Trend Report: 5 Operational Changes Impacting Food & Beverage Manufacturers in 2019 (and How to Update Your PLM Processes in Response)
Introduction 1.Trend 1: Increasing Innovation Speed for Creating Contemporary Products 2.Trend 2: Reducing Costs with Lower Global Goods Pricing 3.Trend 3: Improving Traceability and Response Times to International Regulations 4.Trend 4: Integrating the Customer Experience with Product Digitalization 5.Trend 5: Sourcing International Product Expertise on Demand Conclusion
From ever-complex international regulations to greater consumer interest in ingredient materials, sustainable product development processes and clean labeling, food and beverage manufacturers are facing a barrage of industry changes.
Locally, consumers want healthier, more diverse products at a fraction of the cost and with faster convenience.
Globally, regulatory agencies are growing country-specific requirements for ingredient limits and supply chain operations by the day.
Internally, multi-level formulations, disconnected communication and international sourcing and distribution make traceability an impossible task.
In response, food and beverage manufacturers must track a vast, growing network of product data and data use on a global scale. Using manual processes and physical document tracking across the supply chain just won't cut it anymore in this rapid-action environment.
Not only is PLM software and process automation a growing necessity to maintain speed and accuracy in product development and regulatory compliance, but the methods by which food and beverage manufacturers are using PLM tools are also changing in response.
In this white paper, we cover five significant trends that food and beverage manufacturers can expect to see in 2019 and beyond and how these trends will change internal operations across the supply chain. For each trend, we'll also offer insight on how to adjust your product lifecycle management and PLM software use to keep your supply chain as current, cost-effective and competitive
Trend 1: Increased Innovation Speed for Creating Contemporary Products
It's no secret that consumer preferences are moving towards a desire for naturalness in products with recognizable ingredients and ingredient sources. Contemporary products offer the perception of pure and organic ingredients that don't seem like they were manufactured as a complicated formula in a lab.
“78% of U.S. Shoppers are concerned about the nutritional content of the foods they eat.”
[ “US Grocery Shopper Trends 2017.” Feb 2017. FMI. Page 27. https://www.fmi.org/docs/default-source/webinars/trends-2017-webinar-7-18-2017.pdf]
On a formula level, this means using less sugar, less palm oil and fewer unrecognizable ingredients, and sometimes fewer ingredients in general. On the packaging level, consumers (and as a result, regulatory agencies) desire more detailed insight into ingredient sources and manufacturing standards right on product labels. Labels that denote options such as gluten-free, non-GMO, vegan and locally-sourced ingredients create a culture of choice that's only growing as contemporary products hit the shelves.
“47% of surveyed manufacturers say improving ingredient transparency and labeling helped grow sales”
Furthermore, the delivery methods for these new options go beyond simple labeling changes. Consumer demand is leading a crop of entirely new products, ranging from healthy pre-packaged or frozen meal alternatives to complete meal replacement like protein powder and shakes. Manufacturers must be able to update existing product lines at the ingredient level to align with these preferences and test and launch innovative products at appealing price points.
On the Horizon
Reformulation of existing products
From changing soda beverages to include less sugar or more natural sucrose sources and integrating probiotics to creating more heart-healthy margarine, manufacturers are rethinking and reformulating tried-and-true products to contain a better nutritional profile. To do so, manufacturers need a birds-eye view of ingredient usage across hundreds of formulations and a cost-efficient method for sourcing, determining and using other alternatives.
Improving testing speed for new eating occasions
Creating products for new kinds of eating occasions, like sports protein gels in which customers can ingest all of their necessary vitamins in one go, will require manufacturers to set up their internal operations for even more multi-functional team collaboration. To bring new products to market quickly and smoothly, R&D teams will start to integrate project deliverables from labeling, regulatory, quality, packaging and marketing and the like even more into the new product trial and testing process.
Stricter oversight of supplier data and processes
Updating formulations and revamping internal operations for innovation speed is only half the battle--manufacturers need to go right to the source to ensure that raw materials from suppliers and vendors also meet updated ingredient requirements and brand values. To accurately evaluate and onboard new suppliers, manufacturers need to gather more detailed information around raw material additives, vendor QMS processes and more from the start and ensure those standards remain accurate over time.
