The Food Industry Invests in Artificial Intelligence & IIoT

Industry Week reported in January that American manufacturing continued to expand at a healthy pace and for the 17th consecutive month.  The closely watched factory index from the Institute of Supply Management (ISM) increased to 59.7, up from 58.2 in December, making 2017 the strongest year for manufacturing since 2004.1

In the 2018 Baking & Snack’s Baking Industry Confidence Survey, 58% of respondents indicated their general outlook for commercial baking is better than it was in 2017, with 93% of respondents reporting a positive outlook for 2018. Spending seems to be targeted towards new products, trace-ability, food safety, and sanitation. A greater number of commercial bakers also reported making more profit than in earlier years.2

Growing confidence along with major reductions in corporate tax rates makes for a positive environment for capital spending in general.  Not only has the tax rate been reduced from 35% to 21%, but the new tax law brings stability and certainty for long term budgeting after years of piece-meal changes and uncertainty.

Beyond the traditional acquisition of industrial equipment, a new trend is emerging. It is the investment in the Industrial Internet of Things (IIoT) and specifically in artificial intelligence (AI).  For consumers, the most visible component of the AI investment will be found in the grocery industry. Amazon, Target, and Whole Foods are leading the way by demonstrating the value of AI in guiding their product placement, store deliveries, promotions, and pricing. Chains such as Earth Fare have reported sales increases of 3% after only one year of AI use.

IIoT and AI investments could positively impact the harvesting, packing, and transportation of all types of food products.  Some of these solutions are offered as software-as- a-service (SaaS) in which no major upfront capital expenditure is required. Return on investments can be as short as a few months.  Given lloT and AI has shown to improve efficiency, scaleability, time and cost savings, and connectivity,.

 

  1. Jill Jusko, “US Manufacturing Expands in January” Industry Week, Feb 2, 2018, http://www.industryweek.com/economy/us-manufacturing-expands-january
  1. Joanie Spencer, “2018 Capital Spending Survey results revealed”, Baking Business Feb. 12, 2018, http://www.bakingbusiness.com/Features/Operations/2018/2/2018-Capital-Spending-Survey-results-revealed.aspx
  1. Jeff Wells, “5 tech trends that will shape grocery in 2018,” FoodDrive, Jan 16, 2018, https://www.fooddive.com/news/grocery–5-tech-trends-that-will-shape-grocery-in-2018/514576/
Author:

Anthony Tarantino, PhD

Adjunct Professor, Santa Clara University – Operations and Finance

Six Sigma Master Black Belt, Certified Scrum Master, CPIM (APICS), CPM (ISM)

Senior Advisor to Atollogy for Alliances and University Relations

Tony@atollogy.com