Technology appetite “mushrooms” to accommodate healthier consumers
According to the International Food Information Council (IFIC) Foundation’s 2014 Food and Health Survey, 71 percent of consumers now consider “healthfulness” as an important factor when making food and beverage purchases. This number rose from 61 percent in 2012 – an increase of 10 percent in only two years - confirming that a growing number of customers are taking health into account when selecting products at their local grocery store. Articles about potentially harmful additives and the benefits of organic food continue to saturate the media, facilitating a slow shift in consumer tastes toward less processed products with cleaner labels. But what does this mean for food and beverage manufacturers?
While some sectors of the food industry, such as bakeries and dairies, are accustomed to dealing with fresh products, many other manufacturers are not. Higher demand for foods that omit preservatives while retaining natural nutrition means that food and beverage companies must create and sell products that have much shorter shelf lives. With merchandise that has to be manufactured, purchased and shipped on a significantly more rapid lifecycle, companies must learn to balance the risk of outdated products with the revenue loss from out-of-stock products. Many businesses are turning to technology as a solution to this challenge. By implementing a detailed planning and scheduling or enterprise asset management (EAM) application, food and beverage manufacturers can prepare for the shift to shorter shelf life products.
Moving to ultra-fresh foods requires that organizations have real-time visibility into orders and order patterns. Relying on a flexible planning and scheduling technology platform will not only deliver the necessary insight into forecasts and historical data, but will also provide automated updates if order patterns become abnormal. With the agility to plan production on a daily, sometimes even hourly basis, organizations are better equipped to handle products that have a shelf life of only a few weeks. EAM applications also impact orders by providing visibility into equipment, inventory and materials. Machinery downtime might cause the loss of an entire batch if the product cannot be stored appropriately while repairs are made. Using EAM technology allows manufacturers to establish a preventative maintenance program to better anticipate the needs of equipment, which reduces the likelihood that machinery will break and keeps the factory operating at peak efficiency.
Another difficulty when dealing with fresh products includes more complex scheduling. SKUs with shorter shelf lives must be produced more frequently, and in smaller quantities. A reliable technology application is critical to help balance shelf life versus expected demand and reduce the risk of production bottlenecks such as tank scheduling. Essentially, a planning and scheduling system will optimize new variables, like ingredient availability, that can impact production and directly address the challenge of decreased production capacity due to more changeovers.
Fresh food and beverage products also go hand-in-hand with more strict service level agreements (SLAs). Retailers expect to receive items within only a few days of production, and will therefore define SLAs that require a minimum number of shelf life days remaining. For example, if a grocery store receives a fresh product with only three days left until its expiration date, the store might refuse to stock that product because the window of opportunity for a sale is too short. Manufacturers must rely on technology to increase warehouse management efficiency and follow the FEFO (first expired, first out) methodology, as this will help to maximize the amount of time products are available on the store shelf. EAM technology helps organizations prevent downtime as a result of inadequate inventory and often facilitates an overall reduction in inventory levels, generating savings for the manufacturer by allowing them to purchase only what they need.
Results from food industry manufacturers who rely on spreadsheets or generic, outdated software versus results from those who implement the latest technology tools prove the value of an industry-specific application. In the dairy vertical, top companies have approximately 35 days of inventory, while others stock up to 57 days of inventory. Technology is likely the critical component that differentiates these two groups, and will continue to separate competitors in the food and beverage industry as the demand for fresh products increases. The “healthfulness” movement is here to stay, so organizations should begin considering the challenges outlined above to assess their own preparedness. Providing consumers with the fresh, healthy options they seek without incurring excess expenditure from expired products is essential to ensure future success.