What This Mean for PLM Use:
For manufacturers, being able to create contemporary products is driven almost entirely by the ability to access different trials and prototypes across the enterprise quickly. Manufacturers that can reduce delays in communication and improve data access during product innovation will reduce time to market for new products.
Immediate access to trials and prototypes
To reformulate products efficiently and accurately, product developers must have access to a detailed profile of multi-layer formulations and how those formulations are used in product variations on a global scale. This "single snapshot" is tough to create when formulations and product data live between systems, departments and paper trails. By storing and track product trial versions, creating audit logs of trial formulations and providing a direct way to promote trial formulations to final product formulations, PLM systems enable manufacturers to develop and use a single point of truth of product data to:
- Quickly review previous trials and prototypes created across the enterprise to understand current nutritional profiles
- Compare prototypes and select a new winning trial as fast a possible
- Improve multiple products at once with an ingredient-level reformulation
Integrating product data requirements into PLM gates
By using adjustable formula and label specification templates, PLM systems can be configured to add regulatory, quality and procurement criteria into the R&D trial formula specifications and beyond. Instead of passing, collaboration can occur at the specification level and various specifications can be cross-referenced and updated seamlessly to ensure product development contains comprehensive data from that start.
- Reduces busy work and keeps R&D trials, not data gathering or data entry errors
- Introduces more predictability into product trial stages and anticipates regulatory and quality issues before product manufacturing
- Creates faster and more accurate collaboration around new product requirements between Marketing, R&D, Procurement and more
Supplier communication is often decentralized across email reminders, notes in Excel or shared drives. To get a comprehensive view of raw material sourcing and usage, manufacturers will need a digital, standardized way to collect supplier data and integrate it into product specifications at all times. PLM tools like the Supplier Collaboration Portal allow for easy creation of vendor surveys that reflect modern product requirements and automatic tracking and integration of supplier data into the product life cycle.
- Formats supplier questionnaires to understand specific business practices around additives, sustainability and more.
- Implements regular checks on raw material standards.
- Sets reminders for sending raw material information and track supplier communication in one place.
- Directly integrates supplier data into product specifications for more accurate data use.
“It’s not going to do our jobs for us or come up with ideas for us, but it will give us the rails to do it in a systemized way.” - Major Confectionery Producer
Trend 2: Reducing Costs with Global Goods Pricing
With consumer demands changes for the nutritional composition of products, standardizing suppliers and material sourcing on a global level will be required to stay competitive and offer modern, high-quality products at reasonable price points. As the international pricing of goods decreases, manufacturing costs should also consistently decrease to maintain profitability.
Moving forward, manufacturers with the ability to find and purchase the most substantial quantities or variety of materials from a few vendors and use those materials across multi-country formulations and material sets will win out on cost.
On the Horizon
Simplifying Supplier Portfolios
Being able to streamline a portfolio of packaging or ingredient materials and work with one supplier to source multiple needs will bring an immediate automatic economic advantage to the supply chain. Manufacturers are moving towards streamlined portfolios of vendors and suppliers that can serve a variety of purposes and product needs.
Comparing Material Costs by Country
Being able to analyze price, proper nutritional content and compliant material composition from suppliers is paramount to reducing raw material costs. In the future, manufacturers that can instantly compare raw material options from multiple sources, and understand how using each option may impact final products, will harness the advantages of the global supply chain above competitors.
Using the Right Material Sets Across International Options
Once streamlined suppliers materials have been determined, finding all of the material data sets that use those materials is critical to cost-effectively updating formulations. For materials with similar material sets, being able to immediately see the differences and harmonize raw material sets will expedite the impact supplier changes have on the product life cycle.
What This Mean for PLM Use:
Compare Commonalities Across Specifications
With all specifications and packaging materials stored in one PLM system, manufacturers can easily identify commonalities across specifications. PLM systems can pinpoint which products use similar materials, down to the microbiological level, providing a comprehensive scope of where materials can be swapped or synchronized in one go.
Create Exact Global Specifications
Within PLM, country cost comparisons for raw materials can be built directly into product specifications and provide an instant snapshot of those raw material changes that would affect the validity of specifications across the globe. Once raw material sets have been chosen based on these global cost comparisons, specifications can be configured to require only what is absolutely necessary to reach a fit for purpose manner. With a precise specification, manufacturers can loop in more than multiple suppliers for those materials without changing the specification ever time.
