Many factors, including COVID-19, the war in Ukraine, the hottest summer in history, price rises in fossil fuels, and supply chain restrictions, are shrinking margins for all manufacturers and creating industry-wide complications.
These external factors have heavily impacted the beer industry supply chain. High price increases in various raw materials needed for production and packaging are taking their toll. In Germany, malt has nearly doubled in price, new glass bottles cost 80% more than the previous year, and oil price increases are affecting transportation at every stage, including the delivery to clients.
Some brewers are absorbing costs resulting in shrinking their margins, and others are raising prices which are then transferred to the final consumer. Some small and medium-sized brewers have been forced to seize operations altogether. In contrast, some brewers heavily invest in supply chain automatisation to reduce costs, and others in marketing or business intelligence to generate value. However, it appears that it is solely the counted brewers that are unlocking the potential of IoT as a value creator.
So, what is IoT? There are many definitions of IoT. To simplify, IoT is a system composed of software, hardware, and “things” (machines, objects, animals, or people) that collect and transfer real-world data over a network. However, defining IoT is not sufficient to reap the full business benefits. Understanding consumer needs and how to create actionable business insights is also essential.
What is IoT in the beer industry?
IoT in the beer industry connects different elements across the supply chain using hardware to collect and transfer real-world data over a network. To unlock IoT's potential for brewers, we must examine the intersection between IoT technology and the beer industry.
When you have the information on how the different facets of your business work, you have enough information to make a well-informed and data-driven decision.
There are two significant opportunities for brewers to leverage IoT:
Supply chain optimisation: IoT equips companies to optimise costs and improve transparency across the supply chain in multiple ways.
Client/customer value creation: IoT acts as a lever to collect real-time data providing clients with deep insights capable of driving their business value to the next level and gathering information about final consumer consumption, resulting in an improved service.
Understanding how implementing different IoT solutions can impact your supply chain is essential. IoT implementation to optimise costs is easier and generates benefits in a shorter time but overall returns a limited impact for the brewer. IoT for value creation can tap the full potential of clients, customers, and the brewer itself.
IoT devices can be connected across the entire supply chain, from the raw material providers to the final client. The different information collected and analysed allows companies to optimise costs and create value for clients, customers, and themselves.
Traditionally, supply chains across industries manufactured products and then pushed sales upon clients. Now, more and more manufacturers are focusing on understanding their clients' needs, when they need products, and how they need them, which means planning, production and distribution phases are closely dependent on the client demand forecast. This simultaneously allows companies to optimise costs and gain a rapid, more profound understanding of clients' needs, which can translate into greater profits and revenue for the brewer.
Profit growth is attributable to sales growth and improved margins; therefore, offering clients what they want, when they want it, and how they want it will result in return customers who purchase more and are also likely to choose a superior product selection for their end consumer base, concurrently establishing an improved and more accurate demand forecast that will directly impact the efficiency of production and distribution.
Why should you implement IoT in your supply chain?
Most beer enterprises already realise IoT's power in their sector. However, they often lack knowledge when it comes to the implementation of IoT solutions across the supply chain. Action must accompany the desire to lead the industry; successful companies allocate significant resources and investment to a digital transformation strategy within their business strategy. Three key reasons to implement IoT are:
1. IoT improved ROI: better, more efficient, and cost-effective technology is available
Since the formalisation of IoT as a concept in 1999, technology has rapidly evolved, resulting in affordability, improved performance and security.
Device layer: IoT hardware became better, more efficient, and cheaper to produce over time, rendering the production of devices more profitable.
Network layer: the evolution of different networks enables fast, secure connectivity with greater stability. Today, networks can serve billions of connected devices with the right trade-offs between speed, latency, and cost.
Application support layer: every day, many budget-friendly tools enter the market, making IoT more accessible to everyone without needing specific technical IoT knowledge.
Application layer: computing power has increased about 100 times in the past 15 years. Real-time analytics and artificial intelligence applications can thus shift activity from local devices toward cloud and edge computing solutions.
2. Supply chain optimisation
IoT allows companies to optimise costs and improve transparency across the supply chain in varying methods, the majority of which can be included in the following:
Predictive maintenance: predictive maintenance can reduce costs, improve uptime, reduce environment, safety and quality risks, and extend the lifetime of an ageing asset.
Real-time location tracking: IoT GPS devices allow managers to track shipments with real-time data concerning location and the transportation environment.
