FOOD & BEVERAGE
READY TO SUCCEED: INVESTING IN DIGITALISATION IN THE FOOD AND DRINK SECTOR
Neli Ivanova, sales manager, Industrial Equipment at Siemens Financial Services in the UK T
he food and drink industry contributes £31.1bn to the UK economy every year – and is the country’s largest manufacturing sector, bigger than aerospace and automotive combined. The value of industry exports has nearly doubled in the last decade and despite recent economic uncertainty the export market continues to grow, albeit modestly - up 2.5 per cent year-on-year to £22.6bn in 2018, compared to growth of 9.7 per cent in 2017. Many manufacturers are looking to digitalisation to help keep up the momentum and respond to growing customer demand. New-generation digitalised technology can provide manufacturers with relevant solutions and benefits, for example improved performance through increased manufacturing productivity, more accurate planning and forecasting, enhanced competitive capabilities and greater financial sustainability. Increased manufacturing productivity (the ability to either produce the same number of products for less, or more products for the same) has a clear and calculable positive effect on costs and margins, which is what we at Siemens Financial Services have named the Digitalisation Productivity Bonus (DPB). In the UK food and drink manufacturing industry, it is estimated that conversion to digitalised technology could deliver a DPB of between $7.4 billion and $11.5 billion. Similarly, digitalisation can help to improve food quality improvement and tackle overproduction. Digital information used across supply chains, improves coordination of supply and demand to guard against over-ordering and overproducing, while electronic traceability allows producers to track items from delivery to the supermarket shelf.
Industry 4.0 technology allows businesses to take a product to market more quickly by connecting the supply chain to the production facility through interoperability. Uncovering patterns in data also allows businesses to actually anticipate customer demand – enabling businesses to harness analytics and further refine their processing solutions. In order to unlock the DPB and benefit from these technological advantages, food and drink manufacturers can take advantage of tailored financial solutions to sustainably invest in the new fourth-generation of digitalised technology and automation equipment.
Pay-to-use or access financing techniques such as leasing, and pay-for-outcomes agreements whereby the savings or gains made possible by a given technology fund monthly payments, are effective, alternative methods of funding equipment and technology investments and upgrades. Such financing techniques spread the cost of machinery over an agreed financing period, with monthly finance payments arranged to align with expected benefits gained over time from new/retrofitted equipment, such as improved productivity, operating cost savings, energy efficiency and access to new markets. This removes the need for a large initial outlay, thus increasing the funds available for other expenditures. In other words, asset finance allows manufacturers access to the latest technologies, without having to commit scarce capital or use traditional lines of credit. Financing arrangements can cover other costs such as installation, as well as providing the flexibility to upgrade technology in line with technology developments.
24 APRIL/MAY 2020 | FACTORY&HANDLINGSOLUTIONS
Unlike traditional, generalist financiers that might lack comprehensive technical knowledge to fully evaluate the impact a potential investment can bring to a manufacturer, specialist financiers active in the manufacturing arena understand the technology, its potential future value and its practical application in the food and drink sector. This comprehensive understanding of the financed equipment and technology enables specialist financiers to determine appropriate and tailored financing solutions that meet the company’s specific needs. Their expertise in equipment and technology and finance makes it possible for specialist financiers to assess the cost savings and/or expected benefits for the term of the agreement and factor that into the financing arrangement. Specialist financiers, moreover, can devise financing plans that cover a broad range of costs associated with using the equipment and technology, not just the cost of acquisition, meaning greater transparency regarding the expected operating costs for the customer. By using flexible financing, food manufacturers have the opportunity to benefit from the investment in equipment and technology straight away.
Digitalisation offers many exciting possibilities for manufacturers in the food and drinks sector but reconciling the benefits of digitalised technology with the associated investment is a challenge. For this reason, financial solutions are available to help businesses achieve digitalisation’s advantages while preserving financial flexibility and stability.
Siemens Financial Services
www.new.siemens.com
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