Why the Dynamic Food & Beverage Industry Needs Industry 4.0

Summary

While many of the product categories in the food & beverage industry might appear to be mature and stable, this is certainly not the case.  Take milk for example.  Domesticated cows started providing milk for human consumption approximately 9,000 years ago[1].  Not much changed in grocery stores until about 50 years ago, when skim (fat-free) milk made its way into the grocery store cooler, along with regular (whole), and chocolate-flavored.  Fast forward to today, where, including the non-dairy milks, today’s supermarkets have dozens of types, not including regional differences.  After 9,000 years of stability worldwide, milk has become a complex and dynamic product category.

Another category, bread, has an even longer history, and now has even far greater variety. 

Market Forces Drive Product Proliferation

Product proliferation and volatility are apparent across much of the rest of the grocery store as well.  Today’s consumers demand more variety, and tastier and healthier products.  This includes trends like low-sugar, locally grown, gluten-free, non-dairy, nut-free hypoallergenic foods, and more.  They also choose products that offer increased convenience, usual-ly via specific packaging and/or preparation that fits their lifestyle.  These and other emerging consumer needs form new market segments that drive further product proliferation. Meanwhile, fierce competition forces the opposing need for increasing speed and efficiency.  In addition, companies must adapt to changing government regulations.  How is a supplier to survive in this business environment?

Digital Disruption

Technology has had a transformative effect on most industries.  Digital disruption has and continues to reshape how consumers become aware of products, engage with companies, and make purchases. Transparency has increased radically, particularly in the food & beverage sector.  Bad reviews and commentary in social networks will damage the brand and reduce revenue.  Digital disruption goes beyond communications, and includes applying technology to reshape business processes to prevent problems in the first place and respond swiftly when they do occur.

The Role for Industry 4.0

Industry 4.0 involves modularization, data exchange, and business process automation throughout manufacturing and the supply chain to improve overall operational performance for a company and its partners (the “extended enterprise”).  The technologies start with industrial IoT, cloud computing, analytics, machine learning, and cyber-physical systems and extend to many other technologies.  These range from drones to blockchain distributed databases to enhance execution and effectiveness.  Originated in Germany, Industry 4.0 has become a strategy for improving manufacturing performance with global recognition and support - including in the food & beverage industry.

Improving Execution and Compliance in Food & Beverage

Improving execution has a few major themes.  First, it involves reducing labor, materials, and energy costs.  A second theme involves increased flexibility and agility to meet changing production schedules for on-time shipments with reduced inventory.  A third monitors current conditions, identifies emerging problems, and provides alerts so problems are resolved before mishaps occur.  The technologies associated with Industry 4.0 have been applied to improve operational performance in several areas.

Production: Dreaded unplanned downtime, which interrupts production, has several compounding effects.  First, the associated people are idle with lost productivity.  Second, the work-in-process (WIP) inventory must often be scrapped causing waste – particularly in the batch process area.  Third, missed shipments cause both customer satisfaction issues and lost revenues.  The Industry 4.0 strategy mitigates this by using IoT and analytics for predictive maintenance.  The equipment’s condition is monitored, and early problem detection sends an alert well before failure.  Maintenance and/or repairs are scheduled and made before a failure stops production.

Supply Chain: Throughout the supply chain, goods can be damaged by temperature, shock, or long delays.  An approach to identify a problem has been to put a sensor and recording device in the truck with the goods.  Only after the goods are received is the device checked, which can lead to contention over who is at fault and liable for any damages.  Goods damaged in transit often result in missed production schedules, missed product deliveries, and/or lost revenues.  With an Industry 4.0 approach, the sensor is continuously monitored via the cellular network with alerts to warn people before damage occurs to the goods. 

Energy management: An Industry 4.0 approach helps control energy costs in several different ways.  When multiple electric motors are turned on at the same time (like with fans or compressors), the combined power draw will surge, and the peak can raise the company’s electric rate for the month.  Using an Industry 4.0 strategy to sequence the motors avoids the surge and increased costs.  Also, similar pieces of equipment can have different energy efficiencies – HVAC equipment, for example.  By monitoring efficiency, the system can defer to the most efficient piece to reduce energy costs.

Regulatory compliance: In 2011, the Center for Disease Control and Prevention (CDC) estimated that 48 million people in the US get sick, and 3,000 people die of food-borne diseases each year.  This led to approval of the FDA Food Safety Modernization Act (FSMA), which enables the FDA to strengthen the food safety system.  An Industry 4.0 strategy helps companies reduce the costs of complying with this, and similar regulations.

Brand management: Brand management includes responding to issues in a manner that mitigates long-term damage to the image of the product and the company.  Social networking and the short news cycle causes bad news to spread quickly, which drives the need for a fast and credible response to food safety or other sensitive issues.  Having better visibility into the supply chain with an Industry 4.0 approach provides access to reliable information that facilitates an appropriate and effective response. Of course, applying the monitoring and predictive measures goes a long way toward preventing the problem from occurring in the first place.

Infosys Knows This Space Well

Infosys is a global leader in consulting and technology services. It has helped clients in 45 countries create and execute their digital transformation strategies, including providing expert support for engineering, application development, knowledge management, business process management, and Industry 4.0 implementations.  The Industry 4.0 initiatives provide business value to customers by increasing the topline with new products and services and improving the bottom line through greater efficiencies across the value chain.  According to Infosys executives, the company helps its clients in the food & beverage and many other industries find the right problems to solve, and then solve them effectively.  Areas of focus have included enabling real-time factory visibility, building traceability from raw materials to finished products, instituting condition-based predictive maintenance, implementing energy efficiency, and enhancing customer experience.  Successful projects in the food & beverage industry include:

• Efficient data collection using a distributed sensor network across the value chain including harvest, storage, handling and processing to improve quality, traceability and energy efficiency in production.
• Smart mobile applications for quality, inspection, maintenance and increased adherence to stringent food safety norms.  This also enables strong collaboration across quality assurance teams for regulatory issues and quality control.
• Augmented Reality (AR) that enables faster mean-time-to-repair and first-time-fix-rate for maintenance of production machinery.  AR is also being used for collaboration and training in manufacturing, quality, packaging and logistics.

Conclusion

The food and beverage industry, which has been around in some manner or other for perhaps 10,000 years or more, has entered a new, particularly dynamic phase, resulting in lost revenues and bankruptcy for participants that respond slowly or ineffectively.  Industry 4.0 improves supply chain efficiency and the four major components of asset efficiency: operations, maintenance, energy, and information.[2]  Food & beverage companies that apply the right Industry 4.0 strategies, are likely to be the ones that not only survive in this environment, but also thrive with improved operating performance, growing market share, and higher shareholder value.

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Keywords: Food & Beverage, Product Proliferation, Digital Disruption, Industry 4.0, ARC Advisory Group.