How to address supply chain complexity in food & beverage (2/2)
How to address supply chain complexity in food & beverage (2/2)
Wed, 03/18/2020 – 06:26
- Concluding this 2-part series, Infor’s Monica Truelsch explains how next-generation technologies can help food & beverage companies meet supply chain challenges
For food and beverage companies, the frenetic pace of technology growth in the modern world is, itself, a contributor to the supply chain complexity they must wrestle with daily, alongside the global visibility and volatility that I discussed in part 1 of this series. Since that first article was published, the ongoing response to coronavirus has given us a powerful example of supply chain volatility that continues to reverberate around the world. What is the contribution technology can make?
To offer meaningful guidance on making the best bets in new technology investments, it’s helpful to segment companies by where they fall on the spectrum of farm-to-table. This helps us categorize some of the technology options available to each segment.
If there is a universally applicable tech category that all food and beverage businesses – from farming operations to grocery chains – should invest in, it would be a web strategy. This facilitates capturing the voice of the customer, building brand loyalty and monitoring consumer trends and viral topics that can signal sharp turns in product demand, either up or down.
Dramatic shifts in consumer tastes and perceptions can occur more often and more rapidly than ever before, due to the information economy, social media influence and 24-hour news cycles. The net sales growth realized from a clever, multi-million-dollar advertising campaign for a food product can evaporate overnight on the heels of a product contamination scare, food recall, damaging nutritional study, or even a celebrity influencer rant. On the plus side, that celebrity influencer can also generate an unexpected spike in demand for a product. Overnight success comes with its own set of challenges, from scaling production effectively, to maintaining quality vigilance and profitability discipline as the business expands.
While building situational awareness of developing consumer trends can even help farmers with decisions about what and how much to plant, it is the consistent operational elements of food and beverage supply chains that have much to gain from advancing technologies. The right investments can help producers and retailers counter negative market trends with greater traceability and verifiable quality assurance processes. Technology can deliver cost reduction and productivity increases and can justify rapid financial approval for new initiatives.
With limited space to cover the entire breadth of promising next-gen technologies, here is an abbreviated guide to the top five choices food and beverage companies should consider.
1. Cloud-based software – almost always – and network solutions wherever possible
Aside from some extremely response-time dependent machine control technologies, virtually any type of software investment to be considered for supply chain needs today should be a SaaS (software-as-a-service) or cloud-based solution, rather than one installed on-premise. Feature richness, software responsiveness, data security, future-proofing, lower TCO (total cost of ownership), connectivity, flexibility – these are all proven benefits from modern SaaS solutions. For supply chain applications, these solutions can include supplier management or direct procurement and finance capabilities, transportation management, warehouse management, global trade management, enterprise asset management, real-time transportation visibility, demand planning, network inventory management and more. If the enterprise manages several production facilities, then cloud-based enterprise asset management solutions offer tremendous advantages. They assure consistent levels of production uptime, appropriate maintenance schedules, equipment productivity and TCO benefits that can materially impact food and beverage business profitability.
Beyond SaaS or cloud availability of specific software, consider the network aspect of various supply chain processes. For supplier management and direct procurement, for global trade management, network inventory (goods on order, in transit and at rest in stocking locations), and real-time transportation visibility, a solution that is part of an extensive, multi-enterprise business network, which includes other companies in your supply chain ecosystem, has powerful productivity and visibility advantages over non-network solutions. Easier supplier and carrier connectivity, data exchange, order and issue collaboration, speedy time-to-value, synchronized planning, agile sense-and-respond, partner performance monitoring and comparison – many market-leading capabilities that distinguish agile and successful food and beverage companies today are the outcome of network solution approaches rather than ERP-centric software initiatives.
2. Cold-chain tracking and traceability
If your product quality is dependent on tight temperature control, then investing in technologies, which enable you to verify temperature exposure all the way from plant to store, can yield major payoffs in reducing rejected product, improving carrier selection and service performance, as well as reducing product recalls. Whether moving fresh seafood across oceans by air freight, or premium ice cream by dedicated truck fleets, the technology options available vary widely.
