Sustainable food production as an overriding goal: Producing companies are faced with the challenge of having to operate sustainably and yet profitably. However, these two factors do not necessarily have to be mutually exclusive. Instead of investing in expensive and numerous production machines and constantly increasing storage and production space, it is worth taking a look at the optimization of existing resources. How can a company produce as efficiently as possible given the circumstances? Integrated Business Planning (IBP) is playing an increasingly important role in the food industry in particular. In this blog article, we explain why this is the case and how the approach works.
Sustainability is right at the top of the agenda when it comes to food production. The aim is to conserve resources and minimize environmental impact. Sustainable production methods not only protect the environment, but also reduce production costs and improve product quality. In addition, resource-conserving production methods open up new market opportunities. A sustainable approach thus leads to higher yields for companies and healthier products for consumers. However, food producers are facing a number of challenges, including rising commodity prices driven by increasing scarcity and higher demand. Regulatory requirements are also becoming more stringent as governments around the world enforce measures to reduce environmental impact. Overproduction and waste continue to consume resources and cause additional costs. At the same time, consumer expectations of sustainability, transparency and environmental responsibility are growing.
A holistic approach is important in order to find the right balance between the challenges, demands and own goals. Companies that operate conventionally in production quickly reach their limits and lose competitiveness. Integrated Business Planning software has proven to be very successful in food production. In contrast to other software tools that only specialize in sales planning or production planning and leave out other areas, software for IBP can cover the so-called end-to-end process: from sales, sales forecasts and sales planning to production planning and detailed planning, all areas are integrated and the topic of planning is viewed from different perspectives.
What is Integrated Business Planning?
Integrated Business Planning (IBP) is a holistic approach to corporate planning that extends the principles of sales and production planning (S&OP) to the entire value chain. The integration of IBP ensures that corporate plans and resources are aligned with corporate strategies, focusing on financial performance and operational capabilities. IBP also aims to promote cross-departmental collaboration and transparency by bringing together different functions such as sales, production, logistics and finance. This sets IBP apart from conventional planning methods, which are often isolated and anchored in silos. With a unified view of real-time business data and sales forecasts, companies can make more informed decisions, anticipate market changes and react proactively. In addition, while a stable plan is desirable in operational planning, it is also necessary to react flexibly to sudden changes and influences. These can be, for example, machine breakdowns or fluctuations in the procurement market, such as a shortage of raw materials.
Integrated business planning for food
In order to align a supply chain sustainably, it is important to be able to act early and correctly. To achieve this, all resources must be used efficiently. The integrated business planning approach helps companies to incorporate various influencing factors such as customer demand, sustainability, competition, supply and production capacities and to act accordingly. In addition to the classic planning challenges, industry-specific requirements must also be met in the food sector. These include adherence to deadlines, shelf life and set-up times. In addition, food production processes are often influenced by a high degree of complexity and multiple stages, which in turn increases throughput times.
Depending on the objectives, Integrated Business Planning can be used to plan at product-customer level or product-storage location level, for example. The quantities of raw materials determined result in an operational plan, after which stock levels, demand and production output are constantly monitored in a dynamic network at daily level. Another approach can be the optimization of set-up times. In this case, food production is planned in such a way that set-up times, for example for tool changes or cleaning, are kept to a minimum. Beverage manufacturers therefore often only produce the sugary drinks at the end of the day because cleaning the hoses and machines afterwards is very time-consuming and would be inefficient or impossible to implement in daily operations. The optimization of set-up times plays a decisive role in the production of food in particular - not only for economic reasons, but also due to hygiene requirements. A classic example of this is the production of chocolate: after a cycle with nut chocolate, thorough cleaning must be carried out to remove any traces of nuts from another type.
