TO UNDERSTAND HOW ALL THIS POTENTIAL CAN BE FULLY UNLOCKED, THE RESEARCH PROGRAMME SPOKE TO INDUSTRY LEADERS ABOUT WHAT OBSTACLES THEY FACE. Closing the action gap
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. “SME’s 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."
When it comes to automation, the industry was one of the early adopters of the technology, and it knows how to automate effectively when conditions align. If there is an issue, it is that engineering solutions do not always perform well out of the gate, slowing integration processes. In some cases, the lower cost of some labour proves a tempting potential short-term solution. For digital and AI, the landscape is more nuanced. Three quarters of the leaders in the research revealed that they can see the benefits of digital and AI solutions and how they can support their company’s strategic objectives. Most have already identified exciting opportunities for their business. However, full maturity is a way away. Just half are confident that their business knows the right approach to implementing and effectively deploying newer technologies. There is an action gap between digital enthusiasm and actual implementation. Three key interlinked reasons for this gap emerged during industry interviews, each of which can be overcome with a joined-up industry-wide approach.
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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