PERSPECTIVES

Digitizing the Food Industry to Increase Resilience Post-COVID-19 (Part 2)

2021-01-28


As supply chains rebound from the gravest disruption in our lifetimes, safety concerns and the need for resilience grow stronger. The food industry must embrace a new value chain built around new business models, practices and technologies that can enhance operational capabilities in preparation for the next Black Swan event.

In the post-pandemic era, all blueprints will include a COVID-19 rider. Infectious diseases are expected to be the number-one cause of death around the world by 2050, which makes food safety a top priority. The movement toward alternative sources of meat is a step in the right direction, as it can reduce the risk of zoonotic transfer of pathogens. But the global food industry needs other structural changes to its supply chains and other operations, many of which will benefit from technology.

In part one of this series, we explored food-industry challenges unleashed by the pandemic. In this final part, we look at key steps in rebuilding — creating an industry that is resilient and better prepared for future crises.

The way forward — shifting gears and deepening digital

1    Reengineering food supply chain for resilience

Building resilience into the global food supply chain begins with accepting the idea that things cannot go back to the way they used to be. Feeding a global population expected to reach 8.5 billion by 2030 while also dealing with the climate crisis requires that the supply chain be strong, nimble and smart — none of which can be achieved overnight. Businesses will need to make tough decisions regarding how they source, store and deliver their products.

For example, the past decade has seen growing dependence on imported fresh fruits and vegetables in countries such as the U.S. Meanwhile, the industry also needs to reduce post-harvest food losses (up to 30% for dairy and fish, 40% for fruits and vegetables) while cutting its dependence on vapor compression-based cold storage, which is a major contributor of greenhouse gases. This means production needs to move closer to the consumer and the industry needs to invest in new-age cold-storage solutions that aim to reduce energy consumption. In the long run, this translates into creating a more diversified food supply chain, which will be better able to handle disruptions.

Further down the supply chain, food retailers need to optimize their last-mile delivery mechanisms. In the age of heightened digital competition, delayed deliveries can cost companies future business. To provide on-time delivery while optimizing delivery costs, businesses need greater automation in their warehouses and delivery partners that can provide real-time visibility of shipment status for online buyers. Automation of brick-and-mortar stores can provide a frictionless and safe buying experience for in-store buyers.

2    Leveraging IoT and blockchain for transparency and trust

Meeting the food safety concerns of an increasingly health-conscious and well-informed consumer requires constant monitoring, as product moves from farm to table, as well as the ability to use gathered data to improve visibility across manufacturing and distribution. Internet of Things (IoT) sensors deployed throughout the value chain will collect and present data with which businesses can improve their visibility and create data-driven processes and decisions. These sensors can be deployed on drones for crop monitoring and for temperature monitoring during transit. This visibility also improves the ability of companies to respond to unforeseen disruptions.

Similarly, blockchains have emerged as a reliable way to track not just food products but also the ingredients they consist of. For down-chain players such as grocery stores and restaurants, this data could make all the difference during an unforeseen event. For example, this information can help identify and reduce contamination and, in the case of product recalls, identify specific shipments. Providing customers access to this data can help build or reaffirm their trust in a brand.

  Overcoming retail barriers with digital

For retailers and grocers, the pandemic has demonstrated the need for a digital-first approach when it comes to customer engagement. This approach, in turn, requires a deep understanding of customers, which can only come from enhanced data collection and analytics capabilities. With customers moving to online grocery shopping, the opportunity to learn more about their eating and lifestyle habits is now clearer and more present. It is, therefore, critical for food retailers to move quickly.

With some shoppers still avoiding in-store grocery purchases, retailers need to blend elements of in-store shopping with their digital offerings. In-store associates, for example, can be replaced by virtual store associates — artificial intelligence-enabled chatbots — to guide both in-store and online shoppers. This means rethinking the entire customer journey and identifying opportunities made via promotional online offers. Being data-driven also allows retailers to build trust with customers by providing information about food’s origins and ingredients at the click of a button.

For restaurants, emerging tech-enabled business models such as cloud kitchens can provide new streams of revenue by eliminating the risks posed by in-person dining, which may not recover to pre-pandemic levels anytime soon. Apart from cost savings, these business models also provide an opportunity for restaurants to understand consumers’ food preferences and habits, which can inform future business decisions.

4    Advancing automation for safety and efficiency

For the food industry, automation holds great promise. Those who have invested in AI report an increase in worker productivity and say it has increased the quality of the employee experience, as shown in the figure below. The scope for automating manual processes in the food value chain extends from the farm to the dinner table:

  • Robotic farming, combined with crop-status analysis, can save time while quantifying yield potential and environmental impact of crops.

  • In warehouses, automated storage and retrieval systems can manage a variety of food products under different storage conditions.

  • At packaging facilities, restaurants and retail stores, robotics can automate repetitive processes with remote oversight and minimum human intervention, thus reducing human errors and food contamination.

When accomplished at scale across the food value chain, automation will enhance the industry’s ability to overcome challenges posed by climate change, global food security, and a consumer who is more health- and environment-conscious than ever.

5    Building digital-era skills and culture

Large-scale automation will supplant old jobs with new ones. Early AI adopters in the food industry have experienced an uptick in the demand for high-skill jobs. However, the digital skills gap is not limited to the food industry. This means food industry players will have to compete with other industries in attracting new talent. We believe companies that are able to upskill their existing talent pool and leverage talent from reliable technology partners stand to benefit the most, because attracting fresh talent may prove to be much more expensive.

Accelerated digital adoption technologies also require cultural changes. As machines do more work and data volumes surge, an organization-wide effort to ensure that data-driven insights steer decisions at all levels is necessary.

A digital future

The pandemic has exacerbated the challenges faced by the global food industry, but it also provides an unprecedented opportunity to solve these longstanding problems. With digital technologies at their disposal, food industry leaders can drive a ground-up transformation of the supply chain while developing a better understanding of their customers through data-driven insights.

To learn more, read “AI, Automation and Appetites: How Technology Will Feed the Future,” visit the Grocer Solutions section of our website, or contact us.