From disposable temperature loggers, which travel with products and provide after-the-fact evidence of temperature compliance or excursions, to wireless temperature monitoring devices (TMDs), which can relay real-time problem signals as they develop (with the possibility of correction before the product is compromised), your choices are extensive and will likely depend on the value of your products.
Your choice of carrier and container or trailer for product shipments may be impacted by technology, as well. Leading refrigerated trucking carriers now offer extensive trailer monitoring and telematics capabilities that can provide shippers with real-time visibility to trailer temperatures while in transit, at rest and during loading and unloading activities. Refrigerated shipping containers are becoming increasingly “smart,” as well, with more sensitive internal temperature monitoring and control systems, wireless tracking with real-time temperature readings and more. Because the technology investment in reefer monitoring and control can be spread across many shipments and many customers, working with carriers or 3PLs (third party logistics providers) that offer sophisticated temperature tracking capabilities can be far more economical for food and beverage businesses than product-level sensors and IoT (Internet of Things) devices. Where carrier partnerships for higher cold-chain performance are harder to leverage, food and beverage companies may have little choice but to monitor at the pallet level to protect their products.
Whichever route you choose for cold-chain monitoring, don’t forget the challenges of traceability, the new food safety imperative affecting most of the global industry. The promise of granular product journey tracking and temperature monitoring – from origin through all the nodes and custody hand-offs in the supply chain – is now within technological reach. But the volumes of data generated by these tracking and monitoring solutions must be held and stored for ready access in the case of potential product quarantine and recall situations. Lots or batches aren’t just monitored through the plant production process, but they must be tracked through warehouse locations, carrier terminals and container facilities, as well as over-the-road. Traceability solutions must offer the ability to capture and present business context with lot or batch identification, even carton tracking, up to order levels for production and consignee details – and down through transportation execution systems, so that product journey tracking data is properly associated.
When the need for product traceability arises for a food or beverage producer today, it is usually urgent, and the business can’t afford to lose time trying to piece together fragmented product information regarding production, storage and transport from disparate storage systems. Invest in traceability solutions that increase the speed at which the organization can effectively and surgically respond to developing product emergencies.
3. Source integrity and visibility solutions
In addition to cold-chain assurance, one of the major trends in food and beverage supply chains involves sourcing and ingredient transparency and certification. “Certified GMO-free” or “humane-certified” or “cage-free” involves levels of origin and supplier management, documentation and compliance monitoring that go well beyond what is needed to stamp a product as “gluten-free.”
With similarities to consumer-driven trends in the retail and fashion industries, even jewelry, the food and beverage industry is challenged to engage with suppliers ever further upstream to validate that ingredients, raw foods and processed foods have been farmed or fished or produced in a manner that conforms to particular consumer preferences. This means more than marketing labels. Consumers expect the food and beverage brands they choose to be able to demonstrate their commitments to sustainable sourcing or organically raised foods, and that often means frequent on-site inspections, third-party compliance or quality assurance services. Just as fashion brands aggressively protect their reputations and customer loyalty by policing their overseas suppliers for suspected child labor or worker exploitation, food and beverage companies must invest more in monitoring their suppliers to maintain consumer trust and approval of their brands.
If you are alarmed by the prospect of daunting volumes of certification documents, from these programs, clogging your records warehouses, you should be. Inspection, qualification, and certification processes should all be digitalized today, to ensure that data is both immediately accessible, unlikely to be tampered with, and subject to as little manual processing as possible. Like in the fashion industry, inspectors should carry tablets running inspection apps, not clipboards. Data should be entered once, at the source, by an authorized agent, so it can be digitally reviewed, stored and shared across the enterprise and supply chain ecosystem, as required.
