure what the cost of the project is and what the benefits are. I’ve gone out and worked with companies just to help engineers understand that process. It’s amazing how many people don’t get that. They come in with phony justifications. They come in with soft numbers instead of solid numbers. And then the CEO has to do the evaluation himself or herself. To have somebody that’s doing that is really important.

Spencer: Okay. I’m sitting here thinking about what you were saying earlier, about the vanilla sourced from Madagascar that’s only available every other year, only when the ships are sailing at night … I’m thinking about that example and really curious to pick your brain on what you’ve seen in those types of situations, as far as worst-case scenarios and best-case scenarios, where all of the pieces of the puzzle just really came together for a smooth and successful product launch. Can you share some of those stories?

Van Laar: Sure. When we were doing a project back when we were buying most of the macadamia nuts coming out of Hawaii, that did not go into direct packaging and to retail. That was somewhat of a limiting factor. If the crop was affected, if shipping was affected, the macadamia nut had to be in there. That could be quite disruptive. When we were experiencing the sugar issues years ago, and we were trying to source some offshore sugar, that was extremely difficult for us. Some things we’ve been able to substitute, but when it gets to these newer ingredients that are more specific, it becomes even more difficult to have product available there when you need it.

One project that really stands in my mind is when I was with the President Baking Company, we developed Marie Sugar-Free. The questions are: Does it meet the claims of the product? Will it do what it says it will do? Will it hurt anyone if they have a sugar issue? How do we make it taste good? How do we source the sugar alcohols that we need, and which ones will stand up in the oven? That was a group project from the very beginning. That was sometime in the mid-‘90s, and that product is still out there. I believe it’s still leading the market in the sugar-free arena. So everybody was brought together to make that happen. It was a relatively smaller group. We did it with some exotic ingredients, but we did it right. And it’s still out there.

Spencer: Wow. So, about those really specialized and exotic ingredients that consumers seem to be demanding more of now … I was wondering, if it has staying power …  you answered my question.

Van Laar: Yeah. And back then, we were trying to determine which of the sugar substitutes made sense. First of all, which ones were stable in the oven. That was an issue we had to resolve quickly because vendors made claims that really didn’t hold up. Then the other thing was the effect that the sugar alcohols have on the system, and did we need a claim on there to say that if you eat too many of those cookies, you’ll have to visit the bathroom. I asked the R&D people. I said, “According to the rules, how many cookies would they eat to meet that claim?” And they said, “The whole package.” I said, “Well, then leave it off the package because they deserve to go to the bathroom.”

Spencer: Listen, I gave up treats for Lent. And so, Sunday afternoon, I was at risk of eating an entire package of cookies. Some of us need that claim.

Van Laar: We binge, don’t we?

Spencer: We do! So, what about a worst-case scenario? Do you have any cautionary tales?

Van Laar: It hasn’t always worked, Joanie. There have certainly been difficulties. As a contract manufacturer, we were given a product that had no flour in it. It was a bar product held together primarily with liquid sugars and it was baked through the oven somewhat, but it was not something that anybody had done before. We were not part of the development process or the product; a major sales marketing company developed it. It was right on, it was the right thing to do, but they had no idea how to make it. So, they handed it to us.

It was not the right application for the equipment. It would have been better suited for other equipment. However, the pieces they needed, we had all the pieces, so they could’ve extruded the product better somewhere else, but they would not have been able to bake it somewhere else. They could have baked it somewhere else, but they would not have been able to package it somewhere else. We had close to what it would take — and on paper it would work — but when we started to make this product, it took forever to load the mixer because there were no bulk ingredients. We were making 3,000-lb batches. So, we had to shovel everything in by hand. This stuff was so thick, we had to scrape the dough out of the mixture with two people into the trough. The depositor kept breaking chains. We finally had the equipment supplier come in and look at the stress on the hopper on the depositor. And they just couldn’t believe how much stress was on that steel, so they had to beef that up. The product stuck to the band, it stuck to the guillotine. Extra cooling was needed after we started. This was probably the roughest, but I might add the most successful, startup that we’ve had on something all-in-all. Because as a contract manufacturer, that was the only product that was when I got there in 2001, it was the only product that we were still making in 2016.

There are many other ones that have not gone that well. At Pepperidge, they have the famous Gable top bag, which was made by a piece of equipment that costs a lot of money. And everyone wanted to try to mimic that with a much cheaper, more available machine. We bought probably two or three different types of machines to try that, and they all sat in the junk pile because none of them worked.

Spencer: Wow. So that story you told about the bars … Is that sort of the cross that a co-manufacturer has to bear? Are they often the ones, like if a branded company is like, “Well, we can’t figure out how to make this, so we’re just going to pass it to you.”

Van Laar: That has been the success of many, many contract manufacturers. Many sandwich cookies. I know someone decided that would be a great product. They invented the equipment themselves to do that. Somewhere I worked thought it would be a great idea. We put a production line together to do it, and then we actually sold that capacity. But most of the time, the innovation in bringing products into production comes a lot more quickly on a smaller scale operation. We do a lot if we do that, by hand. That bar we were first talking about … we did not have a way to get them from the wrapping machines to the cartoner. We put them into tubs and then carried them over, but we were making 800 bars a minute, so that really wasn’t going to work. But it gave us the flexibility to get a test on it. We added conveyors very quickly and started to build up that line, but that line changed over the years to accommodate automation and to get the price down. In fact, that was one where the price we started at with this consumer went down probably 25% from when we started. After two years, we took that price down for them because we were able to economize in so many areas. Our customers love it when you come with a price decrease.

