Increasing Productivity With IoT In F&B Industry

Wednesday, September 20th, 2017

Vending machines have come a long way from being machines that just dispense drinks and food. More akin to today’s smart phones, smart vending machines are just one way IoT is changing the way F&B companies and consumers will be working together in the future. What else is in store? By Raghava Dhenuvakonda, managing consultant, and Sriram Bharadwajan, senior manager, consumer goods, Wipro Limited

Countries in Asia Pacific (APAC) are highly diverse in their own ways in terms of culture, language, food habits; but share common trends as far as the food and beverage industry is concerned which is in terms of growth rate, buying patterns and consumer dynamism.

There is an uptick towards healthier alternatives with growing interest in vegetarian/vegan options, “Fresh” & Organic food and functional beverages. Consumers’ faith in F&B companies is increasingly need based rather than brand loyalty. They continue to become more aware and demand healthier and wellbeing oriented products, thereby putting the onus on these companies to innovate and tighten processes around product quality and compliance.

As per the latest market research into digital adoption in APAC, there are over a billion smart phone users in the region, with active internet and social media users touching numbers twice as much. The amount of information shared through the web pages and between the users, to the companies, about the companies, etc., is simply mindboggling. Technology is dramatically changing shopping and food discovery in APAC markets.

Research indicates that Chinese and Korean consumers are purchasing food or drinks online more frequently than the rest of the APAC consumers. This has led to the creation of one stop shop digital mobile solutions for grocery shopping, food delivery and restaurant reservations.

All the above underlines the imperative need for APAC F&B companies to enhance their productivity across their value chains and drive consumer engagement and experience.

IoT In Apac

APAC accounts for almost 50 percent of manufacturing capabilities for global F&B companies. While they take care of the vast regional customer base largely, they also serve as an export base to the western market. However, much of emerging Asia has seen slowing productivity growth since the global financial crisis.

With the need to meet higher and increasingly dynamic consumer demands, higher agility in terms of fulfilment and a highly competitive environment, it is imperative for F&B companies to have an almost real-time supply chain monitoring and course correction.

Gaining real-time manufacturing intelligence in manufacturing plants for a robust shop floor management, connected warehouses for optimised inventory and logistics management to respond effectively to the changing consumer behaviour patterns, and rapid new product introductions are just some examples of what needs to be addressed.

With the digital revolution, especially through smart phones and other means such as IoT (Internet of Things), the ability to connect between devices and exchange information over the internet has opened up new set of possibilities in terms of solution capabilities and opportunities across industries and the F&B segment in particular. This has positively impacted not just consumers but businesses as well in improving their productivity in multiple process areas.

IoT-based solutions have found rapid adoption in North America leading to predictive supply chains through improvements in Supply Chain visibility and agility. This is due to IoT solutions favourably impacting key KPIs like reduction in inventory holding cost, reduction in transportation and labour costs per unit of output.

The enhanced productivity due to IoT also favourably impacts retention of high lifetime value customers and “A” category suppliers. According to a forecast from IDC, there is a likely market opportunity of US$1.7 trillion due to IoT around the world, and APAC alone accounts for close to 40 percent.

APAC F&B businesses can reach out to billions of consumers with their products. However, the bigger opportunity is to leverage connected technologies like IoT to drive visibility, agility, productivity and quality across their value chains so that these billions of consumers keep reaching out to them as well.

But what are some key applications of IoT in the F&B industry?

Better Recall And Compliance

Insurance company AIG quotes that an average of over 530 product recalls occur in a year in Australia, i.e. almost 10 recalls a week. In other parts of the region too, recalls are not uncommon, and all these have rippling effects even in other countries.

For example, the infamous baby formula milk powder scandal and recall in China that was due to contamination in processing caused ripple effects in multiple countries across the region.

Allergen or biological contaminations are key contributors for product recalls most of the time, and these occur during the manufacturing process or are due to contaminated ingredients.

With vendors, co-manufacturers, and value-added suppliers in the manufacturing value chain, lack of tightly integrated quality processes and systems would also be challenges to be overcome from a manufacturer’s point of view.

