Beverage Industry : Journey to Digital Transformation
Back in India, Ramesh, our milkman, arrives promptly at 7 AM every morning and brings his big churn of milk from which he scoops up half a gallon raw milk to deliver to my mother, who immediately puts it to boil. Ramesh has had this routine for over 30 years. He follows in his father’s footsteps and runs his own barn. Every day, he wakes up at 4 AM, milks his cows, probably mixes some water to make up for any shortages and proceeds to distribute it across town on his motorbike.
Even though most of his customers appreciate the fresh, nutrient-rich milk he provides, he has slowly been losing customers to the many different types and flavors of milk available now in the market that have better shelf-life, superior packaging, and may even be healthier.
Extrapolate this example for juices, alcoholic beverages, soft drinks, and even water. I plan to walk you through this process to reveal how the beverage industry has evolved over the years with the shift in consumer lifestyle, diets and consumption patterns. Some pillars that have really helped augment the conventional beverage supply chain can be keystones in helping business owners such as Ramesh to hold on to his customer base and efficiently increase the effectiveness of his offering, in-process monitoring and cutting his costs. What are those? Let’s ponder!
Technology Enabling the Beverage Industry
The beverage industry has continuously managed to meet the evolving consumer demand across the globe and one of the major factors driving possibilities is technology. Over the years, technological integration has improved capabilities, enhanced product quality and reduced wastage across supply chains.
In the 18th century, when shipping technology improved, it was possible to transport raw produce internationally, opening more options for consumers across the globe. By the 20th century, previously manual processes were mechanized to reach the masses. The advent of Information and Communication Technology by 1980 allowed Operational Efficiency at a much larger scale and scope for firms that used electronic point of sales data to manage inventory and also direct and control the flow of products within distribution networks.
Technological innovations in this industry have since been incremental rather than radical. The beverage industry is now embracing the fourth industrial revolution (4IR) to drive productivity improvement and customer intimacy along multiple touch points in the supply chain (some might even argue that the Beverage Industry is the one most impacted by Technology²). As Klaus Schwab, executive chairman of the World Economic Forum, writes in his book, The Fourth Industrial Revolution, the 4IR is characterized by ubiquitous mobile internet, smaller and powerful sensors, and artificial intelligence and machine learning. It is the diffusion of these technologies and their interaction across physical, digital and biological domains that will amplify their impact across the supply chain systems. Five of the emerging technology buckets include: Precision Agriculture, Blockchain, IoT, Autonomous Vehicles, and 3D Printing.
Precision Agriculture for effective Production: The effort to bring the best drink to you begins at the first mile. Precision farming uses sensors, mapping tools, and real-time analytics to monitor the growth of the crop and make optimal decisions around it. The real-time feedback received from these sensors helps precision farmers to calibrate water, the ambient temperature, pesticides, and fertilizers thus improving the crop yield with healthier crops and minimum wastage. Predictive analytics also helps them plan ahead for planting and harvesting times, crop rotation and soil management³. While Anheuser-Busch InBev launched its AgTech platform ‘ SmartBarley’ in 2013, its recent partnership with agronomic insights leader Sentera shows that the integration of intelligence with traditional farming practices is here to stay.
Blockchain in supply chain Transparency: I previously wrote how blockchain brings transparency in the supply chain and promotes fair trade by recording all transactions in a permanent decentralized ledger. However, there are many more benefits to implementing Blockchain than pure visibility.
Blockchain can be used to track and verify the conditions for harvesting, storage, and freshness of the product. This information helps match demand and supply and minimizes the food loss involved. Also, the use of smart contracts improves efficiency by automating processes such as payment transfers as soon as all the necessary conditions for it are met⁴.
Internet of Things for Supply Chain Trace-ability: There is an enormous amount of data generated at each point in the supply chain, and to effectively apply the Internet of Things is to have strong connectivity to gather data, continuous analytics to understand this data and then aggregating this data to make accurate predictions.
