Colin Elkins is industry director for food and beverage at IFS.
In response to growing consumer demand, larger manufacturers are trying to get more health conscious and sustainable—but they’re playing catch-up. The International Food and Beverage Alliance, which brings together 12 leading food and non-alcoholic beverage companies, has declared its intention to “innovate and optimize the composition of members’ products” in a push to help meet the World Health Organization’s goal of eliminating industrially produced trans fats from the global food supply by 2023.
Clean packaging initiatives are now vital to prove sustainability, as younger customer bases make increasingly environmentally-focused decisions when purchasing food and drink items. In fact, 66% of consumers are happy to pay more for products from brands committed to environmentally friendly practices, according to the Nielsen Global Corporate Sustainability Report.
Industry giants are beginning to mobilize slowly to react to this. Between 2020 and 2025, Nestlé will phase out all plastics that are not recyclable or are hard to recycle for all its products worldwide. Coca-Cola has recently reported that as part of its 2020 sustainability goals, 56% of its bottles and cans are refilled or recovered equivalent to what they have introduced into the market. By 2030, Kellogg has pledged to support a million farmers and smallholders to deliver climate-smart farming, continue its work to reduce food waste, responsibly source ingredients and switch to sustainable packaging.
However, large organizations adapting to market changes are often hampered by equally large, monolithic business software, which puts smaller challengers at an advantage.
Ball in the court of smaller food and beverage manufacturers
Now is the ideal time to make investments in new products, processes and technology required to steal market share from companies that have dominated shelf space and slotting allowances for decades. But multiple and rapidly shifting product lines require manufacturing routing and packaging processes that are agile and can change regularly, as new products are added and as demand for product in one package versus another varies from one day to the next.
Companies that successfully compete against the industry giants will need to work on three key areas and rely heavily on supporting software to change the rules of the food industry in their favor.
Introducing new and innovative products means setting up new processes, recipes and routings. The schedule for a day’s manufacturing must be flexible enough to enable a manufacturer to ship the day they receive the order, breaking up batches into numerous packaging and product configurations according to emerging demand.
Unfortunately, this is where many manufacturers find their major ERP software solutions do not have a production scheduling engine at all. That is why even the largest food conglomerates, which may be using a solution such as SAP for finance, are not using it on the manufacturing or operational levels. The management of product as it passes through the manufacturing process is handled through disconnected spreadsheets. In a fast-paced manufacturing setting that will not work. Processes need to be streamlined and tightly integrated with the rest of the enterprise.
When a food and beverage manufacturer runs SAP for financials on a corporate level, they may often opt to implement a more flexible, agile solution for the operational level of the business or in specific divisions through a “two-tier” ERP approach.
In the food and beverage industry, corporate social responsibility used to be a luxury, not a necessity. Manufacturers are now more often required to document the sustainable origins of specific ingredients such as palm oil, which is linked to loss of biodiverse rain forests in Asia, Africa and Central America. This has filtered down to retailers requiring certain percentages of RPSO-certified palm oil in products they place on shelves.
There is immediate demand from retailers for “clean labeling.” They are in turn acting on the behest of consumers who are coming to favor more natural products not only for their sustainability and health benefits, but for more authentic flavor and taste profiles. From retail to restaurants, the ability to tell the consumer a “farm to fork” story about what they are about to consume and enjoy can enable selling at a premium price point. Today more than ever, traceability is no longer just about compliance and risk management—it should always be tracked and displayed by supporting software.
Transformational technologies including the internet of things, artificial intelligence and powerful operational intelligence (OI) tools are already driving benefits in the industry, or present remarkable upsides when applied to solve entrenched business problems. Perhaps the most immediate and compelling way these headline-grabbing technologies can drive immediate results for food and beverage manufacturers is in the planning and scheduling area. Fresh, perishable ingredients and daily planning mean there are significant benefits to be had by applying intelligent algorithms to the precise timing of production.
