Although 2017 saw UK food producers enjoy fastest growth rate in nine years, 2019 looks to bring highs and lows, especially with concerns over cost of workers. Let's look ahead to the 4 key factors that will: impact and redefine business decisions; help inspire clients to better evaluate and mitigate risks; build strong strategies and grow their small to medium sized businesses.
No matter your political view, no one can deny that it has caused disruption. For those involved in food processing, Brexit means a change in the demographics of the labour force, particularly for unskilled labour. It also means turbulence in currency exchange and with agreed hedging arrangements coming to an end, food processes importing ingredients will see the impact of currency adding to the woe of uncertainty over supply chain logistics (cue the images of food rotting at borders). The UK food industry was built on imported labour, but the recent cost rises are not all the fault of Brexit.
2. Minimum wage
The changes to minimum wage, added to the reduction of availability of workers, led to increases that cost the industry almost half a billion pounds. And the bad news continues, as worker productivity is dropping at a similar rate to cost increases. Disruption is uncomfortable at first, but necessity is the mother of invention and we expect to see great leaps for those with the vision to grasp change. Whilst Food Manufacturers enjoyed relatively cheap labour, manpower was cheaper than investment in technology. Now the emphasis is firmly on innovation to drive efficiencies in production.
The Grocer identified key areas addressed by those food producers/suppliers set to excel through disruption:
- Product portfolio: meeting consumer needs
- End-to-end value chain: understanding how to unlock value
- Competitive position: understanding how to assess and react to change
- Investing: product innovation and labour productivity
3. Labour productivity
When it comes to labour productivity and costs, there are two avenues to consider: working with what you’ve got and automation.Working with the labour that you have is low cost and assumes that you will still have this labour force. Analysing productivity to identify patterns that could suggest training requirements, optimising schedules and smart planning of shifts will all help. Data analysis and predictive analytics are cost effective and often use data you already have. Unlocking that value through a simple dashboard often provides “Eureka” moments. Artificial Intelligence and Cognitive Services support “what if?” modelling.
Training is always good, cross-training is also a great way to reduce the cost of training whilst building resilience in your team, and greater flexibility for your scheduling and forecasting. When it comes to attracting new employees, there will be an increase in “Gen Z” employees entering the workforce. These employees will have high expectations for career development and working environment.
Also, consider staff retention. With more employers fighting for a smaller pool of workers, it is more important than ever to hang on to the good workers you have. Investing in HR systems that can help you manage employees, respond to their needs and manage out any performance issues is another smart way to work with what you have.
Automation, innovation, investment in technology. All good but jolly expensive so careful consideration is required to confirm the return and the impact. For example, there’s little point investing in a sausage machine that can quadruple production if the line then grinds to halt in the packing hall. If you’ve started out looking at how to optimise what you’re already working with, then it should be easier to identify the best areas to invest further in. Also, consider machine learning to gain a greater return from all smart machinery you have invested in over the years as well as any planned investment.
Technology is also key to helping inspire, retain and motivate the workforce. Studies show employee motivation and satisfaction are linked to their sense of success and productivity at work. This can be shown through displayed productivity dashboards or back to the HR systems.
With fewer workers, costing more than ever, smart companies will look at all options for increasing productivity and efficiency across all aspects of food production.
To wrap up, digitalisation has fundamentally changed the game for the Food and Beverage Industry. In a world where consumers know what they want, when they want it, and with lightning speed, this industry is struggling to survive in the dynamic world of demanding customers. To survive, the food and beverage industry needs to embrace digitalisation and must leverage all the advantages that come with it.