FIRST MOVE MOMENTUM VS. FIREFIGHTING Obstacle 1. Commercial environment
Proving a significant return on investment (ROI) in a sufficient time frame is one of the greatest challenges facing food and drink manufacturers when adopting technology. Implementation costs are seen to be high compared to perceived benefits 11 , and without short-term gains, long-term investment becomes challenging. This issue was raised repeatedly in industry interviews and is compounded by quarterly shareholders’ review cycles, private equity ownership, and consumer and government expectations around ultra-low food prices. Keith Thornhill, Siemens' Head of Food & Beverage, UK and Ireland, put it succinctly: “Companies can’t see the wood for the trees because they are forever in firefighting mode. It’s like trying to redesign a plane while it's flying.” The highly competitive, fast-moving nature of the food system disincentivises innovation particularly for mid- sized organisations predominantly selling private label products directly to retailers on short-term, open-book contracts. This unpredictable environment can limit innovation as suppliers lose interest. It is difficult to commit to significant investments without the assurance of long-term business stability. “SMEs and midcaps are often firefighting focused on getting the orders out on time with little to no headspace to think about the longer term,” believes Bhavnita Patel, Sector Development Manager for Agri-Tech at the Manufacturing Technology Centre. “A frequent blocker to process and technology projects is that everyone is looking for short-term returns on their investment of between 12 months and two years.” However, if an organisation wants to invest in new technology, such as energy efficient ovens or an automated packaging line, it typically requires sizeable upfront capex for benefits which might not be realised fully for >10 years."
The picture is similar in SMEs and private label companies . Businesses generally target two-year ROI for automation projects, making it challenging to justify investments in advanced technologies that require a longer horizon to demonstrate value . Andrew Martin, Head of Food and Drink at the Advanced Manufacturing Research Centre (AMRC) calls it the “valley of death” and sees it on a daily basis: “Businesses have a great idea but can’t get it to the point where it’s commercial,” he says. “Suppliers are disincentivised from investing too much because of open book agreements. Retailers control the market and, yes, they want innovation but want to know they’re going to get something back.” “In other sectors,” Andrew continues, “everyone knows they have to make enough money to invest in new technology so there’s enough space in the marketplace. In food and drink, the cash left can be miniscule so they might spend money on recipe development, rather than tech.”
11.Konur, S., Lan, Y., Thakker, D. et al. Towards design and implementation of Industry 4.0 for food manufacturing. Neural Comput & Applic 35, 23753–23765 (2023)
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