The food and beverage industry is on the brink of significant change as we approach 2025. Companies in this sector recognize the importance of digital transformation, but many are struggling to navigate the plethora of options available to them. This “option paralysis” is causing companies to lag behind, as they hesitate to disrupt their existing systems in favor of new technologies.
A recent report from IFS highlighted the challenges facing the food and beverage manufacturing sector. While most industry leaders acknowledge the critical role of technology in their businesses, fewer than 10% are considered digital leaders. The majority of respondents, 65%, described themselves as “laggards” who are struggling to make progress in their digital transformation journey.
To overcome these challenges and unlock the benefits of digital transformation, food and beverage manufacturers must address three key areas: cybersecurity threats, supply chain disruptions, and climate change.
According to the IFS report, digital leaders allocate 45% of their budget to digital transformation initiatives, driven by clear strategies and a focus on ROI. In contrast, laggards are overwhelmed by the array of options available to them, making it difficult to evaluate new technologies and integrate them into their existing systems.
To navigate the road to digital transformation, companies must first identify the specific challenges they face. By doing so, they can develop a clear path forward and capitalize on the advantages that digital transformation offers.
1. Cybersecurity Challenges:
Cybersecurity is a top concern for food and beverage manufacturers, with 36.5% of respondents citing it as their biggest business challenge. The increasing frequency of cyberattacks targeting manufacturing systems and equipment poses a significant threat to companies of all sizes. Recent incidents involving industry giants like Dole, Sysco, and Mondelez highlight the potential impact of cyber incidents on production and distribution.
To address cybersecurity risks, companies must prioritize investments in secure technologies such as cloud computing. Single-tenant cloud architecture can provide greater security and protection against cyber threats, ensuring business operations remain uninterrupted in the event of an attack.
2. Climate Change and Sustainability:
Meeting ESG (Environmental, Social, and Governance) and sustainability demands is another pressing challenge for food and beverage manufacturers, with 34.9% of respondents identifying it as a top concern. Despite the importance of sustainability initiatives, many companies lack a credible ESG strategy and struggle with data collection and management for reporting purposes.
Implementing sustainability measures can bring new value to the industry, with initiatives like Digital Product Passports (DPPs) leading the way in promoting transparency and circularity in product lifecycles. By prioritizing sustainability goals and embedding them into operations, companies can drive positive changes in lead time, quality, and business models.
3. Supply Chain Resilience:
Supply chain disruptions continue to be a significant challenge for food and beverage manufacturers, with over a quarter of respondents citing it as an ongoing concern. The need to improve resilience and agility in operations is critical for companies looking to thrive in a competitive market.
Localization strategies, such as friendshoring and reshoring, are becoming increasingly popular as manufacturers seek to optimize supply chain resilience and reduce environmental impacts. By leveraging digital tools like AI-driven data pattern recognition, companies can enhance their supply chain networks, improve risk assessment, and foster better collaboration with suppliers.
In conclusion, food and beverage manufacturers must embrace digital transformation to stay competitive and resilient in a rapidly evolving industry landscape. By addressing cybersecurity threats, sustainability challenges, and supply chain disruptions, companies can position themselves as leaders in the market and drive innovation and growth. It is crucial for businesses to act decisively now to overcome digital inertia and capitalize on the opportunities that digital transformation offers.
