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Exploring digitisation challenges and opportunities

18 February 2019

Food Processing reports on the findings of a recent study which focuses on digitisation within the food and beverage industry. 

The 2018 CSB-System survey spoke to 121 decision-makers within the food and beverage production industry across 29 countries. Questions focused around the status and the future of digitisation within the sector and looked at the influence of IT and the perceived challenges and opportunities of the ‘digital transformation.’ 

Despite pricing pressures, the majority of respondents  rate the current economic situation positively. Indeed, many even expect the situation to improve further in the coming years. However, this optimism went hand in hand with three major challenges: 
 
• Increasing requirements from the retail sector in terms of assortment diversification, response times and flexibility. 
• Strict international legislation concerning food safety, labeling and traceability. 
• Growing consumer demand for quality and freshness. 

Many CEOs see information technology (IT) as the key to improvement and its importance seems to be growing, with 17% of respondents rating IT as ‘very important’, twice as many than in the 2017 survey. These replies additionally confirm that the higher the importance of IT to a company, the more the company invests in it. However, comparing the results with those of other industries, the decision-makers are still not particularly keen to invest. Only about 15% – 7% more than in 2017 – spend more than 1.5% of their turnover on IT. Nearly 70% of respondents do not invest more than 1% of their turnover in digitisation. In comparison, medium-size US enterprises spend 4.3% of turnover on IT, according to Forrester analysts.

The comparatively low level of investment is rather surprising considering that respondents also said that they expect digital technologies and the resulting opportunities to have a massive effect on the food system. In total, 86% of the respondents assume that digitisation will have a major impact on the food industry in the next 20 years. About one-third believe that the producers will come out as the winners of digitisation: The digital transformation will result in networked production becoming the standard, bringing producers and consumers much closer together. Producers will be able to create increasingly personalised products cost-effectively. Placing orders directly with the manufacturer has become more commonplace. Another interesting aspect of the survey surrounds its assessment of the platform economy. About 27% of respondents predict a radical change in the market structures, due to big players like Amazon and Alibaba, but food-specific platforms are on the rise too with manufacturers as well as retailers able to use such platforms to sell products. 

Transformation requirements
In the opinion of the respondents, the lack of actual digitisation activities is mainly due to a lack of employee's skills and not knowing which solutions are available in the market. Therefore, most of the companies have not yet established a road map for their digitisation. By combining the statements of the industry's decision-makers with the experience of CSB as a long-term specialist for the food industry, at least four major open issues have been identified as key to enable companies to move towards becoming a Smart Food Factory.
These are:  

• Increase transparency. 
• Enhance digitisation in marketing and sales. 
• Further digitise factory processes. 
• Improve quality and traceability.

In conclusion, ERP systems will remain the focal point of many processes in food enterprises and they will also play a key  role in digitisation strategies. It is essential for querying and transmitting master data and transaction data as well as for processing of a lot of other information. Ultimately, most of the software applications used in a company as well as new technologies, online shops and apps will be connected with the ERP system. Being the central nervous system, ERP offers the possibility of increasing transparency, enhancing supply chain networks and improving the responsiveness of the companies. Overall, respondents saw many benefits of ERP systems. However, at the same time they think that the demands on the systems are too high. For their own systems, they would like to see more user-friendliness, advanced documentation capabilities and more analysis options. 
 
AI is top
In the context of the survey, four technologies were evaluated with regard to their potential impact on the food industry. Here, collaborative robots and artificial intelligence (AI) top the list, with many companies expecting to see substantial benefits from the use of AI. This survey finding is supported by the findings of Gartner Consulting, where AI ranked as the one with the highest strategic importance. Much less is expected of 3D printing and blockchain, with investment in  3D printing losing momentum after a promising start.

There may be several reasons for the poor results of blockchain. The technology offers a great opportunity for real improvements in the transparency of the value chain, which is one of the top priorities in the food industry. Even so, decision-makers do not yet seem to be convinced that blockchain will gain a foothold in the food industry, or at least not in the near future. However, large retail companies like Walmart and Carrefour have already started using blockchain, so the extent to which retail companies will require the integration of this technology from their suppliers remains to be seen. 


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