Automation is Revolutionizing the Food Industry Study Shows
Enhancing Supply Chain Resilience: Unleashing the Power of Automation and Retaining Top Talent in the Food Industry.
A groundbreaking collaboration between FMI – The Food Industry Association and Boston Consulting Group has culminated in the 2023 Supply Chain Benchmarking Report.
Report Brief:
Supply chain leaders should invest in automation, labor retention, report finds. Both can help secure business continuity, maintain service levels and reduce cost variations, according to a new report from FMI and Boston Consulting Group.
A variety of automation options ranging from receiving and put away to picking and packing can provide different labor productivity increases at facilities, according to the 2023 Supply Chain Benchmarking Report.
Suppliers faced headwinds in 2022 with volatile demand but now are seeing demand lessen from retailers.
The report’s focus on the supply chain comes at a time when the trade group and consulting firm expect service performance to bounce back in 2023 after supply chain challenges in recent years.
Supply chain leaders need to make investments in automation and labor retention programs to secure business continuity, maintain service levels and reduce cost variations, according to a new report from the FMI – The Food Industry Association and Boston Consulting Group.
The recent softening demand is allowing CPGs to recover from their previous capacity constraints. But at the same time, operating cost increases are outpacing revenues, putting margin pressure on CPGs. As a result, CPGs are seeking more ways to make their businesses more efficient, per the report.
“Much of the increased operational burden for maintaining service levels has been shifted upstream to CPGs,” the report noted.
While nine in 10 of large publicly traded retailers analyzed for the report grew earnings before interest and taxes (EBIT) dollars in 2022, only three in 10 of large publicly traded CPGs did the same. Retailers have also been making strides in making their store models more labor efficient.
Supply chain leaders need automation and labor retention programs to build on that progress, the report says. FMI said the report, which is based on a 2023 survey of 12 CPGs, four wholesalers and nine retailers, is geared toward supply chain, merchandising and sales executives responsible for managing complexity and leading change on the demand and supply side.
Employee turnover remains high for CPGs and retailers with higher paying jobs elsewhere, dissatisfaction at work and poor performance as the top three reasons for turnover for both. However, “culture” and leadership” were ranked higher at No. 4 and 5, respectively, for CPGs compared to retailers, who saw those land at No. 6 and 7.
Retailers tend to see a higher median turnover rate among warehouse employees (76%) compared to CPG players (61%). CPGs saw their rate almost split between involuntary and voluntary exits, while retailers saw a nearly 1:6 ratio.
The report noted that retailers have reduced their supermarket labor hours by adapting their staffing and labor models, particularly in labor-intensive departments like fresh prepared and deli.
PepsiCo has deployed innovative machine vision technology that reads warehouse labels and barcodes to drive efficiency and increase throughout its distribution centers.
Autonomous forklifts with navigation capability, robotic case packer technology and a vertical lift module solution with an automated crib storage system can each provide a 2X-3X labor productivity impact, per the report. Meanwhile, an ASRS system of multiple shuttle robots and elevators can have a 5X-10X impact.
Investments in AI, machine learning and optimization solutions can help lay the foundation for accelerating digital capabilities, per the report.
Next-gen sourcing can use artificial intelligence and other digital tools to analyze spend, support negotiation and ensure efficiency, while trade partner collaboration can embed integrated capabilities to optimize the end-to-end ecosystem across partners, the report said.
Benchmarking the Food Industry Supply Chain Ecosystem
Introduction
In the fast-paced and dynamic landscape of the food industry, supply chain leaders face mounting pressures to ensure seamless operations, reduce costs, and maintain exceptional service levels. As we stride into 2023, the challenges of the past two years have prompted a renewed focus on supply chain efficiency and adaptability. A groundbreaking collaboration between FMI – The Food Industry Association and Boston Consulting Group has culminated in the 2023 Supply Chain Benchmarking Report. This comprehensive study provides invaluable insights into the current state of the food supply chain and highlights the pivotal role of automation and labor retention programs in achieving sustainable business continuity and growth. We explore the specific findings of the report, unveiling actionable strategies for supply chain leaders to navigate the ever-evolving industry landscape.
Unraveling Supply Chain Challenges and Opportunities
The food industry faced turbulent times in 2020, grappling with a plethora of disruptions such as labor shortages, volatile consumer behavior, geopolitical tensions, and extreme weather events. While 2022 saw some recovery, demand forecasting complexities and supply chain volatility persist. The 2023 report emphasizes the need for proactive strategies to manage complexity and enhance performance across the value chain.
Leveraging Automation to Boost Efficiency
The report delves into a diverse array of automation options, each offering distinct labor productivity increases across facilities. From receiving and put away to picking and packing, automation has proven to be a game-changer in streamlining supply chain operations. Remarkably, mobile robots, robotic forklifts equipped with navigation capability, automated mix-case picking technology, high speed shuttle systems, and automated cube storage systems have shown to potentially deliver labor productivity impacts ranging from 2X to an impressive 10X.
However, the key to successful implementation lies in laying the foundation for accelerated digital capabilities. Investments in artificial intelligence, machine learning, and optimization solutions empower businesses to unlock unparalleled efficiencies and make informed, data-driven decisions.
By incorporating next-gen sourcing and trade partner collaboration, businesses can effectively analyze spend, support negotiation efforts, and optimize the end-to-end ecosystem across partners.
Unveiling the Labor Retention Imperative
High employee turnover remains a persistent challenge in the food industry. The report identifies the top three reasons for turnover: the allure of higher-paying jobs elsewhere, dissatisfaction at work, and poor performance. Interestingly, culture and leadership emerge as significant factors influencing labor retention in CPGs, ranking fourth and fifth, respectively.
To address this issue, supply chain leaders must invest in comprehensive labor retention programs that foster a positive work culture, provide growth opportunities, and recognize employee contributions. By nurturing a motivated and engaged workforce, businesses can reduce costly turnover and drive productivity.
Four Key Themes Shaping Grocery Supply Chains
1. Service Recovery: Retailers showed remarkable improvements in on-shelf availability in 2022, contrasting the suboptimal service performance of CPGs. Focusing on service recovery initiatives will strengthen customer satisfaction and brand loyalty.
2. Cost Pressure: With costs rising faster than revenues, CPG suppliers are under tremendous margin pressure. To address this challenge, supply chain leaders must implement cost management strategies, optimizing the entire plant-to-shelf value chain.
3. Labor Challenges: Persistent labor challenges necessitate agile operating models and strategic investments to reduce dependency on manual labor. Embracing automation can be a game-changer in streamlining labor-intensive processes.
4. Building Advantage: As the pandemic wanes and demand softens, supply chain leaders must capitalize on transformational capabilities to drive growth and efficiency, gaining a significant competitive advantage.
Conclusion
In the quest for a resilient and efficient food supply chain, supply chain leaders must heed the insights offered by the 2023 Supply Chain Benchmarking Report. Automation and labor retention programs have emerged as linchpins in securing business continuity, managing costs, and elevating service levels. By investing in cutting-edge technologies and nurturing a motivated workforce, businesses can adapt to the evolving demands of the industry, driving sustainable growth and delivering exceptional value to consumers. Embracing innovation, collaboration, and data-driven decision-making will define the future of the food supply chain, as leaders forge a path towards a more agile, efficient, and customer-centric industry ecosystem.
“Supply chain leaders are identifying opportunities across the value chain to improve operational efficiency, costs, and better enable enterprise business strategy,” Doug Baker, FMI’s vice president of industry relations, said in a blog post.
