Food manufacturers have a clear mandate to improve product revenue—fully 82 percent surveyed placed “a lot of emphasis” on this goal. However, the rules for drivingrevenue and profit growth have changed. For years, the industry has relied on top-line growth through mergers and acquisitions and bottom-line growth by improving manufacturing and supply-chain efficiencies. Both of these strategies have mostly run their course and food manufacturers are now turning to product innovation as the best source for continued growth. Product innovation relieson aseries of stages and processescalled the Design Chain spanning from capturing market and customer Requirements through to product portfolio management. The Design Chain, unlike the supply-chain, is iterative and reuses data, knowledge,and experience captured from previous design cycles. Manufacturers can then more rapidly generate new products with a greater likelihood of commercial success. Design Chain processes are also highly collaborative and involve input and decision making from functional departments across the enterprise. To maximize the revenue and profit from each new product innovation, all stages in the Design Chain must be as effective and efficientas possible. Unfortunately, recent market trends have raised obstacles to Design Chain performance that get in the way of efforts to rapidly produce high-margin, lower-cost offerings. Companies that have invested in optimizing the Design Chain have achieved double-digit improvements in product revenue and reduction in product development and overall product costs.
Obstacles to innovation in food design chain
Today’s food manufacturers face a new and rapidly changing environment in which to launch new products. This dynamic environment is considerably more complex than justa few short years ago and has introduced significant obstacles to the innovation process:
- Product Complexity. Food products today are much more complex than ever before. Manufacturers are developing more and more product variations to address the multitude of niche customer preferences while internationally distributed brands are being reformulated to accommodate local tastes. In addition, packaging and serving size are playing a greater role in delivering higher margins as product developers respond increative ways to meet customer needs.Ongoing portfolio management also becomes more complex as product portfolios grow at an exponential rate.
- Supply Chain Complexity. Organizations must manage product quality, formulation, and consistency on a global basis.This is no easy task considering the issues of local supply, diverse manufacturing plants, and seasonal variation in ingredient quality. With the high volume of mergers and acquisitions in the past few years, many larger companies have inherited supplierand distributor relationships as well as warehousing, distribution, and unique manufacturing systems which they now must manage. Also, recent trends towards contract, partnership, and third-party manufacturing further complicate the supply-chain. Creating a consistent product on a global basis when dealing with so many variables is a significant challenge.
- Smaller Window of High Margin Opportunity. New products command higher margins but only while they are unique. Today, most barriers to entry are low and new product innovations can be quickly copied resulting in rapid margin erosion. Recent studies indicate that the first product to market generates on average 33% more revenue than the second and 53% more than the third. Those who make it to market first gain the leadership position and get the highest margin for the longest time. Missing the leadership position is very costly.
- Regulatory Complexity. To keep the public safe and informed, regulatory agencies make rules for handling, packaging, labeling and promoting food products. These rules can vary dramatically across jurisdictions and are revised more rapidly than ever before. Such changes are in turn creating significant challenges as many R&D groups now spend almost half of their time on administrative activities. Companies that are able to respond quickly and efficiently to regulatory changes have lower costs, are able to launch new products faster,and have reduced risk of non-compliance.
- Cross Organizational Involvement. Collaboration is essential throughout the Design Chain. Many processes require input and decision making from cross-functional teams built from representatives in different disciplines and disparate locations. Bringing them together to effectively and efficiently collaborate is critical to both the speed and the quality of theproduct innovation process.
- Manual Processes. The Design Chain employs hundreds of processes to bring an initial concept to market. Yet often these processes are uncoordinated and difficult to administer because they are fragmented and not automated. When processes involve disparate groups—such as R&D, marketing, production and quality—they can become bogged down as each group uses its own standards, spreadsheets and information transfer methods. Similarly, personnel at each location often have their own unique approach. These manual processes limit the speed with which new products can enter the market and substantially increase the costs of doing so.
- Limited codified knowledge. Much of what companies know about their Design Chain processes is either not written downoris stored on individual computers or shared network drives. This is not because there is unwillingness to make key information easy to find but rather no suitable technology is available to serve as an adequate knowledge store. Without adequate access to this valuable intellectual property, failed product ideas are revisited, knowledge leaves with retirees, and process improvement opportunities are limited. Best practices can only be developed when full historical information is available. Companies who have deployed technologies to capture and provide easy access to this critical corporate knowledge report higher investor valuations as an additional benefit.
