With all the challenges currently facing UK food and beverage manufacturers, investment in information technology (IT) could be way down the list of priorities, but failing to invest, even amid a crisis, could mean allowing technology-savvy competitors to gain an edge. Food Manufacture’s Ellie Woollven discusses the issue with Datel’s Paolo Arcangelo
As the UK food and beverage industry faces multiple challenges, working smarter, not harder must surely take precedence.
Competition is tough, as new start-ups challenge the more established brands and occupy niches popular with on-trend Millennials. Vegan, vegetarian, gluten-free and high-protein are just some of those niches gradually entering the mainstream and no longer consigned to dimly lit aisles in supermarkets. Alongside this is the growing call for environmental sustainability and a reduced carbon footprint.
Meanwhile, Brexit is forcing the hand of change, with potential labour shortages on the horizon and a shift in focus to more locally produced goods, while consumers increasingly demand transparency and provenance throughout the supply chain.
If this were not enough, the global coronavirus pandemic has hit our shores, resulting in huge numbers of shops and foodservice outlets being shut. Yet the food and drink industry has rallied and adapted swiftly to the change in demands caused by the resulting panic-buying and the need for a broad sweep of the population to self-isolate. Under these crisis conditions, never has there been more need for efficiency and adaptability in the supply chain to meet consumer needs.
The focus of manufacturing in the UK’s food and drink businesses has been moving slowly, but inexorably, towards greater automation, operated by a more skilled workforce and less reliant on traditional methods. Indeed, research prior to the current pandemic had already shown that, by this year, 80% of manufacturers would need to restructure and place data at the heart of their processes if they were to compete and survive in what will be an increasingly technological industry.
But for some this has also brought trepidation and confusion about how to progress and where to invest. Moreover, with labour skills already in short supply, finding staff to operate more complicated, automated machines is, in itself, a challenge.
Yet with challenge, there is always opportunity and, in the food and beverage industry, it is clear that small, agile, start-up companies have been grasping that with both hands.
“Tougher competition is fantastic for niche-type brands in the gluten-free, protein-rich and vegan sectors, for example,” says Paolo Arcangelo, services director – Sage X3, at business technology expert and Sage platform provider Datel. “There are some incredible, innovative brands coming to the fore and disrupting the industry… and traditional manufacturers are having to respond.”
He points also towards the increasing consumer demand for clear provenance throughout the supply chain and locally-produced foods, but notes: “This is not just a UK phenomenon – it’s global. People are looking inward and seeking provenance… and this all leads back to sustainability, the environment and carbon footprint, too. Consumers are demanding products that have not flown thousands of miles or are wrapped in plastic. It takes a while to turn the big ship, but that ship is turning.”
Indeed now, amid the coronavirus pandemic and with supermarkets under strain, consumers have turned even more to smaller and local producers to fill the gap – and the latter have responded, sensing that they can deliver a positive message to consumers, service demand at a time of need and create longer-term loyalty.
However, the major issues challenging the industry beyond the current crisis will still need to be faced. Referring to values, Steve Hare, CEO of enterprise resource planning system (ERP) provider Sage, puts it succinctly in a blog on the company’s website: “The point of values is not that you abandon them when you are in extraordinary circumstances. That’s when you really need them,” he says.
One such typical value – sustainability – has become a buzzword in many industries. “Everybody is trying to take note of our effect on the world and on the future,” says Arcangelo. “Companies want to be seen to be doing the right thing – for example on sustainable packaging. The food and beverage manufacturing industry needs to be focused on the issue of carbon footprint.
“Customers are more demanding and the new entrants to the marketplace are challenging established brands and occupying niches. So the traditional brands are understanding that there is a need to change to survive.”
Fear of change can hold an industry back and Arcangelo believes terms like ‘Industry 4.0’, ‘artificial intelligence’ and ‘blockchain’ “can strike fear into the hearts of many businesses due to a lack of understanding”.
“But, for example, it can be as simple as… instead of having a service maintenance schedule for a machine, the machine itself tells you when it needs to be serviced. Or saying, for example, to a machine operator ‘Well, I can make that machine there tell you when it’s finished that item, how much it made, the weight etc’,” he says. “The onus is on companies like Datel and Sage to deliver those messages to the business world and say ‘Hey guys, this is not something to be fearful of – once you have this information, you can direct your business in the right way.
“It’s about taking all that exciting technology and turning it into a business benefit.”
In the past 18-24 months, he says, British businesses are beginning to respond to the idea of IT in a much more positive way. The influence of a younger generation, with 30+-year-old executives arriving on company board positions, is helping to shake things up.