Storage condition monitoring: environmental sensors maintain readings of the product's shipping conditions and react proactively to these changes.
Location of goods in warehouses: delivering numerous benefits, including increased efficiency of processes and better inventory management.
3. Value creation for your company, clients, and customers
Value creation could be the least explored but fundamental reason to implement IoT. The beer industry centralises IoT efforts on cost reduction throughout the supply chain. IoT can create value for companies, clients, and finally, customers when implementing it in the HORECA channel:
Company enabler: make quicker and more informed decisions based on real-life data that will provide companies with commercial value creation, operational excellence, stronger consumer relationships, and competitive advantage, notwithstanding the extra benefits of real-life granular on-trade data on demand forecast, marketing, and merchandising.
Reinventing client experience: provide clients with deep insights to drive their business value to the next level. It also reduces the number of breakdowns and downtime with information about the keg's real-time situation. It provides greater control over stock with live notifications to alert any out-of-the-ordinary consumption times or low stock availability.
Reinventing customer experience: clients and companies gain quality control of the product, which provides customers with higher quality beer. Now that PoS consumption information is available, brewers can make a more accurate portfolio recommendation to clients based on: the typology of the PoS, seasonality, and geography, among other factors, which ultimately translates into increased sales for clients and brewers.
SuperBrewer sales reps can now recommend to Julia the exact portfolio mix of her customers. Thanks to a connected app, Julia receives real-time notifications on the level of beer in the keg and predictions on how different events around her bar could affect her sales. These, together with an easy way of ordering stock through the app, and a precise delivery time, allow Julia to serve her customers better, increase sales volume and maximise her profits.
For David, Julia is buying more flexibly and extending her portfolio to various products. This generates higher sales numbers for SuperBrewer, allowing David to predict Julia's and other clients' consumption more precisely, enabling him to plan production and save on costs. As revenues are increasing and costs are being reduced, there is no need to raise prices.
Now that the digital business transformation has been incorporated into the strategy and the value of IoT has been understood, it is crucial to identify where to start implementing IoT along the supply chain to align with a company's general strategy.
Where to start implementation?
Given the wide range of business objectives and strategies, there is no definitive starting point for implementing IoT.
Some producers in the beer industry are already starting to implement IoT at different points along the supply chain, some using the technology to predict and prevent machinery failures, and others to track shipments. We, at Metyis, consider the most compelling use case to be creating added value, understanding clients’ needs, and customer behaviour.
There are two main pillars where benefits can be quantified when applying IoT in the HORECA channel:
Real-time visibility over the HORECA channel: this gives granular visibility on the consumption by PoS in HORECA.
Real-time and granular overview of CAPEX ROI: offers visibility on the return of each installation by linking the outlet installation layout with pouring data.
Data-driven tailoring of PoS portfolios: recommends customer portfolios based on benchmarks of similarly performing PoS with a comparable profile.
Management of distributor performance: determines the distributor management process to provide the same level of quality to clients and customers across locations.
Supply tech and tech service
Improved demand planning and forecasting: predicts demand more accurately and anticipates client and company shortages to avoid such occurrences.
Automatic replenishment: simplifies customers' lives by automatically making orders based on their data and reducing out-of-stock situations and related downtime.
End-to-end supply chain visibility: permits customers to plan more effectively by allowing them to track delivery status, improving their day-to-day operations.
Once companies decide to install and start collecting the data, it is essential to develop the appropriate digital system to extract, analyse, and get actionable business insights that create additional revenue and profit for companies.
Doing so ensures value creation for businesses, clients, and customers and delivers a sustained competitive advantage.
Need for action
It is necessary to strive toward implementing an IoT solution; having the right digital tools to create business intelligence is vital to adding value to companies, clients, and customers by propelling them forward. We advise beginning at the end of the supply chain by collecting real-world consumption data from the PoS and transforming it into actionable insights. Digitalisation can be overwhelming, especially as it requires considerable collaboration and overlap between internal teams and external clients.
At Metyis, we merge technology, processes, and people with our IoT, strategy and analytics teams to unlock the full potential of the solution embedded in your company.
About the authors behind the article
Ricardo Teixeira is a Director of Technology in Porto. He specialised in developing IoT solutions across several verticals, particularly within the beverage industry. Iciar Duran is a Strategy and Business Consultant at Zurich office. She has experience in Consumer Goods, in the last years she has specialized in digital transformation, revenue growth management and pricing.