As we start to witness the widespread adoption of digitalisation – the technology focus behind Industry 4.0, Siemens UK’s Steve Martin outlines how the company’s ‘outcome based’ service proposition, allied to industrial digital technologies, is set to revolutionise its relationship with the food industry.
Food waste is estimated to be costing food and beverage manufacturers £1.2bn every year.
Tackling the issue of inefficient production performance and reducing waste volumes through factory optimisation can lead to tangible rewards of higher yields, cost savings, and a positive impact on the environment, as well as making a positive contribution to the worldwide challenge of feeding our populations.
The world’s population stands at 7.6 billion people, with estimates showing that by 2030 this figure will rise to 8.6 billion.
That means we must grow, harvest, manufacture and distribute ever-rising food volumes just to keep pace with the demands of an expanding population. It will be a challenge.
A key influence on whether we can rise to such a test will be the ability to tackle the issue of food waste that results from the way in which we manufacture it.
According to the charity Waste and Resources Action Programme (WRAP) in its UK food manufacturers report, Estimates of Food Surplus and Waste Arising in the UK, the sector accounts for 1.7 million tonnes of waste through ineffective and inefficient plant and production performance.
This equates to £1.2bn per annum of direct cost affecting the bottom line of the UK’s food manufacturing sector.
So, what are food manufacturers doing about such startling numbers?
If we are to tackle the impending issue of food supply for a rapidly growing global marketplace, then it is incumbent on manufacturers and producers of food to not only play their part in providing an effective and efficient manufacturing solution, they also need to do so in a responsible and sustainable manner – but they need help to do this.
This article first appeared in the March issue of The Manufacturer magazine. To subscribe, please click here.
The optimisation of manufacturing performance, starting with the issue of non-conformance, brings with it viable commercial and reputational benefits.
Addressing industry estimates of the millions of pounds of cost lost to food waste and production inefficiencies would create additional and much-needed financial resources to be utilised in other areas of a food manufacturer’s business.
Cash retrieved thanks to the results of a holistic and intelligence-led approach to tackling waste through the production process could, for example, help fund new innovation. This could be product development, new solutions and processes that shorten time to market.
It could also help with a manufacturer’s digitalisation journey where smart data analysis would support consumer-driven mass-product customisation and further efficiency gains, as well as finance-enhanced marketing programmes and the development of staff as we enter the digital era.
Likewise, the brand reputation and environmental benefits of efficiently doing more with finite volumes of raw materials, or optimising production to meet future demand so it can be met with existing facilities, cannot be underestimated.
The cost and carbon footprint benefits should also appeal to leaders of food manufacturing businesses, due to the positive impact it would have on the environment, linking back to farmers generating raw materials and optimising cost savings in their operations.
REAL WORLD CASE STUDY
A major baked goods manufacturer was using old compressor technology on their refrigeration plant. After an audit by Siemens, it was calculated that replacing the compressors and control system with a Siemens solution could save them more than £100k/pa and provide a significant contribution to their CO2 reduction targets.
Siemens provided a turnkey solution that after implementation has delivered even greater savings than anticipated and will give an ROI in less than two years.
Areas of waste
In a recent analysis by The Grocer magazine, the production areas where manufacturers are currently underperforming when it comes to food waste are abundant and costly.
Their report cites practices of product being checked and when found to be even slightly off spec – but still good to eat – it is discarded after something has gone askew with the production process.
Inadequate production line design, errors on barcodes, lack of insight on actual waste volumes, machinery performance issues and over-ordering of materials via bulk buying are among typical examples where manufacturers should and can up their game.
In addition, there is the financial and environmental cost linked to waste disposal, with significant food volumes having to be sent to landfill.
The issues are so widespread that the sector is currently generating approximately £1.2bn of waste-associated costs, much of which could be diverted to a food manufacturer’s bottom line.
In order to help the industry tackle this challenge, Siemens has developed solutions to provide an innovative ‘outcome-based’ relationship with manufacturers.
The aim is to provide a service-orientated business structure that provides new service offerings that tap directly into the challenges food companies face, and helps to deliver both financial benefits and a boost to future digitalisation activities.
REAL WORLD CASE STUDY
The servitization and digitalisation approach is not restricted to the food and beverages sector. One of the UK’s foremost glass manufacturers, Pilkington UK Ltd, part of the NSG Group, is working with Siemens UK to drive a major energy management project across its production sites.
The programme is designed to enhance Pilkington’s overall energy performance, cut costs and drive a more sustainable and environmentally friendly future.
Significant energy reduction improvements have already been generated at some of Pilkington’s UK sites and a holistic approach covering a range of technology solutions across the entire manufacturing plant is on target to achieve total energy cost savings for Pilkington in excess of £1m.
In a classic approach, a customer identifies an opportunity and creates the business case to install a new asset or production equipment on site that could help tackle the waste conundrum.
They raise the required capital via their CAPEX programme and procure from a machine builder (OEM), who would work on technology specification. The OEM would install the new asset on site with a standard warranty term and the end-user is left to ensure the asset performs through its life.
However, there is now another way. It is a solution based on the value of co-creation through partnership. First, an OEM such as Siemens collaborates to identify and create the business case together with the customer.
The OEM sells a service to deliver an outcome the end user wants from the equipment through a period of time. The OEM procures and installs the required asset using a tailored financial model and delivers a performance-based service with the manufacturer charged a monthly service fee.
In the case of Siemens, they supply the technology hardware, the digital infrastructure and the service.
Such a relationship has many benefits: it moves a percentage of the expenditure from CAPEX to OPEX to make customers more competitive; improves earnings before interest, taxes, depreciation and amortisation (EBITDA); limits obligation; and maximises cash flow health.
It also allows manufacturers to access scalable and future-proofed digital technology solutions to optimise production performance and tackle critical and expensive issues such as waste. Finally, it supports responsible manufacturing by providing the means to address issues such as energy management and carbon footprint impact.
With an end-to-end solution, from initial proposition identification, through digital technology execution, onto service outcomes and clear intelligence analytics, a service-based approach is set to revolutionise the food-manufacturing marketplace.
This new type of relationship not only maximises and accelerates potential cost reductions, it is also embeds a big data infrastructure and digital twin, which are the key components to a digital future, within manufacturing operations – all underpinned by a tailored commercial model to meet the customer’s return on investment.
This approach will help companies get fit for a future where the use of data-led digital technologies will be the key to success.
It can create a truly optimised plant to deliver supercharged results, and enable today’s food manufacturers to make intelligence-based, strategic investments that will truly maximise commercial potential in the years ahead.
REAL WORLD CASE STUDY
A major soft drinks manufacturer was losing hundreds of litres of product on each changeover as they were unable to determine with any accuracy when the previous product or CIP wash had been flushed through the system. This meant good product was being flushed down the drain with serious cost and environmental implications.
Siemens was able to implement a control system with sensors to enable an exact measurement of each product to minimise waste between changeovers. The system paid for itself in six months and was later rolled out to all production lines in the facility.
Steve Martin, Head of Strategic Transformation, Siemens UK