Aspects of the Australian Food Industry

H3.1: Investigates operations of ONE organisation within the AFI.- Describe the activities carried out in ONE organisation within the AFI.

SYLLABUS Link:

Levels of Operation and Mechanisation

Operation: The term ‘level of operation’ refers to the scale of food production, as well as the amount of sophistication of the technology used.

The various levels of operation area are:

1. Household2. Small Business3. Large Company4. Multinational

Food Company Sector of AFI Level of Operation

McDonalds Food Service & Catering

Butcher Food Retail

Woolworths Food Retail

Cake Decorating at Home

Food Retail

Levels of Operation & MechanisationThe larger a business is, the more people it employs, the larger the volume it

produces are the more mechanisation and computerisation it uses.

THEREFORE….

Mechanisation (sometimes referred to as automation): A method of production that relies on mechanical or electronic technologies rather than human labour.

In addition, if human labour is reduced, there is a greater chance of maintaining food quality as processes are more consistent. Example; measuring ingredients.

However, a larger company has more opportunities for problems to develop, such as broken glass in a production line or pieces of metal falling into the product. Special machines have been developed to watch such problems, such as; metal detectors.

The seasonal nature of agricultural products pose no problem for larger companies because they have appropriate storage for the products they use, however, household and small businesses find the seasonal nature of their raw product supply more troublesome because of limited storage facilities.

Levels of Operation & Mechanisation

- ECONOMIES OF SCALE Large, high-profile multinational companies have many benefits due to economies of scale. The cost of producing one unit of a good or service decreases as the volume of production increases.

85% of Australian food products are owned by foreign-owned companies.

Economies of Scale: The efficiencies that can be gained from operating on a large rather than small scale. For example; buying products in bulk may be cheaper.

Levels of Operation & MechanisationLevel of O & M Definition Examples Advantages Disadvantages

Household Home-grown produce or home-manufactured products.Food production is very basic and the quantity produced is minimal. Equipment used is restricted to home appliances.

● Making a batch of lemon butter to sell at a local market.

● Baking cupcakes at home for local cafe.

● Garden that produces tomatoes and sold in a store out front.

Small Business Usually less than 20 employees often a partnership or family-run business.Food is produced on a small scale. Equipment used is not usually industrial.

● Boutique Cake Shops

● Local Bakery● Gourmet Butcher

Shops● Suburban Indian

Restaurant

Levels of Operation & MechanisationLarge Company Operates across one or several

states or across the whole country.A company may operate several stores or processing plants and the quantity of the food produced is sold on a large scale. Many of the tasks involved in the production process are automated and require less hands on labour.

● Greens● Woolworths● Dairy Farmers● Golden Circle

Multinational A company that operate in several countries all over the world. These companies use highly sophisticated technology and have a large product output or yield.Highly influential and powerful.

● Coca-Cola● Cadbury-

Schweppes● McDonalds● Kelloggs● Nestle● Sara Lee

Level of O & M Advantages Disadvantages

Household ● Can specialise, often producing gourmet items.

● May be able to satisfy niche markets leading to greater opportunities if item is successful in the market.

● Can allow person to work from home and work more flexible hours.

● Operating costs are reduced because no rental of factory premises are required.

● Cannot take advantage of state-of-the-art production equipment.

● Low yield or output.● May not be financially viable. ● Hard to maintain consistency and quality

of produce.● Production affected by seasonal nature of

supplies.

Levels of Operation & Mechanisation: Household

Niche Markets: A section of a market that is usually quite small and with specific needs.

Example of a Niche Food Product

Level of O & M Advantages Disadvantages

Small Business ● Greater flexibility to diversify and switch to making different products.

● Access to small-scale commercial equipment.

● Good local customer base.

● Unable to store large quantities of ingredients or goods.

● Limited opportunity to source different suppliers due to small scale.

● Must be profitable to remain competitive with larger companies.

● Need to be in an ideal location.

Levels of Operation & Mechanisation: Small Business

Level of O & M Advantages Disadvantages

Large Company ● Large-scale production possible.● Provides employment to many.● Large profit.● Enjoys the benefits of automation.● Can run continually, often ‘24/7’.● Exerts greater influence in food

sector, with larger voice when dealing with government.

● Leads the way in technology, quality assurance, research & development and career opporunities.

● Less likely to produce boutique, specialised items.

● Higher likelihood of technical problems given large-scale production methods used.

● High cost of machinery and maintenance.● Open to extortion attempts (consumers

attempting to make claims against company).

● More removed from the customer.● Possibility of industrial action and

intervention of unions during disputes.● Expensive to buy into company.

Levels of Operation & Mechanisation: Large Company

ARNOTT’S EXTORTION CASE STUDY - 1997

Level of O & M Advantages Disadvantages

Multinational ● High volume of produce.● Provides employment to many.● Potential for higher profit given

advantages of large-scale production.

● Consistent quality of product and standards worldwide.

● High degree of computerisation and technology.

● Often run 24 hours a day, 7 days a week.

● Open to extortion attempts.● Negative media felt worldwide.● Must adhere to standards set by

multinational company.● No opportunity to diversify or create

unique products due to corporate nature of company.

Levels of Operation & Mechanisation: MultiNational

SPC Ardmona - Case StudyLEVEL OF OPERATION:

SPC Ardmona (SPCA) is a Large Company based in Australia that is currently owned by Coca-Cola Amatil (CCA). The company carries the SPC, Goulburn Valley, Ardmona, IXL and Taylors brands products. SPC Ardmona owns and operates 2 factories in Australia, both located in Victoria. hey manufacture and produce a vast range of products from canned fruits and jams to prepared meals and condiments. In fact, 97% of their crops are grown in Australia, except pineapples, mangoes, beans, berries which are imported from other countries. SPC Ardmona products are available in a wide variety of Australian outlets and formats.

LEVEL OF MECHANISATION:

● It uses a number of technologies to produce a vast range of products from canned fruits and jams to prepared meals and condiments.

● Automation and computerisation are essential to produce the required volume and maintain quality of these products.

● Large-scale production operations are used with 24/7 production lines. ● SPC is the largest producer of premium packaged fruit and vegetables in

Australia, processing approximately 150,000 tonnes of fruit and tomatoes a year.