Main findings for the F&B sector
Overall, there are indications that the F&B sector is reducing the basic infrastructure gap that was evident from the e-Business Survey. Positive signals can be seen in the remote network implementation data that show percentages markedly above the 10-sectors average.
Training and ICT skills raise little concern among F&B firms: only 50% of large companies practice regular ICT training. Outsourcing of ICT processes has slightly increased, particularly among the sector’s medium-sized enterprises.
Standards and interoperability are a “hot” topic in the F&B sector, due to regulatory impacts (such as traceability) that require improved communication among the different partners of the value chain. The most diffused standard is presently EDI, especially among large companies. The use of open source software clearly increases by firm size, as its lower price is balanced by the need of internal competences to develop and adapt it to the company's requirement.
Survey findings show good diffusion of ERP in F&B industry: ERP appears to be a stepping stone towards further evolution of e-business, and often includes procedures common to SCM and CRM software solutions. Accounting systems have an even wider diffusion, extending to small and micro enterprises.
The use of e-procurement in F&B industry still lags behind the 10 sectors, EU-10 average, probably due to the centralization of purchasing activities in the large companies that dominate the sector. Where present, e-procurement does not seem to be a driver for ICT systems evolution.
The 2006 data indicate remarkable growth in the use of SCM systems. This could be attributed to regulatory constraints of food safety and traceability requirements, as well as to the competitive advantages linked to a better management of the supply chain.
e-Marketing and sales are focused mainly on the distribution chain, and therefore usually considered as part of the SCM or ERP systems. CRM systems are used mainly by large companies in a B2B environment, while a more B2C-oriented approach is typical of micro-enterprises and SMEs.
Innovation through ICT solutions development is mainly perceived as process innovation, with an interesting accent on customer services and on the creation of customer communities. Meeting customer expectations joins competitive advantages and regulatory constraints among the main drivers of ICT.
Size and cost are the main barriers: Companies that do not practice e-business see two main barriers that prevent them from doing so: they report that their company is "too small" for doing e-business, and that they cannot afford the required technologies. Other barriers (e.g. security concerns, the complexity of technology) are perceived as less relevant.
The e-Business Index 2006 shows that the F&B industry has a lower diffusion of ICT and e-business in comparison with other manufacturing and service sectors studied this year by the e-Business W@tch. This overall result, however, should be regarded cautiously as it hides a varied picture and, although a direct comparison is not possible between the 2005 and the 2006 data, some interesting trends have been recorded in this analysis.
The synthesis of the results from the e-Business Survey confirms that the F&B industry has a relatively good level of development of internal process integration and supply chain-related activities. SCM, in particular, shows the highest diffusion among the 10 analysed sectors. This could be attributed to the peculiarity of the F&B industry which is the perishable nature of the merchandise. This imposes sector-specific tight handling times and conditions, as well as the need to monitor the origin of the product and the substances that go into it along the supply chain: the positive role that ICT can play in effectively tracking the information flows becomes quite evident in this case.
It also appears that the pressure from distribution is increasingly driving F&B companies towards the adoption of e-business practices; this is illustrated by the growing diffusion of e-invoicing, inventory management and links of ICT systems with those of customers.
A quite interesting trend regards medium-sized companies, which appear quite active in their investment attitude and already advanced in the adoption of solutions such as ERP, SCM and e-invoicing. However, the cost of software and the complexity of the proposed solutions still affect companies’ attitude, especially of SMEs, towards ICT adoption in this sector.
e-Business Index and Scoreboard 2006 42
The Scoreboard is a tool to present in summary form the characteristics of the various sectors and their differing trends within e-business. Results are consistent with the needs of the firms and the characteristics of this sector. The graph indicates the importance of the main e-business activities in the F&B industry.
42 See Methodology Annex for information about the structure and computation of the scoreboard.
e-Business Scoreboard 2006
A.1 Internet connectivity (index) A.2 LAN
A.3 W-LAN
A.4 Remote access to company network B. e-Integrated Business Processes B.1 Intranet
B.2 ERP systems
B.3 Online tracking of production time B.4 e-Invoicing
C. e-Sourcing and Procurement C.1 Firms placing orders online C.2 Use of ICT systems for sourcing C.3 ICT system linked with suppliers C.4 Online inventory management D. e-Marketing and Sales D.1 CRM use
D.2 Firms accepting orders online
D.3 Use of ICT systems for marketing/sales D.4 ICT system linked with customers e-Business Index 2006
(based on 16 component indicators of the Scoreboard) based on data in % of firms
(emphasises activity in smaller companies)
based on employment-weighted data (places a higher weight on activity in larger firms)
100
(*) The index for the hospital sector is not fully comparable to the other industries, as there are only few micro and small organisations in this sector. Thus, the apparently more intensive use of ICT is largely an artefact of the specific structure of this sector. When comparing only the large enterprises and organisations, hospitals would not be within the top rank.
