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Modernise, Optimise, Strategise: How to Thrive During Food & Beverage Market Turbulence
Modernise, Optimise, Strategise: How to Thrive During Food & Beverage Market Turbulence
23 Jun 2022Aptean Staff Writer
Protecting Profits Under Pressure
The food and beverage industry is vulnerable to external pressure – and in recent years we’ve seen how extreme these pressures can be.
From Brexit and the global pandemic to rising inflation and supply chain bottlenecks, uncontrollable events are affecting every element of the manufacturing process. And amid these market disruptions, food & beverage companies are still trying to meet the ongoing challenge of keeping pace with consumer demands and producing compliant products.
When the pressure’s on, protecting profit margins and maintaining growth becomes critical. But how can your business achieve this when trading conditions are constantly changing?
The answer lies in increasing your operational agility. By enabling your workforce to understand the impact of market influences quicker and clearer, and using this insight to make smart decisions, your business can drive strategic improvements while streamlining your manufacturing costs.
To help you manage turbulence, Aptean has used our food industry knowledge to develop a three-step strategy for increasing operational agility in a continually changing – and often unpredictable – landscape, which we’re going to outline in this whitepaper.
Maximising Margins When You’re Squeezed from Both Sides
The operational agility of UK food and beverage manufacturers has been tested to the limit in recent years. And the business case for changing your infrastructure is stronger than ever.
Since the start of 2020 we’ve experienced a global pandemic, fuel shortages, staffing and skills shortages, energy price increases, several extreme weather events and multiple policy changes as a result of Brexit. These forces have impacted both ingredient availability and the cost of production, creating major food chain security concerns.
In addition, supply chain disruption and sourcing challenges have further exacerbated industry woes. Shortages of key ingredients such as wheat and sunflower oil have already forced manufacturers to reformulate recipes at short notice, while issues with the international export of Ammonium Nitrate fertiliser will significantly impact crop yields going forward.
To make matters even more complex, inflation is rising at its fastest pace in 40 years and consumer confidence has plunged to near-record low levels, meaning costs can’t simply be passed onto the end customer. Manufacturers’ margins are being squeezed on both sides, and the only way to offset prices increases is to streamline your internal operations.
Given these market constraints, many food and beverage companies have been reluctant to make significant operational investments. But a solid digital infrastructure is pivotal to driving more efficient processes and making proactive decisions, in order to maximise yield. Which is why the first step in our strategy is to modernise your operational infrastructure.
Step 1: Modernise
The first step towards increasing operational agility in a turbulent market is improving data visibility. You need to see what’s happening across your business in granular detail to know where change is needed first.
Research conducted by IDC, sponsored by Aptean, in 2021 found that lack of operational visibility was food and beverage manufacturers’ most significant barrier to business growth. And this is because business strategy and IT strategy are intrinsically linked; you need operational improvements to drive wider business goals.
When it comes to managing operational data, manufacturers tend to fall into one of three categories:
Digitally advanced – companies in this group are already using a multi-functional piece of software like a food and beverage ERP system to run business operations
Digitally maturing – this group of companies have some technology in place, but are either managing multiple systems across different parts of the business, or have one basic system that has reached its functional limits
Digitally inexperienced – companies in this group are still using spreadsheets and emails or relying on informal communications, which leaves operations vulnerable to error and makes real-time process control almost impossible to achieve
Whichever category your business lies in, there are opportunities to modernise your business operations. Your current approach might ‘get the job done’, but is it fully optimising your manufacturing operations to support profitable growth? Even if you’re digitally advanced, are you using cognitive services to manage quality control or AI to predict demand?
Replacing your current systems with an infrastructure that can support the fast-paced, multichannel demands of modern food and beverage manufacturing will increase your agility and enable you to take actions that maximise margins.
And while your initial goal is to react to what’s happening in your business quickly and effectively, over time the data you generate will enable demand forecasting. This will enable you to move towards predictive models that anticipate what your customers want next.
