Siemens goes extra mile to help bring digitalization to F&B industry
German engineering company Siemens AG may need more patience to see the fruits of the digital transformation it is trying to achieve in the food and beverage (F&B) industry, which often lacks the infrastructure and knowhow to shift to what has become known as Industry 4.0.
Over the past decade, Siemens claims, it has invested US$1 billion a year to acquire software companies and integrate new methods of automation to provide services necessary to digitize industrial businesses across the world.
As a result, its net income rose by 6.7 percent year-on-year (yoy) to €1.46 billion ($1.75 billion) in the third quarter of the 2017 fiscal year ending Sept. 30, thanks to double-digit growth in its digital factory business.
During the quarter, its revenues from the digital factory segment surged by 17.5 percent to €2.96 billion, while its profit from the segment jumped by 22.7 percent to €485 million.
However, its revenues from the process industries and drives division, which includes its food and beverage industry business, fell by 2.8 percent to €2.18 billion, though profit still grew at a modest 2 percent to €103 million.
“The Food and Beverage [industry] is a very conservative market,” Kai Schneiderwind, Siemens’ food and beverage senior director, told The Jakarta Post on the sidelines of the 2017 drinktec trade fair recently.
Schneiderwind further pointed out available business opportunities through the digitalization of factories, which could allow production in the shortest possible time, in line with growing demand for more personalized products, such as beer or soft drinks that millenials crave.
However, he added, many industrial players were still reluctant to pour investment into digitalization programs, mostly because of a lack of funds and of a clear road map for such a transformation.
“The second thing is that it is very strongly dominated by the machine builders. So even though the end users already take certain steps, the machine builders are slowing [things] down, because they are trying to create a seamless production of their machines instead of focusing on innovation,” Schneiderwind said.
Emerging countries in Asia, including Indonesia, could only boost their food and beverage industry by investing big money to automate and digitize production as well as train local workers in the sector.
“The investment will be more likely spent on local system integrators, so the money needed to increase the level of automation and digitalization will be invested domestically and eventually [increase] the GDP,” Schneiderwind said.
Indonesia’s food and beverage industry grew by 7.69 percent yoy in the first half of this year, contributing 6.06 percent to the GDP.
Realized domestic investment and foreign direct investment in the sector stood at Rp 21.6 trillion ($1.63 billion) and $1.18 billion, respectively.
Indonesia may see the entry of Rp 70 trillion of investment in the food and beverage sector this year, up from Rp 67 trillion last year and Rp 43 trillion in 2015, according to estimates by the Indonesian Food and Beverage Producers Association (Gapmmi).
Industry Minister Airlangga Hartarto has repeatedly stated the importance of research and development for the country to fully implement Industry 4.0 systems, which are expected to create efficiency and reduce industrial production costs by 12 to 15 percent.
The term Industry 4.0 refers to the development of automation, artificial intelligence and sustainable technologies.
The ministry has predicted that jacking up computing power and connectivity as well as developing new systems for human-machine interaction, among other things, will require huge investment.
“Such developments can be achieved through the work of affiliated universities that can also act as incubators, the manufacturing industry with middle to high technologies, intensive research and a higher number of researchers,” Airlangga said Friday.