The COVID pandemic acted as a forcing function for the food and beverage industry to speed up their digital transformation. It was a perfect storm that revealed all of the cracks in the industry’s foundation – the rigidity of supply chains and the precariousness of the labor situation, to name just two. The rules of the game changed practically overnight, and many manufacturing operations broke because they weren’t flexible enough to bend.
As a result, manufacturers started taking a close look at their operations and rethinking them with an eye toward increasing agility and resilience. Now, macroeconomic uncertainty is reinforcing the need for businesses to prepare for the unexpected. This article takes a deep dive into what agility and resilience mean for the F&B industry, as well as how digital technologies can help manufacturers achieve these goals and, in doing so, future-proof their organizations.
What does it mean to be agile and resilient?
It was very easy during the pandemic to see what happens when food and beverage operations aren’t agile or resilient: grocery shelves were empty. A USDA study found that median stock-out rates of fixed-weight items increased roughly 130% following March 15, 2020. The categories with the highest stock-out rates included meat and poultry products, convenience and frozen foods, baby formula, and carbonated beverages. The reasons for these stock-outs ranged from ingredient and packaging materials shortages to a lack of truck drivers to transport product, to consumers stockpiling non-perishables, to manufacturers that normally supply for foodservice being unable to transform their operations for retail.
But what does it mean to be agile and resilient?
These two qualities are often talked about in the same breath, as if they’re the same thing. But there are some key differences.
The National Institute of Standards and Technology defines them like this:
- “Agility refers to the ability to make rapid change and achieve flexibility in operations (1) in response to changes in the external environment, or (2) to take advantage of an immediate opportunity.”
- “Resilience refers to the ability to (1) anticipate, prepare for, and recover from disasters, emergencies, and other disruptions, and (2) protect and enhance workforce and customer engagement, supply-network and financial performance, organizational productivity, and community well-being when disruption occurs.”
Steve Banker, VP of supply chain services at ARC Advisory Group, offers a colorful description:
- “An agile company is like a halfback in football that can dart quickly to the left or the right depending on the opening.”
- “A resilient company is like a boxer that can take hard punches and keep on battling.”
Agility is an action, or the ability to take action; resilience is a strategy, or a business mindset. You have to be agile in order to be resilient.
What agile, resilient manufacturing operations look like?
So, in practical terms, what does an agile and resilient food and beverage manufacturer look like?
Here are some key hallmarks:
- A diverse supply chain. Having multiple suppliers for each key material means that operations can continue even if a specific supplier is out of commission. Your supply chain should not have a single point of failure.
- Flexible formulations. In 2022, nearly 62% of F&B manufacturers said that they had modified six or more recipes or product formulations due to higher prices. Knowing where these types of opportunities are can help you respond quickly when the need arises.
- Real-time end-to-end visibility into operations. You should be able to see at a glance what’s going on not just in the plant, but in the warehouse, the distribution center, on the road, etc., across your entire ecosystem. This data should be connected, not siloed.
- Predictive capabilities. Having a clear picture of the present is good, but being able to look into the future is even better. Robust data and analytics can help manufacturers anticipate changes in consumer demand, identify potential supply chain disruptions, optimize production schedules, and perform the maintenance required to keep their lines running. Ideally, internal data is supplemented by data from suppliers, customers, and other sources, which can improve the accuracy of predictions and inform planning.
- Automation. Automation in the food and beverage industry takes many forms, from machine vision systems to help with quality control to robots on processing and packaging lines. As a whole, automation reduces the industry’s reliance on the types of line workers that have been in short supply for decades and will be for decades to come.
The role of digital technologies in powering agility and resilience
Digital transformation is the key to food and beverage manufacturers becoming agile, resilient organizations. Used correctly, almost any digital technology can contribute to this effort. Here, we’ll look at a few of the critical solutions F&B companies should consider.
Digital twins
A digital twin is a virtual replica of a physical system, such as a manufacturing plant or an entire supply chain. By using digital twins, manufacturers can simulate different scenarios and test the impact of different decisions before implementing them in the real world. This can help manufacturers make more informed decisions, reduce the risk of costly mistakes, and become more responsive to changing market conditions.