Dealing with recalls can be nightmare for F&B companies, as their resultant effect can be multi-fold. While the immediate need is to ensure consumers do not use contaminated products through effective communication channels, to prevent further damage they will also need to work with the regulatory agencies to ensure compliance is in place.

More crucial and long-term issues to deal with would be on ensuring protection of brand image to regain consumer confidence following such recalls.

Agility of response in terms of communication with consumers and partners is the fundamental need in the event of recall for F&B. Messages on quality compliance to regain consumer confidence will be key.

With the power of social media and IoT solutions that directly address back-end manufacturing and quality systems, F&B companies can leverage on these to ensure effective recall management as the next generation customer experience.

Predictive compliance visibility solutions with early detection systems to handle food contamination incidents will reduce the lead-time to contaminant detection. They will also serve as early warning systems. With connected systems across the supply chain and the power of IoT, F&B companies can now proactively engage with consumers.

Agile And Efficient Supply Chain

According to a World Economic Forum report, almost a third of the food produced (about 1.3 billion tons) is either lost or wasted globally. In the developing countries, especially in the APAC region, more food is wasted in the production stage than in the consumption stage compared to the developed countries. Improving supply chain capability and efficiency will be critical to support global trade and distribution of products to meet the increasing need to reduce food waste.

A digitally connected manufacturing environment such as with integrated ERP and MES systems can enable real-time data monitoring, insights and predictive analytics from various production lines and plants. This empowers decision makers and controllers in making the right and informed decisions at the right time.

Cold Supply Chain & Route Optimisation

Ensuring food quality right from production and all the way to consumption is the responsibility of F&B companies. One of the key challenges for F&B companies is in maintaining quality (storage conditions) right through, be it in the production stage, or during the distribution stage to retail/consumers.

Maintaining the right temperature in the containers/trucks in transit right from source to destination is the key. In fact, many F&B companies have their own fleet of trucks for transport of such produce, ensuring that these well maintained trucks will be an added dimension to guarantee that only high quality products are delivered.

Sensor-based real-time monitoring during transit and tracking it through web-based solutions on a cloud service or mobile devices has now made it possible for F&B companies to have tighter and better quality monitoring and waste reduction.

Today, a few leading logistics companies have adopted an IoT based solution framework to monitor the health of their fleet through sensor-based diagnostics for prognostic maintenance and warranty management by building advanced analytical models. This has resulted in improved service levels, optimised route management and, more importantly, better planning for MRO spare parts.

Smart Vending Machines

Although the installed base of vending machines exceeds 20 million globally, the functionality offered by these machines is not in tune with the demands of the millennials and the needs of the F&B companies.

Consumers need to have cash/ change to purchase products from vending machines. These machines do not have the functionality to suggest products to the consumer, nor is there a chance to leverage on cross sell/upsell opportunities through personalised consumer interactions with machines and smart phones.

For vendors, the lack of visibility of inventory of products and sales performance leads to inefficient operational processes. This is compounded by the lack of visibility of machine performance and operational status.

This has resulted in a growing demand for smart vending machines which are also an additional sales and marketing channel for F&B companies in recent years. These machines are equipped with additional functionality like mobile payments, interactive displays, and real-time offers.

Future Of F&B

IoT-based solutions have delivered the much-needed impetus in providing visibility and insights with the power of Internet and connected devices to effectively address some of the key challenges and improve productivity.

However, the opportunities available for productivity improvement through IoT are not limited to a process group or upstream/downstream only. A comprehensive approach to take advantage of value-generating opportunities beyond IoT is needed to effectively mine the value of this innovation.

Industry 4.0 (I4.0), perceived as the fourth industrial revolution (after steam engine, electricity, and industrial automation) will offer the ideal platform in due time. IoT will certainly be a key component and foundational element in this.

I4.0 will be a comprehensive solution with capabilities that will include both horizontally and vertically integrated supply chains. With real-time solutions that are based on big data analytics across the supply chain from consumer insights to operational supply chain intelligence, they will equip F&B companies with the necessary ammunition for providing excellent customer service, best in class supply chain performance, and world-class products.