Food Equipment Suppliers Gravitate To Value-Added 'Servitization'

In his monthly column, Scheduled Downtime, Food Processing's Kevin T. Higgins talks about whether or not food companies will find value-add opportunities in outcomes-based services.

By Kevin T. Higgins, Managing Editor

When technology vendors start talking about disruption and the brave new manufacturing world, it can sound like a planet far removed from the one where food and beverage processors toil.

When describing the digital disruption and the Internet of Things, automation consultants seem to compete to see who can coin the most off-the-wall contributions to the English language. A current example is “servitization,” a tortured way of saying companies are looking for value-add opportunities to increase revenues.

Performance-based contracts exemplify servitization. One is Effifuel, the brainchild of the Michelin tire company. The Clermont-Ferrand, France-based manufacturer competes with Bridgestone, Goodyear and other firms in an industry characterized by commodity products. To add value in the premium segment, Michelin created Effifuel, an outcomes-based service for trucking companies.

Smart sensors embedded in low rolling-resistance tires relay data via the internet on driver and truck performance, along with temperature, pressure and other tire variables. Coupled with driver education and other services, Effifuel generates average savings of $3,300 a year for long-haul trucks. Trucking clients who use the bundled services are guaranteed a reduction in fuel consumption. If those savings fail to materialize, Michelin provides a rebate.

Effifuel was cited by Eric Schaeffer, senior managing director at the consultancy Accenture, in an Atlanta address at May’s IFS World Conference, the ERP software firm’s annual user conference. To get out of the commodities business and leverage the digital revolution, the head of Accenture’s industrial practice advises food companies and other manufacturers to embrace “digitally embedded services” based on performance or outcomes. Those services can deliver a disproportional share of profits, even when they are a minor part of revenues.

UK-based IFS is coming off its strongest growth year in North America, with the client base doubling in 2017, Cindy Jaudon, president of the Americas, told industrial end-users at the conference. According to Jaudon, food and beverage manufacturing is a particularly ripe segment because some prominent ERP suppliers to food companies no longer are active.

Itasca, Ill.-based Jaudon (www.ifsworld.com/us) says servitization manifests itself in food and beverage manufacturing as after-the-sale contracts from equipment OEMs. Examples include Tetra Pak’s Plant Care Solutions Service and the Digital Service Group at Buhler Aeroglide. Both services rely on smart sensors embedded in machinery. Performance data are uploaded to a cloud server for analysis and monitoring, with reduced downtime and optimized throughput the promised outcome.

Unfortunately for food manufacturers, their road to servitization is not platted. Suppliers like Tetra Pak and Buhler can participate, but they own the service and therefore the data it generates. Retailers and foodservice companies downstream in the supply chain own the consumer relationship and can sell food as a service concept. “That in effect is what Amazon is doing,” points out Colin Elkins, IFS’s global industry director for process manufacturing.

Tetra Pak hopes to eventually add other OEM’s machinery to its condition-monitoring service, but even if it is limited to the more than 5,000 Tetra Pak filling machines deployed worldwide, the company can conduct benchmarking and data analytics on an unprecedented level in the food industry. It also can predict parts failure and possibly engage in replacement-parts sales.

In effect, performance-based contracts cast suppliers in the role of Facebook and make manufacturers the product, or “users” as Facebook euphemistically calls them. They become sales leads that can then be sold to other companies.

Unlike Tetra Pak’s smart sensors, the hardwired field devices already in place in food plants are not Internet ready. But those devices and the PLCs they are tied to are a goldmine of performance data. The challenge, according to Elkins, is extracting that data and converting it to a usable format.

Extracting data from PLCs with proprietary coding is a roadblock, “but if you can get the data out, you can standardize it in the format you want through the Internet of Things,” which provides a standardized interface, he continues. The next step is to pare down the data so the ERP system isn’t overwhelmed.

No easy task, but that’s the price of digital disruption.

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