According to recent studies, conversion to a digital enterprise could help the global food and beverage manufacturing industry reduce production costs and increase margins by anywhere from $290 billion and $450 billion. This won’t happen, however, due to the introduction of one element of technology or one alternation in industry best practices. Rather, it will be an evolutionary journey as digitalization gradually impacts every facet of the supply chain.
The Potential of Digitalization
Higher manufacturing productivity from digitalization will come from:
- Improved competitive capabilities
- Faster time to market
- Better planning and forecasting
- Reduced inventory holding
- Improved product quality
- Reduced downtime
- Shorter setup and changeover times
- Lower energy consumption
- Greater financial sustainability
Berner Food & Beverage offers an example of the potential of digitalization. The company makes 90% of its products to order. Keeping inventory levels low is critical to profitability. However, too much time and complexity were being absorbed in plant utilization and in forecasting demand. By embracing a deeper level of digitalization, it achieved 95% accuracy in predicting customer demand, freeing up millions of dollars that had been tied up in unnecessary inventory. By implementing predictive analytics to combine data from the factory floor to the enterprise resource planning system, managers could quickly identify bottlenecks and find the root cause of errors or faulty products in minutes.
Food and beverage producers wishing to follow in Berner’s footsteps are embracing multiple technologies to create a digital enterprise. This includes cloud computing, placing connected sensors in plant operations, implementing the internet of things (IoT) to ‘track and trace’ ingredients through the supply chain, and combining data sources with suppliers to improve supply chain visibility.
Where Manufacturers Are Falling Short
But despite progress toward digitalization in many areas, digital initiatives are falling short in several important areas. A survey of industry executives by Siemens found data analytics in use by less than half of food and beverage firms, and that they were collecting less than 60% of their production data. To make matters worse, the lag between data collection and analysis was found to be more than 24 hours in almost all firms. This is much too slow for a world where it has become possible to analyze data in real time and adjust processes accordingly.
While budget constraints are holding many back, a lack of a broad digitalization strategy is apparent in the majority of firms. Many digital initiatives have begun, but most companies lack a comprehensive strategy to embrace digitalization across the enterprise. This entails a change in mindset – moving beyond digitalization as a buzzword or fad and viewing it as a game change that can bring about farm-to-fork traceability.
Review the Foundation
A good place to begin is with a full review of where things stand on the digital front. Every company has a different approach to business, placing emphasis on specific processes. Accordingly, they have typically implemented digitalization across a diverse range of functions. Many have established an excellent standard on the manufacturing floor. Some have a great Ethernet network that enables them to digitally scale. Others have developed a consistent engineering methodology for the management of recipes.
The point is that most organizations have already established certain digital building blocks. These vary greatly from organization to organization. By accurately mapping out where the company is with regard to digitalization, it becomes possible to chart a path to where you want to be. This review is likely to unearth foundational blocks that management was previously unaware of. By identifying those that exist, they can be leveraged as part of a digital strategy.
Such strategies, though, must incorporate emerging trends such as localization. Digitalization can play a big part in embracing this trend while maintaining profitability and growing market share. How? Consumers, more and more are searching for healthy ingredients that are locally sourced. They prefer to consume products to which they have a local or regional attachment. Digitalization enables this by bringing transparency to the supply chain. It allows the organization to demonstrate clearly where products and ingredients came from, what is in them and their precise age. By establishing a digital thread throughout the enterprise, characteristics like local sources and quality ingredients can be established with certainty. This can directly impact profit margins as consumers will pay more for the products they want.
Further, a digitalized supply chain provides agility to respond to changing preferences. A particular product may suddenly capture the imagination of the public. If it takes months to rearrange the supply chain to provide it, competitors will seize the initiative and capture market share. A digital enterprise can spot trends rapidly via advanced analytics, reconfigure the supply chain to accommodate changes and respond to market needs in time to boost productivity. Those that move slowly, on the other hand, may spend a fortune launching a new product line only to find that consumer tastes have shifted in yet another direction.
Risk, too, can be modeled and mitigated via digitalization. Inconsistencies that arise in the food manufacturing process can be spotted in time to greatly reduce the frequency and severity of product recalls. The digital thread makes food and beverage firms better equipped to institute total process improvement, eliminate serious errors, and validate recipes and new product lines through modeling.
There is no one tool, system or technology that can suddenly bring digitalization to the enterprise. It requires an entire digital ecosystem to bring about the transformation. A good place to start is with the right operating system. The Mindsphere cloud-based, open IoT operating system from Siemens assists businesses to harness the wealth of data generated within the supply chain and in the consumer sector via advanced analytics. Similarly, Siemens Teamcenter is the world’s most widely used product lifecycle management (PLM) software. It optimizes business processes throughout the product lifecycle and establishes a firm foundation for the digital enterprise.Have an Inquiry for Siemens about this article? Click Here >>