If you’re working within the UK Food manufacturing sector, or if you’re supplying into the industry, you’ll want to know about the issues affecting it now and in the future.
As the largest UK manufacturing sector, Food and Drink contributes a massive £30 billion to the UK economy each year.
Since the sector is so essential to our overall economic health, any challenge that the industry experiences is bound to have a ripple effect on the supply chain – in particular, those within agriculture, hospitality or suppliers of food manufacturing equipment.
Like any business, those within Food and Drink manufacturing must respond quickly and effectively to change to keep up with competitors.
This has become particularly pressing with the rapid rise of technological advancement and persistent economic uncertainty around the economy and Brexit. In other words, business is forgiving and placing greater demands on organisations than it did in the past, but there is still scope for opportunity.
In the following article, we take you through some of the biggest challenges that are likely to affect the sector in the near future.
Also known as the fourth industrial revolution, the advent of Industry 4.0 is already happening: where it leads, however, is still shrouded in uncertainty.
Prior to the introduction of modern ERP systems, departments and operations were discrete from one another, meaning they could not communicate information between themselves without manual intervention.
In practice this meant inefficient processes in which information passing between, say, finance and purchasing, or the shop and the order management system, would be translated laboriously into each departments’ appropriate process languages.
ERP software has long provided an elegant solution to this and is now considered a central part of the manufacturing process, but for some time, Industry 4.0 has represented the next logical step.
Integrated within current ERP frameworks, Industry 4.0 ensures smart, interconnected factories with greater automation, AI and machine learning.
The possibilities associated with this are seemingly endless. As a result, companies are increasing efficiency, automating manual tasks and more closely integrating previously diverse systems.
The key challenges are in convincing technology–averse staff to adapt to change and in getting a head start on the competition in such a fast-moving environment, as well as funding the transformative technology needed to compete.
Interested in solving some of the challenges presented by Industry 4.0 to your business? Read our latest article here.
Despite the opportunities associated with Industry 4.0, it is not without its challenges.
This transformative technology still needs a workforce to operate it effectively and to carry out checks on the finished product to ensure accountability.
One obvious challenge is a growing need for workers with new skills in an industry with an ageing workforce who are often characterised as being resistant to change.
To operate new technology effectively, greater emphasis is being placed on computer-literacy, data and number-crunching. This is a significant departure from what previous generations would recognise as factory work and is placing greater cognitive demands on individuals entering the industry.
While the traditional characterisation of the food and drink manufacturing sector is one of low-skilled, low-pay workers, this is no longer true.
Results from a recent Grant Thornton survey found an even split between different skill levels: 31% little or no experience, 37% had some skills or training and 33% possessed a degree or even multiple degrees.
With the growing influence of complex technologies infiltrating every level of factory life, this skill level needs to be increased even further, particularly at the low end.
All of this demands greater flexibility from organisations and their staff as the rapidly evolving work environment tests people in different ways.
Businesses will have to remould the way they train staff and invest additional time and money on attracting the dynamic and adaptive workforce required to stay competitive.
Indeed, the need for change has already been recognised by food manufacturers, with 63% of businesses looking to improve productivity placing the highest emphasis on a ‘better utilisation of labour’.
Although traditional factory roles are becoming increasingly sidelined, all is not lost. For all the disruptive effects of Industry 4.0, new opportunities and new jobs are constantly emerging.
These are appearing all the time (read here) and will soften the blow of increasing pressure on obsolescence for some current skillsets.
If this is handled strategically, the benefits should outweigh any unwanted challenges.
Ever wondered how to get staff on board during organisational change? We have an article for that.
While it’s fair to say that everyone has had their fill of Brexit at this point, the fact that it is likely to impact everything from supply chains and labour, to tariffs and prices, means it is worth close consideration.
More than any other factor, food manufacturers anticipate access to labour and skills as being the biggest challenge associated with Brexit. In fact, 55% of respondents in a BDO Food and Drink report said the believed Brexit would have a negative effect on their ability to find the skilled labour they need.
Other challenges relate to supply chains. In particular, the uncertainty surrounding whether or not trade will continue tariff free and the danger of a weakened pound contributing to increased costs on imports are just some of the problems that might appear.