Modernisation: Baird Foods Services’ Story
Centralising information and giving everyone a single version of the truth enables your business to take decisive action based on real-world conditions. Baird Foods Group can attest to this.
In 2017, the company launched a new, fully integrated outsourced meat processing operation – Baird Food Services – in just 12 weeks, to offer meat processing services to directly to its customers.
Building a technology-driven service operation was critical to developing its concept quickly, as Baird Foods Services wanted state-of-the-art processing equipment, a skilled workforce, and a software solution controlling every aspect of the end-to-end processes.
Baird Foods Services selected Systems Integration – now part of Aptean Food & Beverage ERP – to design a completely paperless solution with full traceability, utilising real-time shop floor data capture, from intake to despatch.
From day one, Baird Foods Services’ line managers have used technology to analyse production and make effective decisions that increase efficiency without compromising on compliance or quality. The company delivered 25 tonnes of processed product in its first week in operation, and less than two years later had increased production to more than 400 tonnes of meat products per week.
“We have even integrated beyond our four walls,” Factory Manager, Kevin Horner, confirms. “Our customers can now login…to upload orders and review raw material status, allowing them to schedule delivery of more stock…whenever it’s necessary.”
“By eliminating manual inputs and the possibility for human error, we are assured of ‘one version of the truth’ every time.”
Step 2: Optimise
Once your business has invested in technology to gain a single version of the truth, the next step is to use the insights being generated to reduce production costs and increase margins.
It sounds straightforward, but as you well know, creating a roadmap for change in a constantly evolving market is no simple matter. Rather than focusing on radical strategies, centralising data management will enable your team to make smart decisions that optimise your entire value chain – particularly if you use technology to automate responses.
Here are some examples of where data and process optimisation can add value to your operations:
1. Supply chain
Monitoring inventory levels in real-time allows you to reorder ingredients efficiently without overstocking. And by tracking supplier information, you can understand the impact of delays and cancellations on customer orders, sourcing from alternative suppliers to continue production.
If sourcing challenges or supplier delays are unavoidable, you can re-sequence schedules to prioritise orders that can still be completed based on available inventory. Operational technology will also help you to minimise spoilage and waste – for example, using perishable ingredients based on their sell-by date, or automating catchweight calculations to deliver consistent products while maintaining speed of production.
Digitising your operations will enable you to track asset efficiency and respond to performance issues quicker – reducing downtime. You can also align facilities management with your production schedule, carrying out routine maintenance and servicing at the least disruptive times.
People are your greatest asset, but there are many scenarios in which technology can respond quicker and more effectively, make fewer mistakes and ensure the same information is available to everyone. Automating low-value, high-risk and complex operational processes will maximise your speed and efficiency, while enabling your workforce to focus on tasks where human ingenuity adds most value.
And where manual input is still required, technology makes the user experience slicker and simpler. For example, replacing spreadsheets with real-time data dashboards; introducing mobile and touchscreen technologies for assigning, managing and completing tasks; and coordinating inventory management using barcode scanning capabilities.
5. Quality control
Digital transformation also plays a pivotal role in optimising the consistency and compliance of food and beverage products, particularly for manufacturers with an international customer base. For example, operational software will automate the production of allergen lists and product labels based on the product and quantity, to meet local legislation.
Your company can also use technology to create digital workflows that check products in real-time, flagging anomalies and enacting stop line capabilities to prevent contamination and stop significant food safety issues from leaving the factory. And if a quality control problem occurs, digitised data trails enable quick, accurate product recalls to minimise both financial losses and the impact on your reputation.
Each optimisation may be small individually, but added together they make a huge difference to the reliability and consistency of production, and to your overall profit margin.
While the initial goal is to react to what’s happening in your business more effectively, over time the data you generate will enable demand forecasting and trend mapping – so you can move towards predictive models that anticipate what your customers want next.