Any digital inspection or certification process can be enhanced with on-location digital photographs, to support non-compliance reports or to validate that requested changes and improvements have been made. When the mobile apps created for inspectors sync up field data directly to a manufacturer’s supply chain management software, through APIs or other integrations, food and beverage businesses get near real-time verification of supplier compliance. This speeds the receiving and acceptance of raw materials for production lines or other foods for consumer packaging and distribution.
Whether your compliance-tracking solution runs on blockchain or not is irrelevant – modern distributed database applications and cloud supply chain networks can already offer highly secure user authentication, data intrusion protection, document access and change audit trails to prevent data tampering. Trust, but verify, the human side of inspection and certification processes, because errors or deliberate misinformation can enter any traceability system, even blockchains, at the point where people enter data originally.
4. Sustainable packaging
This is arguably a materials technology recommendation, not software technology guidance, but the business impact of growing “plastic bans” in many communities around the world – and general consumer backlash against the excessive waste generated by “convenience” packaging – should not be ignored. Switching over plant facilities and production lines to use unconventional packaging materials, whether recyclable, re-usable or largely bio-degradable, will mean lots of testing for durability and fine-tuning in factory processing. Extensive product monitoring also will be required during transport activities, in retail inventory environments, store shelves and even consumer homes to understand how new materials are performing. A range of supply chain processes and cost structures may be affected by packaging changes. Moving from lightweight plastic containers to recyclable glass jars or bottles means higher shipping weights and costs for the same food and beverage volumes. Additional carton padding or new handling and storage procedures, to reduce breakage, will be needed, as well as product line modifications. To assist companies during these packaging material transitions, scenario modeling software can be invaluable to explore various financial impacts, and more modern TMS (transportation management system) applications can help optimize heavier weight shipments with better classification, consolidation and transport planning to mitigate increased freight costs.
5. Industry-specific software solutions
Companies that produce beer, wine or spirits, and companies that produce baby food, pre-packaged salads or pet food can be often be lumped together under the food and beverage category because they all face many of the same retail shelf space and consumer demand challenges. But, as individual brands or global producers with complex supply chains that may extend around the globe, their technology needs can be radically different. We’ve tried to address next-generation technology options here that are broadly useful across the food and beverage industry, but the final recommendation is to consider best-of-breed technology solutions developed for the unique characteristics of your products. Brewing beer is a radically different process from coffee pod production. Sanitation requirements and ingredient quality in baby food processing are vastly more stringent than for dog food production. Producing and packaging salsa is quite unlike getting baked goods to market while still fresh.
Food and beverage companies should partner with software providers that have proven expertise with the particular challenges in their respective product domains, where unique supply chain and production requirements come into play. How warehouses are managed or how transportation is executed involves many commonalities across very different industries, and companies can rightly expect to have a breadth of technology providers to choose from. More granular technology choices are necessary for food or beverage manufacturing, production scheduling, batch processing and even enterprise asset management needs. If relevant industry experience and specialized support is available from an ERP or MRP technology provider, which also offers tightly integrated solutions to support additional supply chain needs and functions, that lowers the buying company’s risk and cost exposure from managing custom integration efforts on their own. Technology support is streamlined and TCO and ROI become much easier to measure and control.
Each food and beverage company approaches the challenges of today’s supply chain complexity with a different legacy landscape of customized business systems, production software, financial solutions and ERP investments. How they prioritize new technology initiatives will depend on their market strategies, competitive positions and capital availability, as well as their appetite for, and ability to manage risk, change and potential failure.
What is undeniable about new technology is that it is needed for businesses to thrive, or even to survive. The right technology investments will help drive down costs or scale up production with less labor, or enable companies to pursue profitable new markets and consumer cohorts. Embrace change, don’t be afraid of it. Make small bets and test new technologies with your most enthusiastic or most tolerant customers. Run with what works, drop what doesn’t, and move on. Flexibility and agility in food and beverage supply chains are the new survival skills that will determine how your company fares in the unforgiving natural selection process that modern consumer markets have become.