Strategy

Digitisation is key to averting the global food crisis

By Jason Kay, CCO, IMS Evolve
Strategy
Published: 20 November 2017

The world today has a vast problem with food – from a lack of biodiversity to excessive wastage, from poor health linked to over consumption to massive food poverty. We grow enough food to feed 12 billion – far in excess of the seven billion population – yet more than one billion people are under fed. The UN estimates that, on our current path of food consumption and waste, by 2050 we will reach a tipping point and the world will be in a food crisis.

The problems extend from agriculture all the way through the food supply chain to the home, where food wastage – in more economically developed countries at least – is excessive. The UN target calls for the world to cut per capita food waste in half by 2030 – but while changing consumer education and expectation is essential, as is the drive to increase biodiversity, it is within the food supply chain that these changes will come together. Without democratising an incredibly consolidated food supply market, it will be impossible to reduce wastage, embrace innovation and change consumer behaviour. Systemic change is essential.

Jason Kay explains the role digitisation is playing in transforming the cold food chain to eradicate waste, improve food safety and mitigate the risk of a global food crisis.

Unsustainable model
The way in which consumers have been educated to purchase food – both in store and in restaurants – has changed radically over the past few decades. Following significant consolidation, both retail and restaurant markets are dominated by a small number of organisations delivering a consistent and stable customer experience, one that offers products of identical size, shape and price irrespective of season or country of origin.

Of course, a sizeable proportion of fresh produce will never meet these unrealistic criteria. By creating a consumer expectation for blemish-free goods and specific size, food purveyors have built a market predicated on waste. Even if these ‘non-perfect’ items can be reallocated to sauces or ready meals, damage will occur at each stage of sorting and sifting that will result in further wastage.

Yet what has been achieved by this approach? Economically it is flawed, with subsidised agriculture and incredibly low margins for producers and retailers alike. Consumer populations – certainly in more economically developed countries – are less healthy, due in no small part to excessive consumption and the increasing use of excessive processing to address food safety concerns, especially regarding fresh food, and to extend shelf life. Yet, while much of the population feasts on unhealthy, processed food, by 2027 the world could be facing a 214 trillion calorie deficit. Something has gone awry with the global model of food production and consumption.

Lack of innovation
Over the past 50 years, the economies and ethics of food production have fallen out of sync. Farmers do not want to produce food that is wasted but every aspect of this low margin model results in wastage. Fears regarding food safety combined with failure of cold chain equipment leads inevitably to food being destroyed. But basic process failures are just one aspect of the problem.

The sheer cost of managing suppliers to ensure product consistency and safety makes it difficult for retailers to embrace new, innovative providers; whilst those with existing contracts cannot afford any risks associated with late delivery or under supply, and hence build in significant contingency. The result is not only more wastage but also minimal opportunity to invest in innovation, to explore opportunities for new, healthier food options or embrace automation to improve efficiency.

Achievable change today
Clearly the systemic change required if the world is to avoid the predicted food crisis cannot be achieved overnight. In a difficult, low margin market, with small numbers of players fighting hard to retain share, it is incumbent upon innovators and disruptive market players to leverage digitisation to drive that change.

The most obvious role of digitisation is in minimising avoidable waste. When one in three freight journeys in the UK is food, the use of real-time information to improve routing and distribution planning is key to improving resource utilisation. In addition, using existing sensors on refrigeration units, heating units and air conditioning systems to raise alarms when problems occur to enable immediate rerouting or allocation of items, plus the use of predictive maintenance to avoid equipment downtime, can have a very significant impact on food wastage.

This approach is already being used by forward thinking organisations that are using digital and automation strategies today to reduce avoidable loss of food, achieve huge reduction in reactive maintenance costs, even reducing customer complaints. Add in the use of real-time data to support a comprehensive energy management strategy incorporating a range of different metrics, from seasonal differences to equipment reliability, and organisations can radically reduce annual power consumption. Together these changes result in a reduction in revenue expenditure of tens of millions and, in large estates, percentile point gains on capital employed can run into many hundreds.

Critically, this is being achieved by layering digitisation over existing infrastructure – clearly it is not feasible for retailers to rip and replace control infrastructure across hundreds or thousands of locations. The impact on both profit and customer experience would be hugely damaging.

Instead, by leveraging edge-based processing to ensure information from existing equipment throughout the supply chain is both actionable and actioned to make immediate changes, retailers are able to achieve IoT capacity at pace and with no downtime. It is this frictionless approach to digital adoption that will be key to releasing measurable value.

Democracy and innovation
With this approach organisations can achieve a significant revenue uplift – without the need for massive investment. Indeed, it is the compelling ROI from this initial step of leveraging existing equipment that will be key to providing the investment that will underpin the next level of digitisation – the use of traceability systems to manage the advocacy, source and safety of food.

With the ability to confirm not only that products have been correctly produced but that they have followed the correct processes at every stage of the supply chain, from farm to retailer, digitisation provides a full audit trail of trusted information. This approach delivers low cost governance, radically reducing the cost of supplier ownership for retailers and opening up new opportunities for suppliers to enter the supply chain and create the democracy that is essential to enable innovation.

And it is this innovation that will be key to moving away from the entrenched practices of food procurement that have embedded consumer expectations and misunderstanding. A democracy of participation within the food market will help to educate consumers, improve understanding of food quality and the implications to health, and facilitate the introduction of new products and practices, including biodiversity, that deliver a new consumer experience.

A more predictable marketplace will also encourage investment, enabling SMEs to enter and embrace automation to replace the reliance upon cheap labour to improve productivity. The result should be not only less wastage and a fairer distribution of food globally but also a better consumer experience with access to fresher, healthier and less heavily processed food. In effect, the adoption of IoT to minimise avoidable waste within the retail cold food chain is the essential first step towards full digitisation throughout the food production lifecycle – digitisation that will underpin the global response to the developing food waste crisis.

Conclusion
A fundamental change to the global supply chain will take time. But there are very significant changes that can be made today that not only begin to address the wastage endemic within the food chain but also release the investment required to support the adoption of digitisation throughout the infrastructure that will be key to transforming the end to end business model.

It is by embracing digitisation to improve food safety and advocacy that the market can democratise access in order to generate the innovation key to making fundamental change, from automation to enhanced productivity to improving consumer education and supporting essential change in global food production and consumption.

For more information www.ims-evolve.com