“Growth consist of two factors: growing sales and reducing costs. A lot of it is around efficiency increases in processes and also collaboration with sister companies and in the background utilizing each other to reduce costs.” - Major Cereal BrandTrend 3: Improving Traceability and Response Times to International Regulations
Not only are product specifications and data management becoming more complicated, but so is regulatory compliance around nutrition, safety, QMS, procurement and more. Across the globe, compliance thresholds for many material sets are getting more stringent alongside the potentials penalties for non-compliance.
Many countries have already implemented and enforced sugar and salt taxes, and artificial ingredients are quickly on the path to extinction. The list of "banned' ingredients varies from country to country, leading to a complex web of regulatory standards that internal processes must be able to respond to reduce downtime in production quickly.
“Only 27% of companies can monitor product quality at the grower or producer level”
[ 2017 Food and Beverage Monitor: Insights into Trends and Changes in the Food and Beverage Industry." 2017. RSM. Page 6. https://rsmus.com/content/dam/mcgladrey/pdf_download/rsm_foodandbeverage_monitor_report.pdf]
Furthermore, the interconnected supply chain makes facilitating traceability and appropriate investigative response times to potential accidents or recalls a massive undertaking. For manufacturers, product recalls and safety incidents bring a potentially catastrophic loss of brand credibility, but preventing those incidents requires an impossible level of manual oversight all the way down to the producer level.
As a result, most companies are already on the path to self-regulation with new technology that can provide more precise QMS practices, more compliant labeling, traceability across multi-layer formulas and more. After all, it's becoming very costly if done incorrectly across the board. According to a major chocolate retailer, the cost of recalls globally every year is between $50-100 million. With that expense, you could buy multiple PLMS systems to help manage compliance risks.
On the Horizon
Regulatory focus on scientific affairs
Gone are the days of regulatory teams merely reviewing products or ideation decisions and putting a stamp of approval on set material percentages. PLM systems have evolved to the point where regulatory review within product specifications can be automated, and the sheer scale of regulatory compliance oversight required today makes hiring additional regulatory personnel to perform compliance checks unfeasible.
As such, regulatory teams have started leaning towards consultancy roles within scientific affairs. Instead of checking off if product materials meet the proper levels allowed by law, regulatory teams will start proactive regulatory tasks such as advising on the nutritional soundness of the products, adapting products for future regulatory changes, defending the product within scientific communities and acting as ambassadors of product integrity.
By 2025, most packaging that isn't biodegradable will be heavily taxed. Many manufacturers are already integrating alternative packaging, device refills and more to avoid unnecessary fines.
Immediate product integrity research
Regulatory teams need to be able to research and answer internal and external questions around product integrity, ingredient ratios and regulated product attributes on a microbiological level to prevent or respond to quality issues. Being able to quickly find and update formulas in response to changing rules or compromised supply chains is a necessity to avoid any delays in production and cut down the cost of manual traceability and compliance.
What This Mean for PLM Use:
More detailed specification labeling
Current labeling standards include broad categories like vegetable oils or animals fats. In the future, both consumer preferences and regulatory changes will lead to more detailed categories and subcategories on product labels, requiring greater transparency and more granular raw material tracking from manufacturers. As such, product specifications from formulation to packaging will need to expand to incorporate more specific data fields, and manufacturers will be on the hook for tracking changes to those categories throughout development processes.
On-demand label printing
Today, most manufacturers buy a packaged product with pre-printed labels. However, increasing demands for label transparency means labeling procedures will need to be quickly adaptive to rapidly-changing ingredients on a daily basis. Labeling processes must be prepared for all possible product variations, which would be impossible to keep on hand. Using on-demand printing, manufacturers will be able to create labels that match new formulations as they are designed or put into use and print the right labels as a product comes into the packaging machine. PLM systems can be used to produce label specifications on a daily basis, which can be linked to daily recipes as well as packaging and printing specifications kept in the same system.