And he is positive about the Millennial generation now coming through, as he points out that they have been technology-savvy from an early age. “These people are the future – as generations run out, new people come through. IT staff are knowledge workers and, for the food and beverage industry, this generational shift will result in knowledge workers working with a more knowledgeable and informed consumer.”
Also, while Brexit is forcing some inward-looking reaction in terms of local sourcing, it has also spurred companies to seek business beyond the confines of the European Union. “The search for provenance is common to people – whether in the UK, Asia, the US or elsewhere,” says Arcangelo. “Businesses should be asking ‘How can we take our brand values out to the wider world?’”
So what advantages does investment in IT bring to a business? IDC’s report identifies both a disconnect between IT professionals and businesspeople and a concern about software keeping pace with hardware investments in technologies such as robotics. It cites 65% of UK businesses saying they struggle to get the most value from hardware because of inadequate software.
“Our job is to help bridge that gap between software and hardware,” says Arcangelo. “It’s important for applications to talk to each other and then talk outwards to other businesses or machine manufacturing. In addition, we need to bridge the gap between what the business executives want and what manufacturing provides. Often, we sit in the area between the business executives and the IT people, but in a few years’ time, people will come through who will embrace both disciplines.”
Datel is the largest reseller in the UK of Sage enterprise resource planning (ERP) systems with Sage X3 the latest model. “We sell and support only Sage products and have been working with them for over 25 years,” says Arcangelo. “We have over 1,000 customers using Sage products and are able to implement solutions in a multi-company, multi-country way. In the food and drink industry, we have a heavy focus on manufacturing and distribution.”
Customers of the Sage X3 software include Tesco’s largest fresh fish supplier where the technology is used to provide the retailer with details on the ingredients used, how they are used, right through to the labelling and distribution end of the manufacturing process. Another major customer provides fruit into the large multiples and Datel helps them with a farm-to-fork solution, using blockchain, and delivering full traceability of the product right through the supply process.
But it’s not all about the big boys of the industry. Small ice cream producer, Halo Top, for example, is a niche manufacturer supplying its products, including vegan items, into the major multiples… but again needs systems that are seamless when it comes to dealing with the large distributors.
In fact, these small- and medium-sized enterprises (SMEs) make up the core base of Sage’s customers and the company is committed to them, as Hare points out. During the current pandemic, he says, “they [SMEs] will feel the effects of any slowdown before we do. So please continue to buy things from these businesses and help local communities to survive this shock. This won’t go on forever and we should hold our nerve and stay committed to small and medium businesses as much as we can.”
Communication and connectivity
“Sage X3 offers incredible depth of communication, including full finance reporting, manufacturing quality control and non-conformance information. All of this can be multi-company, multi-country, multi-currency and multi-legislative, allowing businesses to deal quickly and easily on a global scale,” explains Arcangelo. “In addition, it can provide full legal and fiscal compliance information and has incredible data reporting capabilities, with the ability to extract that data and make it easily deliverable and understandable in graphic format. What’s more, the Cloud offers an amazing connected solution with integration capabilities, so one system can talk to any other seamlessly.”
As Hare points out in his blog, Sage customers have the tools at their fingertips to enable them to work remotely, manage costs and cashflow and help make smart decisions to look after the safety of their businesses and people – all vital in a situation such as the current unprecedented pandemic.
Indeed, the company notes on its website that “strong technology roots and good communication processes mean businesses can continue to operate effectively even when challenged with incidents out of their control. Couple this with a supportive flexible working culture, which empowers and enables colleagues to make the right decisions, and a company doesn’t have to slow down in a downturn.”
Meanwhile Arcangelo has a strong final message for those food and drink manufacturers who are reluctant to invest in IT. “Those who don’t invest are actually going backwards, as the people who do invest are accelerating past them. Every time we have a negative reaction from a business about investing, the answer is: ’If you don’t invest, there are other people in the market who will – and their conscience isn’t going to make them stop doing so’.”
Finally, he comes back around to that all-important customer – which is where the buck ultimately stops. “One of my favourite quotes is from Sam Walton, co-founder of Walmart, who said: ‘There is only one boss. The customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else’.”
To find out more about Datel and Sage X3, click here.
Sage has created a hub with some key information on the current coronavirus epidemic.
For a case study of Sage in use, click on video below.
Download Technical/White papers from Sage:
Riding the Wave of Uncertainty - Manufacturers Plan for Brighter Future https://www.foodmanufacture.co.uk/Products/Riding-the-Wave-of-Uncertainty-Manufacturers-Plan-for-Brighter-Future
Download Technical/White papers from Sage:
The Future of the Manufacturing CFO - How disruption is changing responsibility https://www.foodmanufacture.co.uk/Products/The-Future-of-the-Manufacturing-CFO