Digital transformation is having an impact on every area of business with the continued move towards Industry 4.0. One area that is ripe to benefit from Industry 4.0 is the food production industry where changing consumer demands, stricter production standards, and increased competition are all squeezing profits.
Companies need to work smarter to ensure they can remain competitive in an ever-changing landscape. That is where a digital transformation project comes in. Often companies already have the most important piece, ERP software, but are unsure how they can embrace digital change to maximise their productivity. They lack a clear vision or understanding on how digital transformation can supercharge their business results.
Thanks to a mix of new and increasingly inexpensive tech, it is becoming easier than ever to embrace new ways of working. Internet of Things (IoT) sensors, Cloud computing, and big data analytics have all changed the way the best companies are producing their products. This new way of just-in-time manufacturing is helping to cut costs, errors, and reducing the amount of materials companies need to store.
A Real World Example
A recent example of this comes from Nestle who have teamed up with John Lewis in the UK to provide bespoke KitKat bars. Customers will be able to create their own flavour and packaging with close to 1500 flavour combinations possible. While this is only in stores, Nestle plan to roll out an online shop before the end of the year.
This will be the first time Nestle have sold direct to consumer in the UK and highlights their shift in strategy to remain competitive. New ways of reaching customers and offering bespoke flavours that can suit anyone is becoming the new norm, driven by digital transformation in food production.
So, where are you most likely to benefit? Below you will find 3 areas that digital transformation in food production will boost results and improve your business.
1. Opening of New Revenue Streams and Market Opportunities
As profit margins have started to erode in traditional product lines more companies have begun looking towards new revenue streams. This may come from new markets, new product opportunities, or a different approach to reaching the consumer.
Trying to seize new market opportunities is often a risky and expensive operation that has multiple points of failure. Trying to consider the costs and different legal framework or standards in foreign markets and how you could address these is a complex task. Different consumer preferences are also a massive consideration that extends past taste. Digital transformation in food production helps you tackle these challenges in several ways.
First, by providing more flexibility in how you produce products, it is possible to tailor your offering to the target market. This can be to accommodate different tastes or to address legal requirements that exist in different markets.
Second, the improved tracking and reporting functionality can go a long way in understanding consumer wants. While consumer habits continue to change, companies that can collect and analyse customer data are the ones who will triumph. They will be able to offer the products that customers want in the locations they want and will be able to deliver marketing campaigns that are impactful. This targeted production process will be the defining feature of the future that the top companies all have.
Another way to generate new revenue streams is addressing the changing wants of consumers. As they have become more informed and aware of competitors, they now look for something different in purchases. By offering a bespoke service it is possible to give the consumer choice that they have never experienced before. From unique to novelty flavours, the options will bring consumers back as they get to experience variety.
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2. Shortening Innovation and Go-to-Market Cycles
While tackling new market opportunities is one option, often companies will choose to focus on innovating in their core market. This is another time-consuming process that can often end in failure. Thus, improving efficiency of the R&D cycle is a key concern for many.
The first area that digital transformation can help address is the cost of innovation. By using systems and sensors, it is possible to keep a tight control on the amount of materials used. This ensures that the correct amount of raw materials is in each batch, maintaining consistency when swapping out ingredients. Also, sensors allow for the real-time detection of faults, both in machines and production. Early detection allows for corrections, stopping machines from failing and reducing downtime. With the roll-out of 5G, machines will be able to detect a fault in real-time and stop before a fault happens, cutting down in waste during the production process.
Second, once a new product has finished testing, the time to market can be greatly reduced compared to old ways of working. Standard ways of production can roll out to different sites to ensure that all products adhere to the same standard.
Finally, the ability to create new, immersive customer experiences presents an opportunity that has never existed before. Like the KitKat example mentioned earlier, allowing consumers to create their own bespoke product has many benefits. While customers get the satisfaction of a unique experience, it is possible for your company to get market research at an increased rate and reduced cost. Dissecting what consumers create and enjoy can provide insight into potential products for the market at large. You also get to work collaboratively with consumers to create product improvements as they enhance your standard offering in their own way. This helps to build loyalty as they feel that you listen to their feedback and act upon it.
3. Food Recalls and Traceability
Customers want to know more about their food. They want traceability, accountability, and food safety concerns are on the rise. Old ways of production no longer work in satisfying the customers push for change.
Digital transformation in food production allows for the monitoring of quality and traceability from farm to plate. Supply chain tracking technology continues to improve how companies can maintain high standards across the production cycle and ensure that any issues can trace back to their point of origin. Wal-Mart are an example of this as they adopted a blockchain system allowing them to trace the origin of products in seconds.
The future of this will be the ability to add QR or barcodes for customers to scan to see the journey their product has been on. This type of connection is impossible with older ways of working as the information is not available. While this will be the standard future of food production there is currently competitive advantage in early adoption while companies adapt to these new consumer trends.
Something no company wants to have to face is an expensive product recall. While rare, a recall for a defective or contaminated product can be a real headache that creates a negative experience for consumers. You need swift action to minimise the chance of harm to consumers and protect company reputation. Companies using older ways of working are more likely to struggle to get a handle on the situation due to not having key information. A digitally transformed company will be able to see exactly where the incident has happened and what batches are affected. This reduces the size of the recall, helping to keep costs down and impacting less consumers. Furthermore, they can address the cause of the incident to ensure it does not repeat in future.
Like many industries, food production is in a position to benefit from Industry 4.0. Digital transformation will change ways of working for the better and increase the shift towards bespoke manufacturing, rather than mass produced items. Companies that embrace these changes stand to boost their productivity, increase customer satisfaction, and lead the charge into the future of production.