April 22, 2019

Digitalisation in the food manufacturing industry and the role of smart finance


Brian Foster, Head of Industry Finance at Siemens Financial Services in the UK, explains how new-generation digitalised technology (Industry 4.0) is enabling manufacturers in the food and beverage sector to improve performance through increased manufacturing productivity, more accurate planning and forecasting, enhanced competitive capabilities and greater financial sustainability.


Food and beverage is the single largest manufacturing sector in the UK with an annual turnover of £104bn, which is more than the vehicle production and aerospace manufacturing sectors combined.[1]New-generation digitalised technology (also known as Industry 4.0) is enabling manufacturers in the sector to improve performance through increased manufacturing productivity, more accurate planning and forecasting, enhanced competitive capabilities and greater financial sustainability.Recent research estimates that conversion to digitalised technology could deliver productivity gains (termed the Digitalisation Productivity Bonus) of between 7.4 to 11.5bn for the UK food and beverage sector.[2]

Industry 4.0 can help with food quality, for example. Shelf life is a fundamental issue for many food manufacturers and for businesses that make fresh products the same day as they are shipped; it is important to not overproduce.[3]Digital information flowing up and down the distribution and supply chains improves coordination of supply and demand (which may fluctuate as frequently as each day) to guard against over-ordering and overproducing. Electronic traceability enables producers to track items from delivery to the supermarket shelf. This is about connecting engineering, production and IT in order to support joint systems and more efficient demand and production planning.[4]

Other benefits from digital supply-chain integration include connecting communities and technology through a cloud-based platform. Food Industry 4.0 enables businesses to take a product to market more quickly by connecting the supply chain to the production facility through interoperability. Uncovering patterns in data also allows businesses to actually anticipate customer demand – enabling businesses to harness analytics and further refine their processing solutions.[5]

One industry observer notes that Food Industry 4.0 introduces highly flexible “lights-out” (totally automated) manufacturing that enables new economies of production.[6]One example is a food company’s palletising and depalletising systems that run on a “lights-out” basis. A forklift automatically loads the system with individual cases and robots pick the cases, put them into place, and stack them onto pallets. These pallets are then stacked on top of one another in a dedicated area. Sensors detect when space is running out and only then is human intervention triggered.[7]

The results include reduced personnel costs and optimised personnel deployment, reduced human error, higher process accuracy, automatic monitoring and audit information, and automated action triggers for optimised uptime. Digitalisation also permits the optimisation of preventative maintenance programmes so expensive and delay-inducing machine failures are all but designed out. A good example is industrial bakery ovens, which operate on very tight “fresh-bake” delivery schedules. Oven failure at times of peak production can be absolutely disastrous for customer relationships, so predictive preventative maintenance enabled through sensor-derived data analysis is a critical commercial risk-management benefit.[8]

Connected and communicating production machinery reduces wastage. This enables more flexible production with shorter swap-over times, provides greater energy and machinery-utilisation transparency and improves overall equipment effectiveness (OEE) and other key performance factors.[9]One global confectionery manufacturer has been quick to leverage the benefits of additive manufacturing – 3D printing, a hallmark technology in the digital factory – employing it as part of their new product-development process. The company has been able to turn their ideas into 3D models and then into edible prototypes within a matter of days. Innovating the new product-development process in this way has enabled the company to create and test prototypes more rapidly and economically than any of their competitors and has positioned them as a leader in their field.[10]

Although harnessing technological innovations can help realise cost savings through improved production processes and increased automation, keeping pace with such advancements requires considerable capital expenditure.  Companies may be reluctant to commit large amounts of capital to equipment and technology upgrades due to other pressures, such as staff costs and the need to maintain cash flow.  As a result, food manufacturers are looking to access a broader range of flexible financing tools in order to acquire competitively critical technology. 

Against this backdrop, manufacturers are increasingly turning to a range of smart and appropriate financing techniques – known as Finance 4.0 – to enable them to sustainably invest in the new fourth-generation of digitalised technology and automation equipment. Finance 4.0 covers a range of requirements from the acquisition of a single digitalised piece of equipment and technology, right through to financing a whole new factory. These financing methods can also involve alignment of payments for use of the new generation technology with the expected benefits it produces.

With the food and beverage sector expecting 19% growth over the next five years,[11]manufacturers in the industry will need to invest in the latest technology to stay at the forefront of an increasingly competitive and technologically advanced market. Though some may find the potential costs of technology acquisition challenging, there are financing schemes available that enable investment while preserving working capital. If manufacturers defer investment in new technology, however, they may ultimately be left behind. 


[1]Food and Drink Federation, ‘Our Industry in Pictures’, 2019 https://www.fdf.org.uk/statsataglance.aspx

[2]SFS, The Digitalization Productivity Bonus, April 2017 and SFS, CFO 4.0, Essential financial competencies for digital transformation in UK manufacturing, April 2018.

[3]http://www.foodmanufacture.co.uk/Manufacturing/Food-manufacturers-should-prepare-for-Industry-4.0

[4]http://www.foodmanufacture.co.uk/Manufacturing/Food-manufacturers-should-prepare-for-Industry-4.0

[5]http://www.foodmanufacture.co.uk/Manufacturing/Food-manufacturers-should-prepare-for-Industry-4.0

[6]http://www.telegraph.co.uk/sponsored/business/business-reporter/11853908/new-food-manufacturing-technologies.html

[7]Source: original research, US.

[8]Source: original research, France.

[9]http://www.fponthenet.net/article/124535/Industry-4-0-and-all-that-.aspx

[10]http://www.freshminds.net/2014/01/five-large-food-beverage-brands-truly-innovating/

[11]Protel Associates Ltd, Positivity for UK food sector & drink sector in 2017 despite Brexit uncertainty’, 7 November 2016