5 reasons for IBP in the food industry
Limited shelf life, cold chain and storage requirements, supply-driven models, traceability of origin requirements and sometimes very strict regulations are just some of the challenges in the food industry. Growing customer expectations in terms of delivery speed, service quality and sustainability must also be met. In order to operate sustainably and efficiently despite all these factors, Integrated Business Planning has proven to be a success. We have summarized why this is the case in five points:
Maximum resource utilization
The optimization of existing resources is a promising path for manufacturing companies. Various strategies, such as the reduction of waste or the efficient use of energy and water, contribute to environmental protection. In the food industry, the use of by-products and the optimization of production processes are also good approaches because they result in further advantages: lower costs, less depreciation and a higher reputation among customers and thus greater customer satisfaction. There is no need to purchase new machines - the existing ones can simply be used for maximum profit.
Precise forecasts
Good sales planning is the basis for successful production. The more precise the sales planning, the more precise the procurement and production - even in a fast-moving sector such as the food industry. AI-supported sales forecasts reduce overproduction and waste, as demand can be predicted at an early stage and production can be adjusted accordingly. Market trends and seasonal fluctuations can also be taken into account and used sensibly by analyzing data and making forecasts based on it. Accurate forecasts help to create successful production planning.
Improved supply chain management
Targeted management of the supply chain by IBP enables transparent networking of all processes, resulting in a resilient and sustainable supply chain. What-if simulations, warnings and logistics analyses ensure short reaction times and proactive action, which is essential in food production in particular. This can also significantly reduce stock levels, which in any case results in high savings.
High sustainability in production
AI-controlled production planning greatly reduces the risk of food spoilage and write-offs. Best-before dates (BBDs) are taken into account in planning and production so that excess stock does not spoil in the first place. The aim is also to manufacture products using as few resources as possible. The continued use of by-products and by-products also supports an ecological approach.
All-in-One-solution
Thanks to IBP, a holistic planning process is created that enables all stakeholders to work together in a single solution. Accordingly, all stakeholders are actively integrated into the current process. For example, not only sales information for sales planning is included, but also management for the definition of strategic goals. Data silos and isolated processes prevent end-to-end transparency and lead to delayed or even incorrect decisions, which in turn results in lost sales. Integrated Business Planning, on the other hand, takes all internal and external data into account and includes integrated business, supply chain and financial plans in the evaluation of plans.
Practical example: Sustainable production at innocent
In recent years, innocent has developed into Europe's best-known juice and smoothie manufacturer. Production is a major challenge due to the fresh and perishable ingredients. To ensure that enough goods can be produced and that as few raw materials as possible spoil, production must be planned precisely in order to be able to react to changes in the forecast.
For the past eight years, innocent has been supported by OUTPERFORM Planning, the IBP solution from software provider REMIRA. The software ensures smooth production processes by controlling logistics and production planning at several locations in Europe using AI. OUTPERFORM Planning optimizes stock levels and makes timely suggestions for production planning to ensure the availability of goods and avoid out-of-stock scenarios. Thanks to the software, it is always clear in which order the ingredients need to be processed in order to produce sustainably and keep write-offs to a minimum.
With OUTPERFORM Planning, innocent can also simulate how different developments in demand would affect ordering processes, stock levels and production capacity utilization. This option was one of the main reasons why the company chose the software eight years ago, explains Alex Wadd, Supply Systems & Process Manager at innocent: “OUTPERFORM's demand planning and simulation functions are regularly used to prepare for different scenarios. They not only serve as an analysis tool, but also optimize innocent's value chain in the best possible way.”
Conclusion
The food and beverage sector in particular faces special challenges, such as expiry dates or deposit logistics, which must be taken into account in production planning. At the same time, sustainability is playing an increasingly important role in food production, as consumers attach importance to social and ecological responsibility. As an extended form of Sales & Operations Planning, the IBP approach not only pursues short-term planning, but also enables companies to plan strategically for a period of 12 months, for example, and align production with set targets. Artificial intelligence is also used here. The sales forecasts then include, for example, the analysis of historical data or the identification of recurring patterns. The generated sales information then needs to be incorporated into production and purchasing as sensibly as possible - in order to plan sustainably and economically in the end.
Are you interested in Integrated Business Planning in food production? We would be happy to advise you in a free and non-binding web session!