Even when your beverage is in processing, a number of sensors can be used to generate data points- from sensors that monitor quality, taste and contamination in the beverage, to sensors that maintain fill level and feed pressure in tanks.
Inventory can also be tracked from production to storage to distribution. For instance, a manager can plan logistics ahead of time based on the freshness of the drink and can decide which shipments go out first. He/She can also optimize freight and transportation, define routes and manage the fleet down to the number of driver hours, fuel consumed and miles covered.
Autonomous Vehicle Delivery for service: The recent struggle with coronavirus has reasserted how critical the last-mile delivery to the consumer is. Not only for faster and more reliable deliveries, but companies investing in drones, bots, and autonomous cars are hoping to reduce delivery costs by as much as 80%⁵. Pilots run, such as those by Kroger and Walmart with bot company Nuro, though still in the experimental stage, have generated interest to scale. This will, in turn, impel CPG companies to adjust the packaging, assortment, and sizes of their products.
3D printing for both manufacturing: 3D printing or Additive Manufacturing builds up a physical 3D product layer-by-layer from a digital model. Although it has been a buzz word for quite some time, the beverage industry has recently picked up with applications across the industry. The most prevalent of these applications is 3D printing of customized designs on beverage foams, a very popular example is Ripple Maker for coffee, or make complex 3D artworks with drinkable liquid inside a drink (check out Print A Drink). While the above two companies focus on customer experience and engagement, another company, SmartCups, has taken 3D printing to a whole new level. They print flavors at the bottom of biodegradable cups as 3D polycapsules that are activated with the addition of water, reducing storage and distribution costs by being liquid free. Apart from the above use cases, 3D prints are also being used to prototype new packaging designs. It is fast and convenient for small batches, however, it is much difficult to replicate the scale of traditional manufacturing with additive manufacturing.
Looking into the future:
Imagine that a micro-financing firm invests in Ramesh’s business to help him integrate technology into his traditional dairy farm. He has RFID tags on each of his cows for herd tracking and health monitoring which sends regular updates to his cell phone app, robotic vacuum arms for automatic milking of the cows, an IoT enabled processing tank for cold storage and quality measurement. He also receives text messages to help him make optimum decisions around feed, supplements and other metrics for higher milk yield. And there’s not another day when he loses revenue opportunity because of unreliable production or schedule conflicts.
This scenario may not be distant for Ramesh. Chitale Dairy in India has turned this vision into a reality for themselves. They have successfully transformed their traditional dairy by integrating technology through different business processes- from veterinary care, to finances to breeding. Vishwas Chitale, CEO/CTO of Chitale Dairy now remotely manages ‘satellite farms’, backed by the SMS messaging services, and has improved his milk yield by 10 times!
Chitale’s success is an affirmation that beverage companies of all shapes and sizes are embracing the digital age to thrive and grow and are mapping out their own digital transformation journeys.
Is there a Ramesh in your community? What are your ideas to digitally transform his/her business? Leave your thoughts in the comments.
#BabsonCollege #BabsonMBA #BabsonMIS7535 #studentvoices #FoodandBeverage #digitaltransformation #ChitaleDairy #BeverageIndustry #PrecisionAgriculture #3Dprinting #Printadrink #SmartCups #AutonomousVehicles #AutonomousVehicleDelivery #Blockchain #InternetofThings
References:
- Image Attribution and Share-Alike license: https://creativecommons.org/licenses/by-sa/2.0/legalcode
- https://www.mixerdirect.com/blogs/mixer-direct-blog/the-technology-making-the-biggest-impact-in-the-beverage-industry
- https://www.scientificamerican.com/article/precision-farming/
- https://www.supplychainbrain.com/blogs/1-think-tank/post/30764-four-uses-of-blockchain-in-the-food-supply-chain
- https://consumergoods.com/autonomous-delivery-vehicles
- Danny Mackinnon and Andrew Cumbers ( 2011 ) — Introduction to Economic Geography: Globalization, Uneven Development and Place
- Economic Contributions to the Food and Beverage Industry — A Report by the Committee for Economic Development of The Conference Board, March 2017
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