Digitalization divide: Report finds F&B suppliers restricted by outdated processes

16 Sep 2024 --- Time-consuming tasks (60%), data entry errors (39%) and miscommunication (32%) are plaguing F&B suppliers, half of whom still rely on manual spreadsheets for managing daily tasks, finds a study by TraceGains. These issues are hampering their ability to achieve greater efficiency, maintain compliance and meet the evolving environmental, social and governance (ESG) standards.

“Consumer demand for supply chain traceability coupled with emerging regulatory change has resulted in razor-thin margins for F&B suppliers relying on outdated manual-intensive processes,” underscores the report.

According to independent experts like Bain & Company, “a shift is taking place with companies using advanced digital tools for visibility beginning to outpace less sophisticated competitors.”

The research, titled “Old Habits, New Challenges: The Critical Need for Modernization in Food and Beverage Supply Chains,” also highlights a “digital divide,” that leaves suppliers unprepared for regulatory change and sustainability.

Updating operations

Trace Gains provides networked compliance, quality and innovation solutions in the F&B industry and conducted the survey to assess the “readiness and sophistication” among suppliers to manage regulatory change and market influences.

“This new research underscores the urgent need for suppliers to update their operations,” says Paul Bradley, senior director of product marketing at TraceGains.

“With increasing regulatory pressures and shifting consumer demands, widely used, outdated methods are putting companies at risk.”

Digital solutions in the F&B supply chain are required for meeting compliance, sustainability and market demands.The results are based on an online survey of 483 F&B industry suppliers Trace Gains conducted from June 24, 2024 to July 15, 2024. 

Embracing digitalization

One reason for a lack of modernization among suppliers is awareness: one in four are unfamiliar with available technology to manage customer relationships with F&B brands better, states the study.

Of those familiar with technology, two-thirds (65%) cite “keeping up with regulatory changes” as the top driver for modernizing internal software. Other factors include faster responsiveness to consumer preferences (58%), better agility to manage supply chain disruptions (42%) and the ability to adopt tech advancements like AI (33%).

Moreover, 44% of the suppliers agree that business operations are also being upgraded due to a consumer preference for sustainable products and online delivery.

“When it comes to the benefits of modernization, those in the consideration phase saw clear advantages with the approach: 84% expect increased efficiency, 67% foresee fewer errors and 45% believe technology can help them meet regulatory and sustainability goals,” states the report.

“Embracing digital solutions should no longer solely be seen as a competitive advantage — it’s required for staying ahead and meeting compliance, sustainability and market demands,” adds Bradley.

Push for food safety

Recent food safety incidents have amplified scrutiny on regulators, while state governments push for faster federal action, notes TraceGains. 

The upcoming FSMA Rule for Traceability, which will take effect in January 2026, will enforce lot-level traceability for specific food materials in the US and strengthen European ESG regulations to reshape industry practices across Europe.

State governments are pushing for faster federal action regarding food safety incidents.Last week, eight F&B organizations joined forces to get ahead of these new track-and-trace rules, deeming food safety a “cross-industry challenge.” The confederation aims to convey clear, concise messaging and resources that enable the F&B industry to take action in preparing for FSMA Rule 204 through traceability, standardized data collection and training and education initiatives.

Sustainability and cost concerns

Nearly 89% of suppliers stated that aligning with corporate sustainability goals is a significant factor in their decision-making, with more than half (53%) considering it very important.

However, cost continues to influence software purchasing decisions, with 77% of suppliers citing it as their top consideration, followed by ease of implementation (65%) and customer support (56%).

While cost is a concern, the report asserts that benefits of modernizing operations, including improved efficiency, reduced errors and enhanced compliance, are clear.

“By adopting digital tools and aligning with sustainability goals, suppliers are optimistic about the road ahead and their ability to position themselves for long-term success in a rapidly evolving market,” says TraceGains.

By Insha Naureen