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Feeding growth: Technology's part in food and beverage profitability

Getting it right is so right for business

INSIGHT ARTICLE  | 

There’s little doubt that food and beverage (F&B) manufacturers and businesses are actively looking to technology to improve operations, grow sales and, ultimately, generate more profit. In RSM’s 2017 Food and Beverage Monitor survey more than two-thirds of the respondents said they intend to increase technology spend in the coming year. On its face, that’s great news. Adopting technology is one of the most efficient ways to become a more profitable business. The bad news? It’s exceedingly difficult to get technology right. Getting it right is about choosing technology that will help capture data to answer specific, business-critical objectives. Then, it’s about successfully integrating multiple streams of data to produce answers and insights that are both timely and actionable.

The information needed to successfully run a modern F&B enterprise increases by the day. Every business is different, of course, but we’ve identified a number of areas that tend to affect all F&B companies, no matter if you’re growing vegetables, brewing beer or creating barbecue sauce.

Traceability and food safety

A 2015 Ohio State University study pegged the annual cost of foodborne illnesses at $55.5 billion. It’s a frightening statistic, and one that should strike fear in any food manufacturer. Indeed, one in five of our F&B Monitor survey respondents said they were unable to track raw materials and finished goods in certain key supply and distribution channels.

Aside from paying closer attention to hygiene across the manufacturing process, smart business owners are looking to technology to help mitigate food safety problems if and when they occur. Technology can be used to track raw materials down to a particular plot on a farm and finished goods down to a specific shelf in a warehouse. Not only does that potentially help limit the hard costs of a broader recall, it can help lessen long-term damage to the brand.

Of course, product traceability has additional benefits. It can streamline stocking and rotation rules to minimize spoilage, and substitution rules to make the production process more efficient. Whatever the goal, better sourcing and tracking capabilities will prepare a company to better meet the business and regulatory challenges of the future.

Labor and automation

More than 70 percent of survey respondents expect labor costs to rise. As a result, manufacturers will increasingly be looking to automation to maintain margins. Automation can be an important tool to improve efficiency but without proper technology in place, that goal can be elusive. By moving from human to machine, what a business gains in production capacity it might lose in information and visibility. Systems need to be in place to not only tell a machine what to do, but also to capture useable data to identify when things are going wrong.

E-commerce

When devising strategies to grow their business, manufacturers often think of e-commerce. Whether it’s for a direct-to-consumer strategy or expanding global sales, e-commerce is almost always part of the equation. The problem is that manufacturers often grossly underestimate the costs. The reason? They fail to understand the breadth of the impact on the organization. Putting up an online storefront is the easy part, but how do you address the demands of a 24/7 operation that depends on real-time information? Things like inventory management, customer service and production capabilities must be evaluated top-to-bottom. Technology can be the means to bring all those things together, but that analysis needs to be done and changes need to be implemented before hanging the digital “open” sign.

Social media and external data

For some F&B manufacturers and businesses, particularly those selling to other companies, lack of social media exposure can seem like a blessing. Who wants to get bashed online? The problem is that social media isn’t just a vehicle to vent dissatisfaction—it’s also a place where praise is given, advice is sought and trends are born. Most manufacturers will want some way to tap into this valuable information stream, use the data to understand changing consumer preferences and build communities around products. In the end, this fosters brand connections and long-term loyalty. In addition, these social channels can be added ways to not only interact with consumers, but also to sell to them. Snapchat, for instance, provides a convenient avenue for consumers to learn, interact and purchase products.

Likewise, external data sources provide significant opportunities for F&B businesses. Point-of-sale data gathered by third-party providers can help keep track of current trends and identify new ones. Data partnerships like the Farmer’s Business Network—which aggregates planting data from growers across the country—provide critical data to improve operations. And if you’re not paying attention, you can rest assured that some of your competitors are.

The internet of things

In manufacturing, few innovations have received more attention than the internet of things (IoT). Simply put, IoT is anything that connects to the internet, from laptops and mobile phones to the car you drive, wearables, grocery scanners and factory machinery. Essentially, connectivity is omnipresent in our lives, and the data that’s shared and collected via IoT is vast. It’s little surprise, then, that nearly half of survey responses plan to implement some form of IoT technology. Done right, it’s a smart strategy. IoT platforms can help generate granular data that can be used to support almost any manufacturing business process, from the shop floor to the digital storefront. Bringing it all together is the challenge, however, and where many businesses fall short.

Putting it all together

You’ve come up with the business questions you need answered. You’ve identified the data needed to answer those questions, and the technology that can capture it. Maybe some of that data will flow through your existing or updated enterprise resource planning (ERP) solution to help manage and support your business operations. Some data might be communicated to warehouse sensors to improve inventory flow, or some data may be leveraged for customer-facing initiatives. Whatever the case, now you need a plan to put it all together. The processing of all this data into actionable intelligence is probably the greatest technological challenge facing businesses today, and the F&B industry is no exception.

The business analytics layer is where this real magic happens. Selecting and implementing the right analytics platform is essential to getting a good return on your technology investment. That evaluation should happen in the planning stage, at the same time you’re outlining the information you need and how you’ll capture it. Some steps to consider include:

  • Establish a clear vision of your business objectives and how your business intelligence and analytics will be applied to your overall strategy.
  • Analyze and design a plan that’s mindful of your existing data and systems and integrated with possible newer streams and systems. Test your solutions and modify as needed.
  • Train employees on the new systems and processes and gain their buy-in.
  • Monitor and modify as needed after launch, making changes with market trends or organizational shifts.

Ultimately, the best mix of technology isn’t about what’s the latest and greatest or even what your competitors are using. It’s about what best meets your objectives, and what your organization can reasonably put to good use. That’s something only good planning can make clear.


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