Mike Edgett examines the need for food companies to demonstrate increasing levels of agility in responding to market changes
In the face of intense price competition and ever-changing consumer tastes, food and beverage companies are under increasing pressure to slash costs while introducing new, ‘improved’ products to market much faster than ever before, something that’s easier said than done, even for the global brands.
For an industry that’s still reeling from 2013’s horsemeat scandal, the perfect storm of price competition, fast-changing consumer and retailer demands, often complex manufacturing processes, multifaceted supply chains, not to mention everchanging health and safety requirements, means that companies operating in this sector are under constant pressure to respond quickly and effectively. For food and beverage companies, never has it been more important to ensure a business has the ability and the agility to implement and manage successful change.
Technology is key
So many and varied are the factors that need to be taken into account when contemplating even the most seemingly innocuous of changes, technology is key. And, while tempting though it may be to rely on the familiar systems, which have steered the organisation this far, this is often where food and beverage companies are failing.
Food companies rely on technology to optimise performance and drive efficiencies, but very few make sure their software is efficient as possible. ERP, for example, has changed beyond recognition in recent years, as one-sizefits- all solutions are no longer tolerated, instead being replaced by solutions which are designed specifically for the needs and nuances of food and beverage companies – crucially, with scale and flexibility in abundance. These solutions have optional modules to address unique industry requirements such as the all-important traceability, new product introductions, and complex scheduling, to name but a few, helping to provide a business with the necessary flexibility and agility to respond to industry challenges.
Recipe for success
With the right solution in place, food businesses can cut costs without sacrificing quality, a common necessity in an increasingly competitive marketplace. The levels of complexity that are so prevalent in food and beverage manufacturing mean that solutions are needed that that can handle recipes to such a level of detail that, for example, if an ingredient with a slightly different specification is used in a product, it can re-calculate the amount of that ingredient as well as others in the formula that will be needed to maintain the finished product specification and quality. This allows manufacturers to not only track precise costs but enables the provision of accurate nutritional information, providing that all-important visibility for both retailers and consumers relatively easily.
It’s not just recipe reformulations that business management systems can help with. Unilever’s recent announcement that it will be cutting the size of British ice-creams including Magnum, Cornetto, Ben & Jerry’s and Feast by up to a third to bring them all under 250 calories, makes them just the latest in a list of confectionary companies who are reducing the size of their snacks in response to the UK government’s antiobesity drive. With some cynics regarding these types of changes by manufacturers as merely taking the opportunity to charge more for less, in reality these seemingly simple changes bring with them a whole host of other modifications – new packaging, new labelling, new recipes, new storage requirements, new pricing structure, to name but a few. However, with the optimum solution in place, these can all be managed effectively.
Best laid plans
More than any other industry, the food and beverage sector is reliant on the accuracy of its forecasting and demand planning. Obviously seasonality has a big role to play for many manufacturers but increasingly aggressive pricing and promotion strategies across the board mean that many suppliers find themselves in the unenviable position of having to change tack at lightning speed, running the risk of falling foul of the competition if not.
Traceability is another area where the right solution can mean the differencebetween success and failure, with the inability to facilitate a product recall within stringent timeframes, for example, spelling disaster for a food business. To try and achieve full batch traceability with manual processes would be like looking for a needle in an enormous haystack. The right business management system can more than handle all the necessary information (to include batch number, department, date, product characteristics, ingredients, testing, nutritional information, best before date, for example), helping manufacturers to achieve that allimportant BRC grade A accreditation when it comes to traceability, improving control and visibility over production, products and manufacturing and ensuring that vital speedy response to compliance requirements.
For optimum business agility, food companies need a technology solution that provides all the functionality that’s critical to their specific business needs within a unified suite. A business with numerous disparate, industry-generic, siloed applications just can’t hope to compete with a competitor whose business systems provide enterprise-wise visibility at the click of a mouse. It’s only with this holistic view of operations that a business can hope to refine manufacturing to drive down costs and increase profitability.
The ability to deal with changes to the business itself is also paramount in a sector of frequent mergers, acquisitions and partnerships. If a food company is to grow, it needs a system with the ability to keep pace with this growth. A technology might be more than capable of dealing with domestic growth, but what about the additional functionality required when moving on to an international stage? Multiple currency and multiple channel support are part and parcel of the best food and beverage-specific solutions out there, speeding-up and easing the transition from the domestic to the international stage.
Today, food and beverage businesses across the board are inundated with market pressures from all angles. Key to their survival is the ability to adapt and evolve quickly and effectively in response to changing market requirements. Those with the right tools in place will go from strength-to-strength, increasing profitability and maintaining growth, even in an often hostile business environment. For those whose systems aren’t up to the challenge, now is definitely the time for a comprehensive rethink.
Mike Edgett is industry and solution strategy director, process manufacturing, Infor. With over 14,000 employees and customers in more than 200 countries and territories, Infor automates critical processes for industries including healthcare, manufacturing, fashion, wholesale distribution, hospitality, retail, and public sector. Infor software helps eliminate the need for costly customisation through embedded deep industry domain expertise.