Spencer: You’ve got that right. So when developing a new product, we’ve talked a lot about all of these moving parts and all of these schools of thoughts and fundamentals that have to be considered. Something’s going to get missed. What’s one or two things that a baker really needs to be sure to remember before firing up that line and taking a product into production? And then how far into the future do bakers need to be thinking when they’re developing a new product?

Van Laar: The first thing, and the most important thing, is: Can I make it on the equipment that I have? Are minor modifications needed? Are huge capital investments involved? If so, what is that CapEx and where do I go to get that? With this bar product, there was really no alternative. The equipment we were using, we had to make it work. It was one small piece of the process, but if that didn’t work, nothing worked.

I’m thinking about production as R&D is showing me prototypes, and this has happened, that someone will show them a piece of equipment and they’ll design a product to meet that specific piece of equipment. Well, if we don’t have that equipment, we can’t make it like that. There are simple products to make and there are very complicated products. When we went through the soft cookie wars back when, and we went through some filled products, there was a lot of specialized equipment that was out there. Most of that equipment is gone now because of the inefficiencies of running it. But as a CEO or as a project manager, I’m thinking about the nuances of putting that on the line as it’s being developed. And I think that’s most crucial.

The other thing I’m thinking about regularly is resources. What resources do I have to make this happen? Do I need to get my equipment vendors involved? And do I need to get them involved now? How do I partner with those vendors? How do I get them into the process early on, so they know what to expect and they can also offer suggestions going forward? I think those were the two biggest things: knowing how to make it and knowing who it’s going to take to make it.

Spencer: Yeah. And you know, when we did , about how they can get involved with product innovation very early in the process at their technical center. So I think it is important for bakers to consider speaking with their equipment vendors — current or potential — very early in the process. Would you agree with that?

Van Laar: And stay involved with them. Absolutely. Talk with them, but stay involved with them, see what things they can do, because sometimes equipment may drive innovation. I hate to think that it just always has to keep up with it. They’re looking to do that too, you know, Shawn and Reading and the other companies that are out there. They’re paying attention to trends. They’re looking at what’s going on and they’re trying to figure out how to stay ahead also, just as we are with the products.

Spencer: On that note, how do bakers reconcile in their minds when they’re looking at capital investments, the project and products that are yet to be conceived?

Van Laar: Joanie, I’ve been fortunate; back in 1982, I bought a crystal ball and it has worked so well for me over the years.

Spencer: Did I just ask the impossible question?

Van Laar: No, because it’s what we live with. It’s an excellent question. A question that we all have always struggled with. To give you a couple of examples … I mentioned the bar that we made and we stayed very flexible in the beginning with contract manufacturers. That’s often the case: Don’t over-automate it in the beginning, because then you lock yourself into something. People are a lot more flexible at times than machines, but automation is a lot more preferred than people. So, as you find out what the process is going to do, the biggest thing to me is deciding what you want to be. What are you? If you’re a cracker manufacturer, you don’t put in a cookie line. That’s pretty obvious. But if you’re going to do chocolate cookies, you need to be prepared to do chocolate. And is it going to be a compound or real chocolate? Knowing the direction of the company is certainly crucial toward those things.

I was involved with a project where we spent millions for a line that had no product committed to it. Everybody knew it was the right thing to do, they knew it was on trend. It’s like the old baseball field deal: You build it, they will come, but within six months, somebody did come. It turned out to be a great product, but it’s a gamble. It’s a huge gamble. I know other companies that have gone on even more substance and have gone out of business when that product did not come through. So it’s difficult to know how to put it out there, but someone in the organization has to have that strategic objective, know what they’re going to do. At times I’ve wondered what they’re thinking, but it always turned out they were a lot smarter than I was. So, I just followed orders.

Spencer: It seems like there is that fine line that you have to walk when trying to disrupt and innovate in this marketplace: how much risk you’re willing to take and still be cautious in how much you invest to take that risk. Right?

Van Laar: Absolutely no question. Way back in 1981, I was an industrial engineer (IE) at Pepperidge Farm. Of course, the IEs are all gone, but we were the efficiency experts. And one of the projects that I put on the profit improvement plan was to help the ladies and men that put the caps on the cookies on Milanos. So, they took the chocolate piece and by hand, put it on the other piece. Many, many a day. It took 12 people to do that on the line, and then it took 12 people to put them in those fancy little cups that they went into. The machine that placed cups into the bags was a million dollars and the machine that made the bag was a million dollars. Now this was back in the ‘80s, so we looked for a way to put those 24 people somewhere else. It was ripe for automation, but nothing existed for that. I carried that project on my profit improvement plan for years and years and years. Finally, robots with vision became available, and we were able to do that and not lose the handmade look. It would show the chocolate, but it also put little fingerprints on if we wanted it to also to show that people had touched it. So the technology has got to be there; it’s got to be there on time and it’s got to be available.

Spencer: Definitely. And that’s actually a good segue to tease next week’s topic because we are going to talk about how that technology and automation is making life easier for bakers, especially these young bakers, but also it’s creating this gap of the knowledge transfer. So next week we can talk about how — even though we have technology and robotics to make the process easier — the actual knowledge of the bakery process that can’t be lost in order to keep these products moving forward.

Van Laar: One of my favorite subjects, Joanie.

Spencer: I cannot wait. Alright, Dave, those are all my questions for this week. I thank you so much for your time and insight. Once again, I look forward to discussing the knowledge transfer next week. If any of our listeners have any questions for you, on our final episode, we’re going to give you an opportunity to answer those. If any of our listeners have questions for Dave, they can reach out to us at info@avantfoodmedia.com. Dave, I will talk to you next week.

Van Laar: Until next week, Joanie.