In a whitepaper on “Building Operational Resilience and Agility,” Deloitte outlined how an India-based dairy cooperative used a digital twin to increase their revenue by $98 million during COVID lockdowns:
First, they had partnered with a technology provider to create a digital twin of their supply chain ecosystem, including supplier locations, plants, and customers / retailers. Using this system, they could see the capacity at which plants were operating, how many trucks were operational, and any idle capacity. They could also easily track customer demand, and they saw the demand for cheese and condensed milk increase sharply.
To meet this demand, the company started operating at 115% capacity. It used the digital twin to identify idle capacity and distribute the load. It then started using rail transport, which was considered an essential service, and secured partnerships with multiple e-commerce retailers. In addition, they increased advertising.
According to Deloitte, the digital twin allowed the company to “reconfigure its agile supply chain ecosystem…to sell more products and manage crises better.”
Cloud computing
When I started writing about the food industry back in 2015, many people I spoke with were hesitant about cloud computing. They were concerned with security risks and protecting their proprietary information. Today, the cloud is widely considered to be more secure than on-premises software.
EY calls cloud computing “foundational for companies that are ambitious about moving and transforming at speed, meeting elevated customer expectations, and future-proofing their business.” This is largely because of its speed and ability to connect multiple systems, providing the real-time end-to-end visibility that is a hallmark of an agile and resilient operation.
Other Industry 4.0 technologies
Digital twins and cloud computing fall under the umbrella of Industry 4.0. There are several other technologies in this category, and a group of researchers recently performed an analysis to identify which technologies have a direct impact on various supply chain resilience elements such as flexibility, redundancy, visibility, robustness, and information sharing.
Their conclusion? All of them contribute to resilience. For agility specifically, these are the technologies they identify: Internet of Things (e.g., sensors), cloud computing, big data analytics, artificial intelligence, digital twins, blockchain, industrial robotics, and additive manufacturing.
Enterprise resource planning (ERP)
ERP is one of the best tools in a food and beverage manufacturer’s toolbox for informing day-to-day operations because it supports automation and processes across the entire business and provides real-time data to inform decision-making. According to ECI Software Solutions’ 2021 State of Manufacturing Digital Transformation survey, nearly 95% of manufacturers that use ERP say it helped them manage the impacts of the pandemic.
In a blog post, ECI Software Solutions highlighted four ERP trends that help manufacturers stay resilient:
- The no-one-size-fits-all world. Cloud-based ERP systems are modular, so manufacturers can select and deploy only the applications they need. These modules can include material resource planning (MRP), production capacity planning, lot tracking and traceability, quality control testing, customer relationship management, and much more.
- Intelligent and mobile, for time management. ERP is constantly evolving and today includes many artificial intelligence and machine learning tools. Paired with mobile functionality, these tools provide data that can quickly be turned into actionable insights.
- Dealing with the supply chain. To meet the need for greater overall visibility into a company’s operations, ERP is increasingly integrating with supply chain management systems.
- ERP and 3DP advancing together. 3D printing food may still be in the early stages, but there are many other uses of 3DP in the food and beverage industry, for example, printing spare parts for machines, innovative packaging designs, or robotic grippers.
How to future-proof your business by going digital
It’s clear that food and beverage manufacturers need to harness the power of digital technologies to future-proof their organizations. So, how do you do it? Just like with ERP, there’s no one-size-fits-all answer. Every company’s journey will be different.
Here are five recommendations from Deloitte for companies to target their digital transformation efforts:
- Take a “virtual first” perspective. This means re-thinking your assumptions to determine where “physical can become optional.”
- Find agility and extensibility with the cloud. Migrating your data to the cloud will hope you standardize, automate, and scale while also becoming more agile.
- Automate decision-making where you can and where it counts. Look for tasks that are done repeatedly but don’t require much human oversight. By automating them, you can free up employees’ time to work on more value-adding tasks.
- Amplify product/service innovation. Cloud computing, AI, data analytics – all of these can support faster new product development while also lowering risk.
- Become an accelerator. Once you’ve progressed on your digital transformation journey, you can start leveraging cloud solutions that have common services, like APIs, to enable better performance and innovation.
Becoming truly agile and resilient requires food and beverage manufacturers to think about their operations a little differently than they did 10 or 20 years ago. By looking at their entire business ecosystem with an eye toward preparing for the unexpected, companies can ensure the ability to quickly adapt to changing circumstances (agility), which will support future-proofing, no matter what the future might bring (resilience). Embracing the digital transformation is the only way the industry will be able to reach this lofty goal.
Originally Published in Food Industry Executive
