Controlant Food Industry Report: State of the Industry 2022

It won’t be news to anyone that the food industry has been affected by Covid-related disruptions over the last two years, but as the dust settles, we can identify the significant trends that are affecting the industry right now. What we’re seeing in the industry is significant transformation across all areas of an organization’s operations. From supply chain woes to the challenges faced by extraordinary inflationary pressures, finding ways to meet the new consumer is critical for future business success. With each disruption comes the opportunity to differentiate your organization in the marketplace. With proper planning, agile organizations can utilize the lessons learned to prepare for success for many years to come.

Disruption-driven transformation

Not only is the food supply chain being asked to do more with less, but we’ve each been given responsibility for ensuring business continuity and finding ways to save money, improve quality, and increase customer satisfaction. For leaders and other strategists, it’s important to break down silos of “how things have always been done” and to think long term. Regardless of where we are on the supply chain, when we each consider the interconnectedness of our company environment, it’s critical that we consider the challenges faced by other parts of the organization and how it will impact our own areas of expertise. How is the “great resignation” impacting your vendors’ and distributors’ ability to deliver on time and at a high level of quality, for example, or how could concerns about inflation and supply chain challenges pose risks to Economically Motivated Adulteration (EMA) and food safety? When we take a few steps back from our own areas of expertise and consider the challenges facing the company at a higher level, we can move from a position of reaction to one of prevention.

Preparing for curve balls

Valuable conclusions can be drawn from conducting a post-mortem analysis of incidents, but more pertinently, what should firms do in response to lessons learned within their industry as well as outside? From a global shortage in shipping containers to mass factory closures in China, being quick to absorb learning points can bolster an organization’s resilience, making it easier to navigate the next crisis, irrespective of the nature of the problem. There’s usually very little forewarning of these disruptions, so agility is key. What can your company learn from the microchip challenges that the automotive industry has experienced; or from the shortage of the humble twist tie that brought bread production across America to a halt? How would the inability to obtain a critical ingredient impact your ability to produce? Likewise, how can your company benefit from the sudden pandemic-driven surge in the uptake of new technologies across the supply chain?

The accelerated implementation of automated and robotic solutions provides an opportunity to maintain this pace; to see past traditional red tape and – without going so far as to throw caution to the wind – follow more visionary business plans. Let’s look at a few of the most significant trends already impacting our industry and discuss how companies are successfully taking on these known challenges and opportunities.

Sustainability is the way

The impact that the global focus on sustainability is having on the food and beverage industry can’t be overstated. Sustainability efforts in the food and beverage industry can be broken down into a few areas, outlined below, but sustainability must be an embedded feature of the industry, rather than an external influence. Simply put, sustainability culture is the way the industry will operate in the future.

Tackling food waste
It’s a dismal fact that around 40% of food never makes it onto the consumer’s plate because of inefficient supply chains. Reducing food waste is arguably the greatest challenge facing our industry today. Not only is it critical that we solve this challenge if we intend to feed the world, but it makes great business sense as well, with a direct impact on the food cost line of your P&L. Given ongoing food inflation concerns, the positive impact of reducing food costs is significant.

Reducing carbon
The carbon footprint is also a focal point for food companies in various ways, depending on the type of company. For retailers and restauranteurs, the primary focus might include localization of suppliers, to reduce transit costs. For food distributors and manufacturers, this could include reducing transit distances to minimize fuel usage or transitioning to more renewable power sources.

Being a good global citizen
Sustainability is often used as a euphemism for global citizenry. This concept can encompass everything from how you take care of your employees, your suppliers and their environmental impact, to recycling and composting efforts. There simply isn’t a single, unified definition of sustainability that meets every company and their unique situation.

Your version of sustainability
What does sustainability mean for your organization from a social, environmental and economic standpoint? If you’ve already gone through the process of identifying and implementing sustainability initiatives, this is good news; you can now focus on executing them. If not, you now have a great opportunity to define sustainability for your company. Put more bluntly, you need to do this soon and you need to be thorough: what we’re seeing is that it’s no longer acceptable to pay lip service to your sustainability efforts. Organizations today will need to demonstrate their efforts. Companies are doing this through a variety of ways, including annual reports as well as audits conducted by external parties.

The technology to act

Nearly everything in our lives has been changed by technology and how we get and consume food is no different. Just a few years ago it was impossible to imagine having your groceries delivered to your home, now nearly a quarter of customers are purchasing their foods this way. Restaurants are no exception. In fact, meal delivery and takeout has grown significantly over the last two years, providing opportunities for retailers and restaurants to innovate in ways that were previously unimaginable.