As a result of these obstacles, Design Chain processes are slow, costly, and error-prone resulting in lost business opportunity, increased risks, and diminished market leadership. Throwing additional staff at the problems may helpin hurdling the obstacles but doesn’t remove them. A better solution is to optimize the Design Chain so that obstacles can be lowered or even eliminated.
Strategies to optimize the food design chain
The food Design Chain involves a great deal of knowledge consisting of historical, current, and even future data, documents, inter-relationships, and events. People from disparate departments and locations participate in each link, each requiring access to information and notification of change. Finally, Design Chain process workflows must be automated in order to develop and leverage best practices. To achieve this level of information access and process efficiency, food manufacturers must:
Capture and provide access to Design Chain knowledge.
By implementing a single knowledge store for all product information, food manufacturers can enable those involved in processes to be fully informed. This central repository reveals what product concepts have been explored, why some were not pursued and others failed and the current stage for each product. It also makes it easy to determine the impact of changes, compare different product configurations, research allergens and understand the effect of new regulations. Answers to Design Chain questions posed internally, by customers, or by suppliers can be rapidly and accurately answered. An effective Design Chain knowledge repository must track and manage a wide range of information types, views, and events such as those listed in the table below. Consolidating multiple databases and information repositories into a single knowledge base can also significantly reduce the cost of IT infrastructure support.
Automate key Design Chain business processesusing workflow technology.
Most Design Chain processes are well defined and repeatable, moving information between designated individuals or groups to support decision making. Collaboration is slow and error-prone, often relying on simple technologies such as emailfor information routing and a few specialists to ensure the designated process is followed. The value of automating these key processes is threefold :
- Effectiveness–workflow managed processes don’t miss key steps or fail to inform key people while providing flexibility to accommodate exceptions. Ensuring consistency with important process steps increases output quality, reduces errors, and mitigates risks.
- Efficiency–workflow managed processes often involve far less participant time to complete. This results in faster new product development, greater organizationalresponsiveness,and improvedproductivity.
- Accountability–workflow managed processes provide executive staff with a strategic view ofall active projects, enabling superior oversight and more effective allocation of scarce resources. In addition, all process steps, information exchanges, and participant decisions can betracked to support audit requirementsand identify individual responsibility. By automating, food manufacturers enforce standard operating procedures while making decisions easier, faster and more informed at every stage. A critical element when automating Design Chain processes is to ensure the workflow technology has dynamic access to the central knowledge storeto avoid making decisions on outdated information.
- Facilitate non-specialist access. Design Chain knowledge is required to support many processes beyond R&D. Staff in purchasing, manufacturing, marketing, quality control, sales, logistics, and executive level need to access or input valuableknowledge store information to effectively perform their jobs. Expanding access to both customers and suppliers can also have a significant impact in terms of organizational responsiveness, market credibility, risk reduction, and knowledge worker productivity. Unfortunately, most Design Chain process technologies utilize complex interfaces that limit access to all but specialists who use the system on a daily basis.To be truly effective, the knowledge base and automated workflows must have user-andtask-appropriate interfacesthat are highly intuitive and display only the informational elements required. Personalized interfaces make system access fast and easyforall, minimize support costs and maximize enterprise value.
- Integrate related systems. Manufacturers typically employ a range of systems for supply chain management, formulation, packaging design and equipment control. These systems should be linked to the centralized knowledge repository and workflow systemsto optimize operations. Automated integration with enterprise supply-chain systems as well as various desktop applications can reduce errors, improve productivity and leverage previous technology investments.
With an optimized design chain, food manufacturers can make well-informed decisions, react quickly to market opportunity, improve supply chain relationships, and better manage their product portfolio.
The Optimized design chain with Lascom CPG Solution
LASCOM CPG is software solution for food industry companies migrating from a cost-cutting strategy to a ‘growth through product innovation’ strategy. Lascom CPG Solution enables this migration through more effective information management and by automating, managing, and streamlining critical Design Chain processes throughout a product’slifecycle.
To continue to meet shareholder expectations, and perhaps even to survive, today’s food manufacturers must migrate to a growth through product innovation strategy. Unfortunately, product innovation has become considerably more complex, costly, and involves more risk. To be successful, Design Chain processes must be optimized through the application of process improvement and targeted technology investments. Deploying a centralized knowledge base and optimizing each link in the Design Chain can significantly improve the chances for product success while providing management with the information needed to manage their product portfolio, defineand repeat best practices, and respond more quickly to market requirements. Lascom CPG Solution provides a comprehensive process improvement and knowledge management platform targeted at optimizing the Design Chain for processed food manufacturers.