Revenues in the food and beverage industry are growing, but profit margins are shrinking. Market forces, combined with the battle to meet ever-changing consumer demands without compromising quality and food safety, means that many manufacturers and retailers have pushed price margins to the limit.
Here, Sean Robinson, Service Leader at industrial automation specialist, Novotek UK & Ireland, explains how to modernise without the hassle.
Despite the fact that the UK’s leading food and drink producers experienced revenue growth of 7.5% in 2017 — driven by inflation and a weak pound following the Brexit referendum — commodity price inflation resulted in average profit margins falling half a percentage point to 6.2%.
The figures, according to OC&C’s 30th annual Food and Drink 150 report, show that although the weaker pound saw exports grow by 14%, producers and retailers were also hit by increased commodity costs of around £1.6 billion; £645m of this was absorbed by producers, lowering their margins.
The research is not inconsistent with Novotek’s experience in the food and beverage industry. Our customers operate in industries ranging from brewing and baking to processing and packaging.
As the sole distributor of GE Digital’s analytics platform, Predix, in the UK and Ireland, this also includes non-edibles customers who work in the manufacture of toothpaste, laundry detergents and the like.
The biggest challenges these businesses face is responding to customer buying behaviour in a way that is flexible, efficient and cost effective.
Being able to change flavours, roast specialty coffee beans, cut out steps in the cleaning sequence and even optimising the current draw on a motor in the chocolate conching process are all elements that put pressure on manufacturers.
Unsurprisingly, this has forced many manufacturers to act in haste, adopting new technologies as a means to an end rather than equipping themselves to make the most of what the future holds.
Novotek’s position as a supplier of everything from automation hardware and software that runs inventory and scheduling, to full MES systems, means that we have a unique view of how to solve this problem; businesses should buy automation systems like they would trousers for their six-year old.
In the same way that buying trousers for your child is a trade-off between giving them something that is practical now, but also something they can grow into, plant managers should future-proof their automation system.
Food and beverage businesses that have been reluctant to build connectivity into their systems often still rely on physical food safety audits — many still routinely use clipboards.
This doesn’t have to be the case, considering that the cost of components such as sensors, HMIs and PLCs has come down in recent years, with hybrid devices now offering added functionality.
As well as lower cost, plant managers should take advantage of real-time data collection that can be accessed by relevant stakeholders across the company. MESs can provide executives with easy to understand analytics and reporting.
This convergence of information and operational technology (IT/OT) also means that machine data from the factory floor can be automatically correlated with quality system data in an offline laboratory to provide actionable insights.
So, regardless of whether revenues in the food and beverage market have shrunk, businesses shouldn’t feel forced to push their profit margins into unsustainable territory.
By considering the efficiency and productivity gains offered by the latest automation systems, businesses can thrive. It’s almost like buying trousers for your six-year old.