Optimisation: Bearfields of London’s Story
Bearfields of London uses traditional curing methods to process more than 20,000 pork legs every week. Having been in business for more than a century, its products are synonymous with high quality – and the company wanted to future-proof its operations to maintain its outstanding reputation.
Rather than purchasing multiple pieces of software to solve individual department challenges, Bearfields wanted an all-encompassing solution that could take the company completely paperless. It invested in Systems Integration, now an Aptean Food & Beverage ERP solution, to deliver total stock transparency across its five sites.
Every product now has a unique identifier with weights, dates, life left on product and use-by dates attributed to it, and barcode scanners shows exactly where the product is kept – eliminating opportunities for human error.
Digitising operations has delivered real-time visibility on checks, non-conformances and corrective actions, while automating processes such as labelling raw material intake has reduced resourcing requirements, decreasing the cost of service.
“If I was to summarise the biggest benefits we’ve realised since the implementation, it’s all about transparency, streamlining operations, working leaner and smarter. 100% transparency means that we have far less cash tied up in stock,” Managing Director, Steve Bearfield, concludes.
“With 100% stock and KPI transparency, and sales order processing directly linked to picking and despatch, we’re confident that the right stock is allocated to the right orders.”
Step 3: Strategise
Understanding and anticipating customer demand isn’t just an opportunity to optimise your manufacturing operations. It empowers your business to make strategic decisions that drive business growth, even in challenging circumstances.
Market turbulence is forcing many food and beverage manufacturers to reconsider the number of SKUs they’re producing – whether due to fluctuating demand or ingredient shortages. And when you’re faced with tough decisions, you need to know which products are most profitable for your business.
High quality data insights give your company a stronger grasp on how conditions are affecting consumer preferences, so you can make business decisions rooted based on real-world insights. And agile operational capabilities enable you to respond to these insights quickly and accurately.
A good example of this is UK online butcher, Farmison & Co. By scaling production in response to rising demand for home meat deliveries during the pandemic, Farmison doubled its revenue to £12.1m in 2020. They then recorded a 150% year-on-year Christmas sales increase in 2021 by responding to strong demand for turkey, ham, beef, pigs in blankets and cranberry sauce.
Data validation and operational efficiency are also giving food and beverage companies the confidence to explore emerging markets like plant-based foods and cultivated meat. If you’re interested in treading new ground, technology can help you to manage the production and compliance challenges associated with product diversification.
Strategic data insights are also pivotal to evolving your business model and accelerating product development.
For example, many food and beverage companies are outsourcing production to contract manufacturers and/or co-packers in order to scale production and increase flexibility without requiring additional capital expenditure. Others are making use of third party logistics to enhance shipping and distribution.
Food manufacturers are also using operational agility to explore new sales channels. Going direct-to-consumer provided a revenue lifeline to many brands during the pandemic – from PepsiCo’s online pantry to Heinz to Home – and demonstrated the benefits of building close customer relationships. D2C delivers the rapid feedback that manufacturers need to increase the speed of product innovation and testing, creating new revenue opportunities as a result of giving customers what they want.
IDC research, sponsored by Aptean, has forecast that 90% of industry growth will be captured by food and beverage companies that engage directly with consumers, and more than 80% of firms that have invested in digital software to run their business operations have seen improvements in D2C revenue.
Digitally-driven operations also give food and beverage manufacturers a stronger framework for international expansion. Products can be reformulated for local tastes and cultural expectations while being produced at scale, while food and beverage ERP software automates compliance processes to make sure products meet regional regulations and are labelled correctly. This is proving particularly advantageous for UK food companies trying to manage additional admin demands as a result of Brexit.
Strategise: ABP’s Story
For more than 15 years, ABP has partnered with Systems Integration (now part of Aptean) to enable agile process improvement across its extensive livestock management and kill line operations.
Every stage of ABP’s supply chain is underpinned by a bespoke batch numbering system for bi-directional traceability across its network of 45,000 farms. The company can trace products right back to farms, herds and individual animals, providing customers and consumers with total peace of mind about produce integrity.