Instant product material traceability
By offering a single point of truth for multi-layer formulas, manufacturers can use PLM systems to immediately search and identify formulas affected by safety or quality issues. In the case of a potential product recall, being able to instantly drill down and see which product batches used contaminated ingredients can make the difference between containment or catastrophe. Manufacturers can also use a PLM system's master view of formulations to understand the scope of how many multi-layer formulations will need to change in response to upcoming compliance changes. On a daily basis, PLM tools that include threshold parameters for ingredient and material attributes within product specifications standardize and automate ongoing compliance and the prevention of recalls and safety issues.
“DevEX allowed me to set up the standards and thresholds for my materials and gives me a check mark for each requirement. Once you’ve built it in and verified it, you don’t have to do it anymore.” - VP and Global Director of Product Development & Innovation, Major Spirits Manufacturer
Trend 4: Integrating the Customer Experience with Product Digitalization
The ecosystem around the modern brand experience goes far beyond packaging choices or marketing-created demand. As consumers want a more direct line to manufacturing details, consumers are increasingly looking for a connection between nutritional info, product images and specific consumption occasions. Product digitalization starts at the operational level by combining meal potential with marketing-oriented systems.
“Companies with digitally-transformed operations saw 18% higher gross margins than their competitors
[ 2017 Food and Beverage Monitor: Insights into Trends and Changes in the Food and Beverage Industry." 2017. RSM. Page 5. https://rsmus.com/content/dam/mcgladrey/pdf_download/rsm_foodandbeverage_monitor_report.pdf]”
On the Horizon:
Online grocery sales
Today, almost every major national grocery store chain offers some type of online ordering and delivery service. When shoppers can customize and pre-schedule repeat items in their shopping carts, it enables stores, suppliers and manufacturers to customize the data analytics they can pull from those repeatable actions. With online sales, manufacturers will be able to track and better predict consumer trends more precisely. These insights will create new areas for meal innovation but also shorten the time expectations for product launches. Manufacturers who can quickly formulate and reformulate and get new and innovative products to the shelf in the same real-time manner as they are pulling sales analytics will be well-positioned to serve online consumers.
The usage of smart labels
Consumers want to be informed about the ingredients, formulas and source of foods they are buying, on demand, and it’s increasingly resting on the shoulders of manufacturers to provide this information in a cohesive, interactive way. Giving consumers the ability to scan an item's barcode in the grocery aisle and link them to informative dietary websites, pop-up information or location-based promotions will provide a more connected experience to the brand and build trust. As such, data that is collected and used in formulas need to flow far beyond the systems in which they originate. Being able to easily reformat the most current product data into consumer-facing online services, like microsites, apps and push notifications and other smart devices, create new challenges for manufacturers that still need to digitize internal operations across the product lifecycle.
Sensors on the plant floor
Many manufacturing plants are beginning to use sensors on machines to track the efficiency of each step in the process, monitor the product quality and shelf life and match the customized ordering with rapid distribution and delivery. Not only do these trackers aim to eliminate food waste, but they maximize output by ensuring only the right and most viable products make it to consumers at any given time. Although this type of tracking and data reduces the manual work required for quality assurance, manufacturers must be able to automatically leverage and correlate data from manufacturing plants back into formulation design and innovation portfolios.
What This Mean for PLM Use:
Creating a standard record of product information
Because PLM systems can be trusted as the standard of history for all product information, PLM is a natural connective hub to marketing-oriented systems, PIM, CRM, ERP and more. Using PLM to automate the collection, storage, use and dissemination of product data to other systems will become paramount to manufacturers’ abilities to accurately forecast consumer trends and manage real-time portfolio analysis. As the customer data becomes even more deeply ingrained with product data, PLM systems will transform from operational system into a hub of strategic intelligence that enables real-time decision making across a connected supply chain.
Flexibility in recipe design and production
To service the new normal of consumer customization and analytics, manufacturers must be able to quickly access and activate multiple variations of the same product and packaging. Increasing and using the number of product variations and experimental formulations requires accurate data maintenance and data harmonization across all systems and processes. PLM enables more in-depth formula comparisons that show the differences in characteristics of two or more products, enabling faster decision making across ingredient and cost possibilities. PLM can also be used to track formulation and packaging versioning and understand how product variations were created, modified and evolved over time and over many different scenarios.
