R&D strategies of selected food processing companies engaged in third party manufacturing / Yolanda Herrera Frayre

Year : 2006

Number of Pages : 71 leaves

Adviser: Dr. Olivia C. Caoili

Executive Summary

The main focus of this project is the development of the absorptive, assimilative and technology utilization capabilities of small and medium-scale enterprises or SMEs, by providing guidelines for research and development. The author believes that this will benefit the whole country because technological capability in food processing will be diffused to a bigger cluster of industry players. It will also help create jobs for our people and ensure the safety and quality of industry outputs. Research and Development (R&D) is a major concern for nearly all aspects of the food processing industry. It provides the engine for the absorption, assimilation, utilization, and creation of technologies relevant to the industry. The R&D department plays a critical role in serving as the technical arm of a food processing company, and in keeping management up to date on technical know-how and information on areas of interest for the company. Toll Processing Manufacturers, which are referred to as TPMs in this study, consist of small scale SMEs and large multinational companies. This study focuses on the smaller companies, that is, the company offering TPM services which are smaller in scope and revenue generation than its client, or the bigger company availing of its services. Most of the major players in the packaged or processed food industry avail of the services of Third Party Manufacturers or TPMs, in addition to maintaining their own manufacturing plants and operations. This arrangement will continue to prosper for as long as a win-win situation between the companies providing the service and the company availing of the service is maintained. This situation also gives the small to medium scale food processing companies a chance to enhance their technological capability and become more competitive because of the training and technology provided by the company availing of the tolling services. At the same time, this arrangement also allows the brand owner of the product being tolled to focus on more important value-adding activities in its value chain. The methodology used in this study involved a combination of Internet and library research, trade checks/supermarket survey, interviews of key representatives from TPMs, large food companies or clients, and the Bureau of Food and Drugs. Data gathered were analyzed to come up with recommendations which are primarily addressed to current or prospective TPMs. The trade checks and personal interviews done by the author showed that tool processing in the Philippines covers products like processed meats, drinks in tetra packs, spice mixes and condiments, and many other products, which confirms that the established industry practice of toll processing is increasing within the local processed food industry. The project then came up with recommendations for the role of R&D, the development of R&D performance metrics, and the formulation of R&D strategies that are applicable for TPMs. The assumption here is that a healthy partnership between the TPMs and the large food manufacturing companies (local and/or multinational) and/or food service companies availing of the TPMs' services will lead to a more competitive local food processing industry.