A starting point may be determining how much of a perishable ingredient to have on hand based not on historical sales figures but on current and leading indicators, including current sales pipeline, weather conditions and other data from inside and outside the company. It is then possible to make data-driven and predictive decisions about purchasing or how much of a precursor product to make prior to a day’s orders to meet daily demand. Combined with mobile geolocation technology and vendor portals, IoT can also improve receiving, ensuring that it dovetails with production for more rapid manufacturing.
While strong, integrated ERP is essential for the success of an international contactor, food and beverage manufacturers will benefit from adopting OI software, a revolutionary enterprise management tool that rests on top of these systems. OI ties the underlying data in ERP and data from various other data sources into a comprehensive business map that helps monitor and manage business processes even as multiple variables change. OI software can also unite ERP products run by disparate businesses engaged in collaboration. This may be something as simple as shared sourcing between a brewery and a pasta company that pool their raw materials.
1. Improve agility
Introducing new and innovative products means setting up new processes, recipes and routings. The schedule for a day’s manufacturing must be flexible enough to enable a manufacturer to ship the day they receive the order, breaking up batches into numerous packaging and product configurations according to emerging demand.
Unfortunately, this is where many manufacturers find their major ERP software solutions do not have a production scheduling engine at all. That is why even the largest food conglomerates, which may be using a solution such as SAP for finance, are not using it on the manufacturing or operational levels. The management of product as it passes through the manufacturing process is handled through disconnected spreadsheets. In a fast-paced manufacturing setting that will not work. Processes need to be streamlined and tightly integrated with the rest of the enterprise.
When a food and beverage manufacturer runs SAP for financials on a corporate level, they may often opt to implement a more flexible, agile solution for the operational level of the business or in specific divisions through a “two-tier” ERP approach.
2. Use CSR as a competitive differentiator
In the food and beverage industry, corporate social responsibility used to be a luxury, not a necessity. Manufacturers are now more often required to document the sustainable origins of specific ingredients such as palm oil, which is linked to loss of biodiverse rainforests in Asia, Africa and Central America. This has filtered down to retailers requiring certain percentages of RPSO-certified palm oil in products they place on shelves.
There is immediate demand from retailers for “clean labeling.” They are in turn acting on the behest of consumers who are coming to favor more natural products not only for their sustainability and health benefits, but for more authentic flavor and taste profiles. From retail to restaurants, the ability to tell the consumer a “farm to fork” story about what they are about to consume and enjoy can enable selling at a premium price point. Today more than ever, traceability is no longer just about compliance and risk management—it should always be tracked and displayed by supporting software.
3. Tap into transformational tech
Transformational technologies including the internet of things, artificial intelligence and powerful operational intelligence (OI) tools are already driving benefits in the industry, or present remarkable upsides when applied to solve entrenched business problems. Perhaps the most immediate and compelling way these headline-grabbing technologies can drive immediate results for food and beverage manufacturers is in the planning and scheduling area. Fresh, perishable ingredients and daily planning mean there are significant benefits to be had by applying intelligent algorithms to the precise timing of production.
A starting point may be determining how much of a perishable ingredient to have on hand based not on historical sales figures but on current and leading indicators, including current sales pipeline, weather conditions and other data from inside and outside the company. It is then possible to make data-driven and predictive decisions about purchasing or how much of a precursor product to make prior to a day’s orders to meet daily demand. Combined with mobile geolocation technology and vendor portals, IoT can also improve receiving, ensuring that it dovetails with production for more rapid manufacturing.
While strong, integrated ERP is essential for the success of an international contactor, food and beverage manufacturers will benefit from adopting OI software, a revolutionary enterprise management tool that rests on top of these systems. OI ties the underlying data in ERP and data from various other data sources into a comprehensive business map that helps monitor and manage business processes even as multiple variables change. OI software can also unite ERP products run by disparate businesses engaged in collaboration. This may be something as simple as shared sourcing between a brewery and a pasta company that pool their raw materials.
Get ahead of the food and beverage game
In the current food and beverage market climate, there is significant ground to be gained by the most innovative manufacturers with products designed and marketed for a more health and sustainably conscious customer base. Those who make agility, social responsibility and new tech top priorities can realize these benefits fast—but they must make sure they don’t become one of the industry laggards, held back by inflexible software in this rapidly changing market sector.