In the first of a two-part white paper, warehouse and logistics automation company Swisslog examines the challenges facing the food and beverage industry, and how automation can help companies remain competitive and adaptable. Senior sales consultant Arijit Biswas writes.
This article first appeared in the March edition of Food & Drink Business magazine.
Getting fresh food from farms, to distribution centres, to stores, to consumers, while meeting ever-changing consumer demands makes food and beverage supply chains one of the trickiest to manage profitably.
Further complicating this delicate supply chain are factors such as: volatile commodity pricing; inventory management that accounts for perishability; traceability, quality and safety; frequent new introductions; high demand uncertainty; complex manufacturing constraints; and environmental impacts of climate change.
This is the first in a two-part series on the changing nature of the food and beverage industry.
Dealing with volatile commodity pricing
When a consumer buys food at the supermarket, it may seem like the prices are steady week-to-week, because at that level, they generally are.
This is because companies have often hedged commodity prices to avoid being susceptible to the typical volatility of the industry.
In reality, these prices are fluctuating all the time, which can make it difficult for food and beverage processors and distributors to set price levels.
The price of grains, meats and a huge range of ingredients can change dramatically over time. These changes would affect every company that uses that ingredient as part of their product mix.
The uncertainty of high demand
In addition to pricing fluctuations affecting supply, there is also a high degree of uncertainty in demand for food and beverage products. Restaurants, pubs and clubs change menus to meet current trends, and consumers change their buying and eating habits regularly. The food and beverage industry is highly unpredictable in this area, so companies need to be as adaptable as possible.
Inventory management for perishability
One of the biggest challenges in the food and beverage industry is the perishability of goods such as fruit, vegetables, meat, poultry, fish and dairy. According to Deloitte, more than 30 per cent of all food produced is not eaten. Much is wasted or lost in production.
Traceability, quality, and safety
Traceability, quality, and safety are important in most industries, but because the end customer is consuming the product, the food and beverage industry is particularly aware of these qualities.
Research from the Centre for Food Integrity found that 65per cent of consumers want to know more about where their food comes from.
Further research from the Consumer Goods Forum and Futerra revealed that 79 per cent of Gen Z, age 22 and under, believe brands are never honest, or not honest enough, about environmental issues. From consumers aged 23 to 28,
66 per cent believe the same.
This is an area where automation technologies can provide measurable benefits to companies seeking stronger traceability and credibility.
Automated warehouse and distribution systems can be set up to provide end-to-end traceability on all food and beverage products.
Frequent new product introductions
Unlike some industries that manufacture the same product profitably and successfully for decades, the food and beverage industry is constantly innovating, evolving and changing, especially with new product introductions.
Warehousing and distribution systems need to be set up to constantly adapt to the introduction of new products, which may have totally different requirements to those in production.
They might need different storage temperatures, for example, or require a gentler handling process to protect product integrity.
High levels of perishability, the delicate nature of products and strict hygiene requirements place complex and demanding constraints on the manufacturing process for the food and beverage sector.
The most significant constraints are:
Time: for perishable goods, large volumes need to be manufactured and processed in short time periods.
Batch controlling – which can be managed by automated software – is essential to maintain consistent quality and reproducibility of production.
Temperature: many food and beverage products require specific temperature ranges to be maintained throughout the production, transport and storage cycles.
For the dairy industry, pasteurisation is a crucial process to maintaining product quality and shelf life. Warm-to-hot temperatures need to be maintained for consistent periods of time for pasteurisation to occur.
Other products need cold storage environments to maintain freshness and keep product integrity.
In these environments, automated technology can reduce the time people have to spend in sub-zero environments, where there are risks for prolonged exposure.
Process Control: Australia and New Zealand have strict legal standards for cleaning and hygienic processes, such as HACCP (Hazard Analysis Critical Control Point).
Growers and farmers are facing increasing challenges from unpredictable weather patterns and record temperatures, which can have drastic effects on crop yields, creating a ripple effects throughout the supply chain.
In its paper AI, Automation and Appetites: How Technology Will Feed the Future, Cognizant cites the dramatic effects of climate change on production and shows how automation and AI can be an effective countermeasure to unpredictable climate changes.
Cognizant’s paper says that for every one degree over pre-industrial levels that the Earth warms, wheat yield will fall six per cent.
“The challenge presented to farmers has led to some moving indoors. Innovative programs at MIT have already begun using automation and data analytics to program indoor farms that precisely manipulate indoor conditions to best grow herbs and vegetables,” it says.
Industry 4.0 has allowed food and beverage companies to optimise supply chain management with new tools for better demand planning, supplier management and inventory control.
The food and beverage industry is highly susceptible to outside forces causing changes in supply, demand and choice.
It is an industry that must constantly think on its feet in order to remain competitive and profitable.
The challenges identified in this white paper are not going away. They may transform in nature, but they will still place the burden on food and beverage companies to constantly adapt.
Part two of this paper will discuss the benefits of using automation to stay agile and competitive.
Arijit Biswas is the senior sales consultant for the food and beverage sector, Swisslog Australia. he has a master’s degree in engineering sciences from the University of Queensland.