Digitising its livestock procurement processes has enabled ABP to make bookings up to six months in advance – even accounting for predicted calving times. And maintaining high animal welfare standards is a priority, so veterinary checks are carried out on every animal, using Aptean software to record any exceptions or conditions.
In addition, ABP’s livestock portal provides real-time data about lots, animals, and payments, breaking down the gradings achieved, premium prices awarded and any charges that have had to be applied (such as cleaning and clipping charges). This empowers ABP to understand the value of its farmer relationships in greater detail and make profit-driving decisions.
“We embrace new technological capabilities wherever possible, to help us drive up standards across the company.”
Creating Business Opportunities, Whatever the Future Holds
With market turbulence making trading tougher by the day, investing in digital software is no longer advantageous: it’s essential.
Many manufacturers are holding back on operational investments, but if you’re still relying on spreadsheets and legacy systems to run your business, you need to act quickly – or you risk falling behind your competitors.
Thankfully, the affordability of multi-functional food software has evolved, meaning it’s possible for companies of all sizes – from SMBs through to large-scale manufacturers – to find a solution that delivers on your needs AND your budget. Choosing cloud-based ERP technology will empower your business to modernise and optimise in a logical, step-by-step process, without overwhelming your teams with complex operational procedures.
Manufacturers in the early stages of digital transformation can start simple and add new functionality as your confidence grows, increasing the quality and sophistication of your business intelligence over time. Digitally maturing manufacturers can add new people, sites and regions to your operational network as you expand, without having to rip out and replace your infrastructure. And digitally advanced manufacturers can mine data insights and use advanced algorithms to predict customer demand.
Investing in food and beverage software enables your business to implement an agile foundation for providing consistent, reliable information in the face of constant change. And it also delivers the operational flexibility you need to adapt to market conditions and add value to your bottom line – whatever the future holds.
Modernise, Optimise, Strategise: Your 3-Step Strategy Recap
Step 1: Modernise
Invest in software that provides complete visibility over your operations (including multi-site), in real-time
Give all personnel, partners and external bodies access to information that is relevant to their role for a connected, cohesive approach to food manufacturing
Step 2: Optimise
Use the insights being generated by your software to make improvements across your value chain
Identify which processes can be automated to increase speed of production and reduce manual errors
Step 3: Strategise
Underpin product and business development strategies with real-world customer insights – moving to predictive planning as those insights deepen
Use your agile infrastructure to pivot production based on demand, exploring new customer, channel and market opportunities
Increase Your Operational Agility with Aptean Food & Beverage ERP
Aptean Food & Beverage ERP is built specifically by the industry, for the industry, to give you full control of your growing business while also retaining all the flexibility you need to respond dynamically in a fast-moving food environment.
We pride ourselves on understanding the food industry, delivering the food-driven functionality you need to succeed.
Total Traceability – Aptean Food & Beverage ERP offers fast, complete traceability to optimise compliance with global food safety initiatives and regulations. And because every transaction has complete traceability back to the source (and forward to the sale), you have full tracking of revenue cost and of material traceability.
Real-Time Data Capture - True traceability and complete control comes from capturing data at the time of transaction with no impediments. A central feature of our solution is real-time data capture at every point of your supply chain, providing the visibility you need to run your business.
Automation – Aptean ERP collects data directly from equipment in real-time, removing the need for manual entry. Our software also captures mobile data in the plant or out in the field, ensuring you’re ready for what’s next, now.
On a Microsoft Platform – our solution is a unique, industry-specific technology built on an underlying Microsoft Dynamics 365 Business Central platform. That gives it a familiar, user-friendly interface, allowing your employees jump in and get to work in the system with minimal additional training.
How To Thrive During Food and Beverage Market Turbulence
Prioritising modernisation, optimisation and a sound strategy is necessary for success in the food and beverage industry. Increase operational agility in a continually changing (and often unpredictable) manufacturing landscape.