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.
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.
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.
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:
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.
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.
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.
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.
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.
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.
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.”
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!