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IT is the New Hot Flavor in Food and Beverage

Posted by Dave Kravitt

Industrial Internet of Things, Manufacturing 4.0, Smart Manufacturing, The Fourth Industrial Revolution and Industry 4.0 — these are all pseudonyms that generally refer to the same concept — technology that enables connected operations and production systems that can predict or adapt to changes in the facility or broader environment to provide a better outcome. It is a mouthful with powerful implications. The advantages of a full connected production and delivery system with automated data collection is very appealing to those in the food and beverage industry.  

food and beverageThe inner workings of the food and beverage industry are a complex web of traditional systems and new digital technologies. Companies are forced to balance consumer demand for more personalized and healthier products with supermarkets requiring a large volume at lower prices.  Added to this dichotomy is the growing regulatory oversight. The challenge is, how do you produce 10,000 perfect loaves of gluten-free, nut-free bread and deliver to their final destination on-time at a lower cost than you did three months ago? 

This is where innovation can play a significant role in reshaping the winners and losers. The disruptive effect of technology is wide-reaching. It has radically reshaped how consumers shop, become aware of new products and engage with brands. As digital transformation reaches further, it is reshaping business processes and changing marketplace dynamics.

The RSM Food and Beverage Monitor found that nearly 60 percent of the thriving companies they surveyed had implemented a big data solution to understand their internal ecosystem better. In a marketplace where the difference in the oven temperature of a few degrees is the difference between 10,000 perfect loaves of bread and 10,000 burnt loaves, information is vital. The magic that is now starting to transform production lines is the intersection of older legacy systems with these new digital solutions. When your systems can adjust oven temperature and conveyor speed based on Big Data analysis of customer preferred product color and moisture in real time without employee invention, digital transformation starts to take hold.

Equally important is the frontend. Sales must be able to take orders anywhere and at any time, accurately. This ranges from online ordering to commercial delivery drivers being able to place new orders at the customers' location. This is a hyper-competitive marketplace where customer service and transparency are important considerations for many businesses.  

What would a new system look like if you to start over and create one addressing all of these concerns? Some of the features uniquely required for the Food and Beverage (F&B) include:

  • Date functionality.  Products in F&B are typically perishable and often have short shelf lives. Companies must track, calculate and publish several date variables, including manufacture date, packed date, best before date, sell by date and expiration date.  These dates are critical in the sales process, so customers with longer delivery times do not get soon to expire merchandise.  
  • Catch weights.  Multiple, variable units of measure (UOM) must be defined and tracked within the system.  Companies may manufacture by weight or volume and simultaneously in packs, cases or drums, for example.  Further, they may buy or sell in one unit of measure yet price in another. Dual UOM tracking allows users to see orders, invoices, and inventory in two units.
  • Pricing & Promotions.  Margins in F&B are notoriously thin, requiring tight management of a myriad of price lists, discounts, contracts, promotions, offers and volume discounts, some of which are date controlled ensuring the business remains profitable. Products, product lines, customers, customer types and other variables may be used to assign pricing when placing orders. Pricing must always be correct and consistent. If not, you will face penalties from the distributor or retailer and lower customer satisfaction.
  • Manufacturing. Food processors must continuously balance the demands of fluctuating market and customer requirements with operational efficiencies, asset utilization and profitability while also ensuring safety compliance and traceability. The F&B marketplace often relies on product data management and product lifecycle management systems. These systems help develop and maintain formulas, packaging, the transfer to manufacturing and quality systems.

The F&B industry is forced to deal with a seemingly never-ending list of variables that could impact the final product. To control the outcome, various manual and automated data collection tasks are completed and then tracked with lot or batch numbers.  These critical lot numbers must be traceable from each of the raw material lot numbers, specific processing parameters, packaging material lot numbers and eventually to the customer ship-to. F&B manufacturers produce goods that adhere to the package labels. Certificates of Analysis (COA) are also key for all materials coming into the facility as well as products leaving.

Just when you think the complexity ends, it only increases with a new set of variables as products begin making their way to market.

  • Stock & Distribution.  In the F&B industry, accurate warehouse locations and quantities are augmented with shelf-life, sell-by dates and catch weights necessitating real-time visibility of inventory and stock movements. Systems must address stock rotations, picking rules such as first-expired-first-out (FEFO) and other requirements caused by perishable goods. Products must not only be delivered on-time, but customer service must be able to provide retailers accurate delivery dates and times so they can plan accordingly.  
  • Returns. Managing returns establishes efficient routines and controls to promote accuracy and higher customer satisfaction.  Systems must be in place to track return goods from a pick-up request at the customer through to credit in accounts receivable.
  • Product Recall.  Company reputation and survival are at stake when it comes to product recalls.  Systems must be in place to rapidly and accurately identify products impacted, define recall windows, isolate and quarantine affected products, notify customers and possibly government authorities.  Manual systems no longer can address these requirements and manufacturing systems must be in place to not only record relevant lot information but to be able to act upon a recall as well.
  • Purchasing.  The system that manages purchasing must address previously mentioned features unique to F&B such as lot control and tracking, dual UOM’s, shelf-life management, etc. Often the product variations desired by research and development in F&B necessitate more suppliers with a greater diversity of raw materials to support desired product proliferation and shelf space expansion at the retailer.

It is understandable why those in the F&B industry are turning to technology for help. All of the factors outlined are just the tip of the iceberg. Companies that can navigate these processes smoothly and adjust to variances with limited employee intervention will ultimately succeed. With so many factors in motion and the cascading effect of even one date change, it is worth taking a hard look at the technology investments available today.

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Tags: Maximize ERP Investment, Enterprise Planning