Despite economic uncertainty, and low confidence in the UK government’s ability to negotiate a good deal, the drive to increase efficiency through technology is likely to result in greater investment in equipment and other tools.
In a BDO survey, only 13% of manufacturers said that Brexit would negatively affect their capital investment. This means that, whatever the economic circumstance, the opportunities provided by new technology are so great that spending is likely to continue in this area.
In some cases, it might be necessary to make difficult choices, such as whether to absorb these costs or pass them on to consumers, but investment will carry on regardless.
Check out the key takeaways from our roundtable discussion with local business leaders on challenges within North East manufacturing.
Supply Chain Management
Ever-increasing influence of data and automation is having a massive effect on the nature of food manufacturing supply chains.
Data analytics is capturing more and more information that can transform decision-making in the most fundamental way. However, taking that data and using it to forecast efficiently and accurately is where the challenge lies.
More visible data can reduce the likelihood of foods perishing and increase efficiency as patterns emerge and pitfalls can be avoided. But this is only useful if the company can interpret the data accurately and then act accordingly.
For this, flexible processes and resilient supply chains need to be in place to take advantage of increased insight into supply chain activities.
A Deloitte Report in 2013 outlined four characteristics that determine supply chain resilience. These are:
- Flexibility – adapting quickly to challenges without increasing operational costs
- Visibility – the tracking and monitoring of supply chains in real-time
- Collaboration – working with other companies towards shared goals
- Control – having resilient guidelines in place to monitor all operational processes in real-time
Those companies that adapt to the importance of good data analytics and respond most effectively to this are the ones who will earn a significant advantage over their competitors.
ERP software is now an essential part of Supply Chain Management. Read our article on the other areas where ERP software will produce the biggest results here.
Changing consumer demands
2017 saw the sale of organic food and drink rise to record highs in the UK, with a 6% increase resulting in a market with a colossal £2.2 billion.
In the coming years, this shows no sign of slowing, with over half of UK manufacturers expecting an increase in growth due to new product development.
With consumer demand related to the desire for healthy eating infiltrating supermarkets and restaurants at all levels the race to fulfil expectations is on. Whereas vegan options, free-from foods and exotic ingredients were once reserved for niche markets, this variety of choice seems to be ever-growing.
Gluten free, nut-free, allergen-free and dairy-free are just some of the options that are being demanded by clued-up consumers.
People are increasingly health savvy and have the knowledge and disposable income to take full control of their diets.
For food manufacturers this means reconfiguring existing set ups to make space for a wider variety of production options – in terms of processes and ingredients.
Increased demand, and most importantly, changeable demand, means manufacturers are seeking the necessary equipment to handle increasingly varied demand, and importantly, demand that is subject to rapid change.
The key word here is flexibility. With increased likelihood of switching production, new equipment needs to be reliable and efficiently turned around for changing orders.
Brands are waking up to the damage that not catering fully to customers can do to their reputation. This means providing options that are as inclusive as possible at all market levels.
To better deal with changing consumer demands you’ll need a solid ERP solution. Here is your guide to getting that selection right.
It would be naïve to accept that changing customer demand is driven purely by increased disposable income or smart marketing campaigns.
An increasing move towards health foods is significantly driven by heightened awareness of diet and its effect on our quality of life.
Along with a demand for more choice and a raising of health-awareness comes the need for increased regulation.
Legislation is constantly being updated that is more stringent, with severe penalties in place for companies that do not play by the rules.
With allergies and intolerances s hot topic in the news these days, it is more important than ever to ensure clean environments and to track ingredients.
Those who cannot safeguard the shop floor from unwanted materials and those that fail to show the provenance of the ingredients they are using will come under increasing prohibitive legal pressure.
With so many rules and regulations in place, some businesses now have whole teams of people to maintain an up-to-date understanding of the legal situation.
One technological advantage that companies have is the ability of ERP software to track goods and maintain accountability – and smaller companies that lag behind will soon be investing in such technology if they haven’t already.
This way, if something goes wrong during the production process, it can be pinpointed accurately and those responsible can be brought to account.
Thanks for reading our guide to the main challenges currently affecting the food manufacturing industry; we hope you found it useful. If you’d like to discuss further how ERP software can benefit your business in meeting these challenges head-on, you can arrange to speak to a CBO consultant here.