Food and Beverage: Rising to the new challenge
Research shows that businesses that invest during an economic downturn tend to thrive in the future, not simply survive. Food and beverage manufacturers are reliant on agile technologies to adapt processes to the new normal. Smart financing solutions can make these investments affordable. Find out how.
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There can be little doubt that the economic aftershock of the COVID-19 pandemic will be felt for some time. The food and beverage industry, not including breweries, may largely have escaped the threat of temporary shutdown, yet a midterm economic slowdown will affect consumption.
The current circumstances, widely referred to as the ‘new normal’, make the importance of investing in agile technologies even more critical. The sector has had to rapidly adapt to changing circumstances and patterns of consumption, and expert commentators are suggesting that companies who have invested in agile technologies and machinery are best placed to react to shifting market demands.
The industry will be reshaped in the medium- to long-term and Siemens Financial Services (SFS) is helping manufacturers of all sizes to understand the potential gains from technology investment in the Food and Beverage industry and to continue their investment program, with the help of affordable smart finance solutions despite challenging markets.
Surviving and thriving in a time of crisis
Historic evidence shows that companies that continued to invest in previous crises emerged ahead of their competitors.
In an industry where SMEs are in the vast majority and provide two-thirds of jobs in the sector, 74% have already invested in improving production processes through digital technologies.
Agility, flexibility and increasing digital methods and connections will help to meet the new challenges, and all in turn require updated technology and platforms to be workable. In some cases, technology needs to be replaced, in others existing platforms can be upgraded through a retrofit. It is not surprising, then, that key commentators on the current situation are highlighting the importance of maintaining the momentum of investment in technology and machinery.
Without adoption of automation other digital technologies new ways of working will be neither affordable nor competitive.
Agility and resilience with technology
For each food and beverage manufacturer as well as in the packaging supply chain, achieving business results in line with the market – or indeed ahead of it – is a basic ambition. However, these markets are not only highly competitive, they have also been disrupted by recent events.
Now in more uncertain times, food and beverage companies need the means to adapt quickly to the challenges the markets throw at them.
Technologies, including automation and digital transformation, are one major factor in ensuring and enhancing agility, resilience, efficiency, productivity and competitive advantages for food and beverage manufacturers.
Smart financing enables continued investment
Expert commentators are advising companies to diversify their financing sources, nurturing existing
lines of credit, but also harnessing alternative options which do not eat into these existing lines of credit.
A good example is smart financing. These solutions are designed by specialist providers specifically to enable investment in technology, equipment, retrofits and digital transformation.
This provides a financially sustainable journey through a low economic period, along with the agility and resilience to navigate the medium-term difficulties, so that manufacturers can ultimately emerge ready for growth as the markets recover. According to historic research, those organizations that continue to invest tend to be more successful.
The cost of not investing
What, then, is the scale of investment required to resiliently cope with the current challenges and emerge fitter and more competitive as markets recover?
A previous global study from SFS has shown that the window of opportunity to gain competitive advantage through digitalization investments is narrowing, with a “tipping point” of five to seven years, after which manufacturers will be playing catch-up.
Financial gains from aspects of digital transformation
Moreover, the cost of failing to invest in Industry 4.0 can be quantified financially, according a variety of studies.
The size of the investment challenge
We have noted that one key element of the challenges impeding investment is the cost of digital transformation– a pressing situation for food and drink manufacturers large and small, East and West.
SFS has developed a model that conservatively estimates the size of the investment challenge faced by the Global Food and Beverage manufacturing industry as it seeks to implement smart factory technology during the five-year period 2020 to 2024.
Enabling measurable business outcomes
Smart finance for digital transformation in manufacturing tends to come from integrated specialist financiers, where the funder understands the technology, the sector, the applications and the operating pressures.
What does smart financing do?
- Aligns payments with rate of benefit received from the technology investment.
- Intelligently flexes financing periods to fit each organization’s cash flow needs and profile.
- Provides guaranteed payment level for the whole term – no possibility of variable rates.
- Encompasses equipment, software, maintenance, service and even labor costs if required to deliver a complete solution.
- Can be linked to business outcomes, such as productivity increases, energy reduction, optimized uptime, etc.
- Extends available financing arrangements beyond relationship credit ceilings – additional to core bank credit limits.
What the business outcomes enabled by smart finance?
1. Digitalization upgrade
Acquire Industry 4.0 technology as needed, but spread payments to align with the expected rate at which benefits will be gained.
Retrofit current hardware with digital capabilities – with upgrade options built into the financing period.
3. Transition management
Acquire new technology solutions, often in stages, with payments scheduled for when the solution is up and running.
4. Energy efficiency
Use expected future energy savings to in effect pay for energy efficient technology upgrades and alternatives.
5. Outcomes finance
A range of packages where payments can be aligned to expected business outcomes such as productivity improvements, availability or other production KPIs.
6. Sustainable growth
Financing that helps manage cash flow and liquidity at times of rapid growth with increased production capacity and productivity.
7. OEM and vendor sales enablement
Specialist financing for technology solutions that systems integrators, OEMs and distributors can offer end customers, making those solutions more affordable and increasing the likelihood of adoption.
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