When it comes to the cold supply chain, organizations are actively implementing new and innovative monitoring and traceability technologies to meet regulatory compliance, to build agility into their supply chain and to gain a competitive advantage in the marketplace. Companies are finding that having control of the conditional attributes of their shipments, such as temperature, light and location, and the consequent ability to intervene in real-time, is allowing them to save significant sums of money through active prevention, instead of the costly practice of passive reaction to excursions, disruptions and other hiccups. With the distribution crunch hitting nearly every industry, it’s important that companies build collaborative partnerships all along their supply chain. Organizations are finding that when they actively monitor their cold supply chain and share this information with associated parties in real time, they can minimize waste and become shippers of preference.

Regulatory motivation

When the Food Safety Modernization Act was implemented several years ago, it was the most significant update to the U.S. food industry in nearly a century. Building on this success, the Food and Drug Administration then introduced the New Era of Smarter Food Safety, “to create a safer and more digital, traceable food system.” To achieve this, the FDA intends to modernize the food industry, utilizing state-of-the-art technology and impacting how today’s consumers obtain food. The process is collaborative, utilizing the expertise of the food industry, technology providers and governmental agencies to achieve buy-in and long-term success.

Traceability is seen as a cornerstone of food safety measures and has increasingly been in the spotlight. Although traditional “paper” traceability has been required for many years, it has often been found to be inadequate at keeping consumers safe. The FDA now takes a more prescriptive approach to traceability requirements, with the ultimate goal of requiring digital systems that will accelerate the recall and withdrawal process. Regulations around traceability and food safety vary from country to country, but they are all motivated by the same general aim to ensure the food we consume is safe. For example, the European Union is actively implementing new regulations related to minimizing the risk of Economically Motivated Adulteration (EMA).

As we are aware, EMA poses risks not only related to commerce, but also to food safety. Having a truly traceable food system is a critical tool in reducing these risks. The bad news is that food fraud cases are on the rise globally; from adulterated honey in South Africa, to Spanish ham relabelled with extended expiry dates, to methanol-tainted Ukrainian vodka. The good news is that most countries already have mechanisms in place to regulate and prosecute these cases, plus ever-improving technology to detect and recall them, or to prevent the product ever reaching consumers. In this context, organizations are utilizing real-time supply chain technologies to enhance their paper traceability programs. By layering truly real-time conditional data on top of track-and-trace programs, organizations can move beyond simply knowing where their food items are, to knowing that the foods are safe. No matter the ideal impact of regulations, they are designed to stipulate the minimum requirements for compliance, and organizations are encouraged and challenged to go above and beyond these minimum thresholds.

Cost counter measures

The food industry is familiar with working within very tight margins but is under significant and new pressures – including increases in wages, supply chain and inflation – so it’s certain that finding ways to save money is top-of-mind for most companies. To control these costs, leveraging all areas of your business is vital. For example, organizations are automating laborious tasks so that less people are needed, and so that employees can focus on higher value tasks. Using autonomous vehicles, robots and other technologies to reduce labor constraints can also make a strong business case.

On the other side of the equation, what seems to be top-of-mind for consumers is inflationary costs, now at a 40+ year high. Consumers are rightfully concerned about this headline trend, and although there’s almost no way to halt the rising cost of food, there are measures we can take to slow down the rate. Organizations are looking for better ways to tighten their belts, and waste is one of the variables they’re focusing on; finding ways to minimize waste can help to mitigate the need to raise prices. When we consider that consumers are beginning to modify their purchasing habits – buying value-focused brands, for example – this is expected to become an even higher priority in the year to come.

Post-Covid preparations

As the world moves past two years of Covid-driven disruption, we can now implement plans to mitigate these types of risks moving forward. Unsurprisingly, one area of significant focus is the cold supply chain. Peering through the lens of possible future demands, the way in which organizations have managed this area of their business during this time simply doesn’t hold up to scrutiny. There are many factors at play, but what is consistently identified as an area of opportunity is the implementation of state-of-the-art technologies that provide insights and visibility that is actionable.

The adoption of state-of-the-art technologies enable organizations to proactively prevent waste, to reduce the time teams focus on tasks, and to improve customer and consumer satisfaction, all the while gaining the insights organizations need moving forward. Controlant technology is providing these types of insights for organizations that are leveraging the supply chain as a competitive advantage for their organization in the marketplace.

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