Tighter connection to manufacturing facilities and processes
The increased connectivity of devices, machines, facilities and processes means manufacturers must invest even more in a strong data governance strategy and the capabilities to implement changes to formulation and manufacturing processes simultaneously. Manufacturers that can quickly shift suppliers based on audience data, funnel those changes into formulation data, and distribute those changes to different manufacturing locations with different equipment footprints can more quickly respond to real-time market demands. PLM enables manufacturers to translate product and ingredient specifications and packaging design into connected operational requirements on the plant floor via connected supplier and co-man portals. By linking personal safety, equipment set up, input and output attributes, and recipe quality validation alongside formulation updates, manufacturers can better track if manufacturing processes are changing at the same pace to meet both consumer demands and new financial targets.
“Our product lifecycle tools allow us to make informed decisions and keep us on the straight and narrow, and deliver what our customers are looking for.” - FSQA Technical Services Manager, Multinational Meat Manufacturer
Trend 5: Sourcing International Product Expertise On-Demand
Typically, product development involves developing a local or regional brand and then slowly globalizing those product lines across new regions and markets. Today, manufacturers don't need to wait for this kind of brand maturity model; with the sheer choice and rapid availability for global goods, brands can reach for global opportunities from the start.
However, enacting an international product development and distribution strategy requires a more connected level of collaboration that outstrips the capabilities of regular manufacturer communications. Internally, manufacturers need more social collaboration tools built into the product development to scale institutional knowledge and readily access historical data across department lines.
On the Horizon
Master list of product trials
Understanding a brand's global reach requires a birds-eye view of historical product research data. To cut down on research time and improve testing times, R&D teams need access to historical data across the enterprise to avoid repeat trials. Being able to immediately assess which types of tests may have already been performed in various labs or areas of the business in the past and analyze those outcomes or reuse formulations involves information sharing that can't be replicated on paper.
More transparent lab procedures
Lab activities can be fiercely protected, but as R&D trials have more and more product requirements built into the testing process, the lines between lab research and production will start to blur. Eventually, manufacturers will keep lab outcomes in a PLM or cloud-based system to create a direct line from testing to manufacturing and ensure product requirements are met before testing begins.
Changing security standards
Similarly, security standards within and beyond the enterprise will slowly change with the need for more direct collaboration. Siloed department activities will be a thing of past as more and more people inside and outside of the organization have insight into each stage of the product life cycle.
What This Mean for PLM Use:
Collaborative view of global trials
As manufacturers create a virtual team for product development, PLM systems provide one formulation library where previous tests can be stored by product, ingredient, team and more. With formulations in one place, adding in social collaboration tools enable anyone across the organization to directly ask product scientists questions about previous trials and outcomes.
Bringing R&D and lab teams onto standardized PLM systems requires data storage and use that can cross system usage. Providing product scientists with cloud-based access to product innovation and enables other departments to proactively access the most current product data coming out of testing stages.
On-demand ideation and technology scouting
Manufacturers are also starting to empower their employees to quickly find internal experts across all departments that can advise on products or new technologies uses. Within PLM use, product management tools will move more and more towards embedded interactive, on-demand social platforms. PPM tools are already adopting some of these tools around areas of ideation and technology scouting by integrating social messaging and collaboration options directly within product specifications, or at least capturing those interactions alongside product data. Finding an expert across a global corporation is an incredibly complicated and time-consuming process, but having a social collaboration network in place enables corporations to capture and share institutional knowledge on a massive scale.
“Product developers can see what is our current experimental or current ingredients that they can use from. Instead of looking around the lab, they can see what’s available immediately.” - R&D Senior Research Scientist, Major U.S. Juice Company
Changing consumer preferences for natural ingredients and insight into production processes, more detailed regulatory controls over all aspects of product nutrition and material usage and faster innovation time to market--it’s all here to stay in 2019.
Food and beverage manufacturers can stay ahead of the curve by modernizing product specification and improving data access across teams can create a cohesive, comprehensive master view of product integrity with PLM software. With one single point of truth for product insight in hand, manufacturers will be better equipped to respond quickly to traceability needs, find and use the most cost-effective vendors and materials across product lines, meet consumer demands more efficiently and understand the risks and rewards of making wide-ranging product changes on a global scale.