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Author's profile photo Valeria Vinclair

Digitization in the food industry: 3 challenges and how companies solve them

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According to a Sales Force study, only just under ⅕ of the food industry sees digital transformation as a threat. Even though those responsible in the industry are optimistic about digitalization, many companies are already facing major challenges.

Challenge #1: Increasing customer demands

Customers are becoming more demanding. More than ⅔ of customers today consider the positive experience to be just as important as the service received or the product itself. The importance of response times and consistent communication across all channels is also increasing. 

Digitization in customer service

In order to address growing customer demands, digitalization offers a range of new technologies: 

  • Chatbot technologies can automatically answer standard customer service queries. Customers get an answer faster, while human customer support can focus on effectively answering more complex inquiries. 
  • By networking purchasing, warehousing and sales within modern cloud-based business software and using advanced analytics methods (demand sensing), supply bottlenecks and disputes with customers can be avoided. 
  • In marketing and sales, more target group segments can be addressed in a more differentiated manner through automation.

Challenge #2: New market entrants

In macroeconomic terms, digitization is also splitting up value chains. Established companies that used to control the entire chain must compete against new start-ups. This is because the digital transformation has dismantled the conditions of entry for new companies in many places. A larger capital stock is not enough to deny new market entrants access.

These start-ups then compete for parts of the value chain and, through the use of modern technologies, are often able to offer an equivalent or better service more cheaply or at the same price. One example is the triumph of global platforms such as Amazon, which step by step have been stealing the thunder from traditional retail, while making it easier than ever for new retail companies to enter the market. 

Digitalization in production

Automation in industry is gaining more and more momentum.

  • Collaborative ki-powered robots take over parts of the production process
  • Standard tasks can be automated through intelligent process automation
  • New technologies such as predictive maintenance allow for a low TCO and higher overall plant efficiency.
  • IoT networking of devices enables remote maintenance

These technologies have the potential to create the basis for the necessary modernizations in production. Their implementation is an essential tool for making business-critical processes in industry more efficient and positioning themselves robustly for the future. 

Challenge #3: Growing pressure on supply chains

The Corona crisis has highlighted the importance of resilient supply chains for sustainable business success. Against the backdrop of climate change and ecological problems, political pressure on the food industry is also growing. Stricter requirements are increasing the administrative burden. More and more laws require transparency – for example with regard to supply chains. As environmental awareness is also increasing among the population, sustainability is becoming more and more of a purchasing decision. 

Digitalization of the supply chain

The digitalization of the supply chain not only has the potential to create more transparency for consumers and controllers, but also to systematically increase efficiency along the supply chain. 

The basis for such a digitalization of supply chains is the use of IoT technologies along the entire supply chain from production to sales. 

  • Production volumes: Instead of estimating based on experience, intelligent tools evaluate various factors to estimate demand as accurately as possible. This means that over- or underproduction is less likely to occur. 
  • More efficient maintenance: Instead of fixed maintenance intervals or a reactive model, sensors on the machine measure its condition and reliably calculate when the probability of failure increases. Predictive maintenance can thus increase GAE, reduce TCO and make maintenance more efficient overall
  • Identify need for optimization: A digitally networked supply chain not only makes itself transparent to customers, but also to decision-makers in the company. Since daily updated figures are clearly collected at any time, they can make better, data-based decisions….

Here, IoT technologies are the key to more transparency vis-à-vis states and customers. By networking all devices with each other, supply chains can be mapped automatically without increasing the administrative burden. 

ERP system is the basis for sustainable change

A modern ERP system remains the central prerequisite for the development and implementation of a viable digitization strategy. Both classic functions such as the retrieval and forwarding of master data and new technologies are increasingly built on a flexible central system. 

An ERP system like SAP Business ByDesign is the command center for planning and controlling essential business processes. Starting with a functioning business solution, some of the key challenges can be addressed. But it also creates the basis for more far-reaching transformation projects in the future. 

Digital transformation affects all companies in all industries. In the SAP community, you will find like-minded entrepreneurs with whom you can exchange ideas on current digitization issues. Post your comments or questions here: https://answers.sap.com/tags/2521823005136277121291. Or connect with us!

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