Source: e-Business W@tch (Survey 2006)
4 Current e-Business Trends and Implications
Topics in focus
This chapter aims at providing insights into current ICT use and e-business activities, which are specific to the F&B industries. It does not claim to provide a comprehensive overview, as that would exceed the limits of this report. In fact, it would be difficult to realize, as ICT and e-business are relevant for nearly all core business areas of the F&B industry. Therefore, the issues analysed, as well as the case studies presented, should rather be understood as representative examples of current practice and the related opportunities and challenges. The following issues have been selected as particularly relevant for the F&B sector, in agreement with DG Enterprise and Industry and in coordination with industry federations:
Internal process automation: Section 4.1 discusses the trend toward integration and automation of internal processes in the F&B industry. This trend is particularly relevant to large, international food companies, but on a lower scale it also applies to smaller businesses. Constraints imposed by food legislation and necessity to lower the time-to-market of new products are among the main drivers to the adoption of ERP solutions that integrate production, administration, sales and logistic processes. Industry size is paramount for the adoption of leading-edge technologies, such as Product Lifecycle Management, used only by large companies. Drivers, challenges and critical issue related to internal process automation are discussed.
SCM and CRM: Section 4.2 discusses SCM and CRM systems to support integration along the value chain. In the F&B industry, the focus of SCM systems is on cost-reduction, optimisation of logistics operations and on the sector-specific issues of food supply safety and traceability, through the closer integration of external enterprise relations. The usage of SCM in this industry is still limited; firms implementing SCM need to address relevant organisation and technological challenges. Distribution is a major force driving F&B companies towards integration of the supply chain.
Mobile applications: usage and latest developments are discussed in Section 4.3 Mobile applications and Wi-Fi systems, together with RFID applications, are strictly intertwined with supply chain management and quality assurance issues, and hence mostly adopted by large enterprises – though some applications, such as sales force decentralisation and mobile/home offices, are relevant also to SMEs.
The widespread diffusion of PDAs, mobile phones, laptops and other portable devices, in combination with developments in Wi-Fi technology, can help SMEs to gather, store, analyze and share data, with a timely access to accurate accounting, inventory, sales and CRM information. Wireless devices such as printers and scanners/receivers are frequently adopted along the production and distribution of food and beverages.
RFID-based solutions: RFID (Radio Frequency Identification) technology has a substantial and growing importance in the food industry. RFID can support the flow of information along the chain, from the receipt of raw materials, right up to distribution of the finished product. This provides real time visibility of information regarding the product and processing, including traceability and location of goods.
In the delivery phase, RFID may be used to verify the sender’s data and to trace the raw materials; during the transformation phase for food safety; and during the distribution phase for tracing the entire supply chain. Tags can be fitted with sensors that are able to memorise climatic factors (temperature, pressure, humidity) of the environment they are in. Through the most innovative applications of RFID technology, it is possible to monitor the preservations status of a substance, and receive warnings when temperatures go outside accepted ranges.
Food producers are using RFID under pressure from large-scale retailers.
Significant impacts are expected for sales processes, due to a reduction in waste and returns, as well as better promotion and inventory management.
Exhibit 4-1: Case studies and business examples presented in this report
Section Company / project Country Topic(s) 3.7 Case study
Chocpix UK Case study about business process
innovation 4.1 Business example
Fiorucci Italy ERP aimed at improving inventory management
4.1 Business example
Mathiesons UK Integrated project of traceability 4.1 Business example
Heinz USA Pilot project of PLM (Product Lifecycle Management)
4.2 Case study
Blédina France
Implementation of an SCM system integrated with the company’s existing ERP and legacy systems
4.2 Business example
Metro Germany Example of retail driven SCM 4.2
Case study Logistics Exchange Programme
Ireland
A collaboration programme between retail suppliers within the logistics part of the supply chain primarily for food industry.
4.2 Business example
Ebro Puleva Spain Analytical CRM
4.2 Case study
Godiva Belgium
Implementation of a CRM strategy in which the physical channels (shop counter, phone/fax) are complemented by ICT applications
4.3 Business example
Krispy Kreme USA Route automation systems and order management
4.3 Case study
La Bella Easo Spain A system for point of sale control and management
4.3 Case study
Pastificio Riscossa Italy Wi-Fi applications in the picking process 4.3 Business example
Purina-Nestlè Switzerland/USA Podcasting and mobile marketing 4.4 Case study
Latterie Virgilio Italy Implementation of RFID tagging at “wheel”
level on Parmigiano-Reggiano Source: e-Business W@tch (2006)
The case studies and business examples as summarised in Exhibit 4-1 – together with the results from the Survey and analysis of secondary literature – build the basis for the conclusions and the policy implications presented in chapter 5 of this report.